A brief summary of the government guidance on furloughing employees
Update: Employer must have created and started a PAYE payroll scheme on or before 19 March 2020 instead of February 2020 and 2) on 17 April 2020, Chancellor extended furlough scheme by 1 month to end of June 2020. to reflect continuing social distancing measures.
The UK Government introduced the Coronavirus Job Retention Scheme on 26 March 2020 and it was subsequently updated on 9 April to include information on eligibility and pension contributions.
The scheme is a financial package designed to help UK employers whose operations have been severely affected by the current coronavirus pandemic (COVID-19). It enables employers to retain employees and so protect the UK economy. It is currently in place for three months from 1 March 2020.
The scheme is open to any legal entity including businesses, charities, recruitment agencies and public authorities that meet the following key criteria:
- must have created and started a PAYE payroll scheme on or before 28 February 2020;
- enrolled for PAYE online - this can take up to 10 days; and
- has a UK bank account.
Who is eligible?
The scheme is open to office holders (including company directors), salaried members of Limited Liability Partnerships (LLPs), agency workers (including those employed by umbrella companies), limb (b) workers, apprentices, individuals and administrators. Public sector organisations may use the scheme to furlough employees if they meet specified criteria.
Employees eligible to be furloughed
- Employees that were on employer PAYE payroll on or before 28 February 2020.
- Full-time, part-time, agency, flexible employees or employee on zero-hour contracts.
- Foreign nationals on any category of visa scheme. Grants under the scheme are not counted as ‘access to public funds’.
- Rehired employees that were made redundant or that they stopped working for employer after 28 February
- Employees that started unpaid leave after 28 February 2020.
- Employees who are on long-term sick leave.
- Employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding)
- Employees who are unable to work because they have caring responsibilities resulting from coronavirus
There are some employees that are not eligible to be furloughed:
- Employees hired after 28 February 2020
- Any employee who is actively working for or on behalf of the eligible employer or any of its linked or associated organisations
- Employees working reduced hours
- Employees self-isolating or on sick leave (therefore eligible for Statutory Sick Pay
- Furloughed employees who become ill and therefore must be paid at least Statutory Sick Pay.
There is no advice for companies on how to select staff to be furloughed. However employment and equality law still apply.
It is up to an employer whether or not to furlough, which employees to furlough and when. However, the decision and selection of employees must be structured, formal and comply with direct or indirect discrimination and equality law. An employer must create an objective selection procedure to decide which employees to furlough. This will ensure they are fair and consistent, limiting the risk of falling foul of discrimination law.
Employers should discuss the plan and process with employees and come to an agreement with the worker if the employment contract needs to be changed. Employers must confirm the agreement to furlough in writing to their employee and a record of this communication must be kept for five years.
Employers who furlough employees can apply for a grant that covers 80% of their usual monthly wage costs up to £2,500 a month from the date that the employee starts furlough. The £2,500 cap includes associated Employer National Insurance contributions and pension contributions (up to the level of the minimum automatic enrolment employer pension contribution) on that subsidised furlough pay.
Any regular employer payment like wages, past overtime, fees and compulsory commission payments is eligible. However discretionary payments must be excluded. Employers can choose to top up employer's employee’s salary, but are not mandated to do so.
In order to make a claim, employers must provide:
- Employer PAYE reference number
- The number of employees being furloughed
- National Insurance Numbers for the employees employer is seeking to furlough
- Names of the employees that employer want to furlough
- Payroll/works number for the employees that employer want to furlough
- Employer's Self-Assessment Unique Taxpayer Reference or Corporation Tax Unique Tax-payer Reference or Company Registration Number
- The claim period (start and end date)
- Amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
- Employer's bank account number and sort code
- Employer's contact name and phone number
- The amount employer is claiming.
How to Claim
HM Revenue & Customs (HMRC) is creating an online claims portal for the scheme which is expected to be available by the end of April 2020.
When it becomes available and an employer makes a claim, HMRC will check the claim, and if an employee is eligible, the grant will be paid by BACS to a UK bank account.
This is a brief summary of De Jure Chambee's view on the Job Retention Scheme as at 14 April 2020. It is not legal advice. If employer wish to use the scheme employer should read all the government guidance before deciding how best to proceed. To seek independent legal advice from our CORVID-19 Team of specialist employment, health and safety, insurance, personal injury, Health and Social Care and regulatory/local authority lawyers, please contact our offices:
Telephone: +44 2087980917 (Chancery Lane Office) Or +44 1223 643580 (Cambridge Office)
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