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Coronavirus: Advice for employers

The Government has published further details of the Coronavirus Job Retention Scheme (otherwise known as the ‘Furlough’ Scheme if you pronounce it).

Sticking with previous article water based analogies, the scheme is a ‘life-ring’ to help UK employers ‘tread water’ whilst the UK navigates the choppy economic waters of coronavirus by providing them with Government support to pay their employees in the short term, to keep them afloat.

We first heard of this scheme on Friday 20 March 2020 during the early evening Government TV briefing, and whilst it came as a big relief for employers that the Government was putting its hand in its pocket to help, the detail was very light (a few paragraphs on the Government website only). Employers were therefore left in a tricky situation of wanting to urgently utilise this scheme but not knowing which of their employees it applied to or what could be claimed etc. Advisers were also left in a tricky situation of advising on something which was brand new with very limited detail.

Thankfully for all, as of 26 March 2020 the Government published further updated and more substantial guidance on the scheme meaning we all have greater clarity on how it will operate.

Below are the key points from the above updated Government guidance:

• Who is the scheme open to?
All UK employers that had a PAYE scheme in place on 28 February 2020

• Who can apply for the scheme?
Any organisation with employees can apply, including charities, recruitment agencies and public authorities

• How much can employers reclaim?
Employers can reclaim up to 80% of wage costs up to a cap of £2,500 per month, plus (not including) the associated employer NICs and minimum auto- enrolment pension contributions on that wage. Fees, commissions and bonuses are not included

• As an employer do I have to top up the extra 20%?
No, but you can if you choose to. However, this is subject to employment law and renegotiating any contractual entitlements

• What about for employees whose pay varies?
For employees whose pay varies, the employer can claim for the higher of (i) the same month’s earning from the previous year (eg earnings from March 2019); or (ii) average monthly earnings in the 2019-20 tax year

• What are employees entitled to?
Individuals are only entitled to the minimum wage for the hours they work. So if they are furloughed and do not work, and 80% of their normal earnings would take them below the minimum wage based on their normal working hours, they still only receive 80% as they are not working

• Which employees are eligible?
Only those employees on the payroll on the 28th February 2020. Anybody who was on the payroll on 28 Feb and has since been made redundant can be rehired and put on the scheme.

Can employees be taken on and off of the furlough scheme to match work requirements?
Furlough leave must be taken in minimum blocks of 3 weeks to be eligible for funding. However subject to this, it is possible to rotate employees on and off of the scheme

• Can furloughed employees work at all?
No, furloughed employees must not work at all. However, they are able to undertake training and do volunteer work, provided they do not provide services to or make any money for their employer

How do I put employees on the furlough scheme?
When agreeing changes in hours (and acceptance of 80% pay if not topped up by the employer), assuming the contract does not already allow for those changes, normal employment law applies in terms of varying the contract of employment. Individual employee consent to the changes is best. An employer must also be careful not to discriminate in deciding who to furlough

Can employees on sick pay or self-isolation be furloughed?
Employees on sick pay or self-isolating cannot be furloughed, however can be furloughed afterwards. Employees who are ‘shielding’ can be placed on furlough

How often can employers claim under the scheme?
Employers can only claim once every 3 weeks. Claims can be backdated to 1 March 2020.

It is unclear currently whether there will be actual legislation on the Job Retention Scheme, so for now we are reliant on the Government guidance. There is further Government guidance expected on the mechanics of claiming payments under the scheme shortly.

For more information, contact Head of Employment & HRTom Evans.

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