COVID-19: What is Furloughing?
The Coronavirus Job Retention Scheme was announced on 20 March 2020 to provide security for employees over the coming months considering the current crisis. The scheme provides a mechanism that allows businesses to retain employees without the need for them to work and for those employees to still receive a minimum level of their salary. The scheme’s purpose is to reduce the amount of redundancies and avoid employees being laid off without pay.
There is a lot to consider before Furloughing your staff and we are all starting to realise that things will never be the same after COVID-19. Businesses that thought homeworking would never work for them may have different opinions, people working from home could find it is not for them, and let’s not forget we are still do not know how long lockdown will last.
Before you make your staff redundant or Furlough, we urge you to think long and hard about your business and its needs in the next 6 months. Look at your people, who will be with you to support you, to work hard and get your business through these challenging times. Although the scheme is positive overall, it is worth noting it will only pay out 80% of your employees pay of up to £2500, you will have to make that payment before you claim it back and your staff cannot work whilst being furloughed.
The recent guidance allows the below to be furloughed:
- Employee’s on agency contracts under PAYE (provided they are not working)
- Employee’s on flexible or zero-hour contracts
- Full time employees
- Part time employees
What is the Coronavirus Job Retention Scheme?
- The government has introduced a furlough scheme where an employer can claim 80% of their employee’s wages, capped at £2,500 a month. The employee must be on on the payroll as of 28th February 2020 and can be furloughed for a minimum of three weeks. This scheme is temporary for three months and is available to support organisations whose operations have been affected by COVID-19.
Who can claim?
- Recruitment agencies (agency workers paid through PAYE)
- Public authorities
Does an employer have to consult with employees before furloughing?
In most cases it will be necessary to agree with employees that they will be furloughed, because their employment contracts do not give the employer a unilateral right to withdraw work/lay-off, plus in most cases pay is being reduced. If the alternatives are redundancy or unpaid leave of absence, it is very likely that employees will agree to being furloughed in order to receive the financial protection on offer.
However, if employers are identifying individuals for furlough who would otherwise be made redundant, and so the alternative contemplated by the employer to putting employees on furlough is a redundancy exercise, then this will potentially trigger collective consultation duties. If collective consultation obligations are triggered, the usual time frame for the consultation to take place is unlikely to be viable in the current situation. There is a “special circumstances” defence which may allow the process to be condensed (but it cannot be avoided altogether).
In addition to collective consultation, it is likely that individual consultation will also be required given that a change is being proposed to an employee’s current working arrangements (and potentially to their wages). The level of discussion required will vary depending on the number of employees the business has to talk to and how quickly changes need to be made.
An employer will need to consider what it will do about those who refuse consent. Would they be at increased risk of redundancy, will the employer enforce this pay cut unilaterally and hope that the employees do not claim back the shortfall of wages, or will the employer back down?
What if the employee is on Statutory Sick Pay?
- Employee’s on sick leave or self-isolating are eligible for SSP and then furloughed after this.
- If an employee is self-isolating in line with all public health guidance, they can be placed on furlough
What happens with Employer National Insurance and Pension Contributions?
- Employers remain liable for associated contributions on behalf of their furloughed employees; however, they can claim the associated National Insurance contributions back.
- Employees and employers may decide to have a pension break, however the minimum auto-enrolment employer contributions of 3% can be claimed back
Do employers have to top up the salary?
- Employers can choose to top-up the salary in addition to the grant, however they are not obliged to do so
How do I submit a claim?
- When the online service becomes available by the end of April 2002, claims are simply submitted through HMRC
- You can only submit one claim at least every 3 weeks and claims can be backdated to the 1st March if applicable
What if the employee is now below the National Living / Minimum Wage on the 80%?
- The employee should not be working while furloughed, therefore this will not apply
- Furloughed workers who are not working must be paid the lower of their 80% salary, even if this would be below NLW/NMW
Can employees continue to work while furloughed?
- No, employees should not carry out any work for their employer during this time. They can however take part in volunteer work or any training if it does not provide services to generate revenue for their employer.
What happens when the government ends the scheme?
- The employer must decide depending on their circumstances, as to whether employee’s can return or if necessary, consider termination of employment.
- The scheme only applies to those who were employed on 28th February 2020
- The job retention scheme will initially run for 3 months from 1st March 2020
- The scheme is available for any employer in the country
- Employees, PAYE and zero-hour workers are eligible for the scheme
- Employers can choose to top up any employee’s wages but are not obliged to do so
- Furlough must be for a 3-week minimum length of time
- Employers can claim 80% of the furloughed employee’s usual monthly wage costs, of up to £2,500 a month
- Employees hired after 28th February 2020 cannot be furloughed or claimed in accordance with this scheme
- Not all employees have to be placed on furlough. However, those employees who are placed on furlough cannot undertake work for their employer, including providing services or generating revenue.
- If an employee is working on reduced hours or pay, they will not be eligible for this scheme
- When deciding who to offer furlough too and when making decisions, equality and discrimination laws will apply in the usual way
We are here to support you; if you have any questions please get in touch on 01782 338787 or book a convenient time for you and a member of our team will get in touch!
Stay safe and stay inside!