HMRC has published further details on how the new Coronavirus Job Retention Scheme will work in practice. It had already been announced that the new scheme will see the government cover up to 80% of wage costs, up to a cap of £2,500 per month, for each employee that has been furloughed (on a leave of absence). The scheme will run for at least 3 months, backdated from 1 March 2020, but will be extended if necessary.
It is unclear if HMRC will rely on their published guidance or if we will see new legislation introduced. For now, the additional guidance for businesses seeking to claim support for employee’s wages includes additional information that had not been announced. HMRC expects the new online service to be available by the end of April 2020.
The main points covered in the new guidance are as follows:
- The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020.
- Any UK organisation with employees can apply. This includes charities, recruitment agencies and public authorities. The government does not expect many public sector employers to use the scheme as the majority of public sector employees are continuing to provide essential public services or contribute to the response to the Coronavirus outbreak.
- Furloughed employees must have been on the payroll on 28 February 2020 and can be on any type of contract. This includes full-time employees, part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts. With agency employees, the scheme is only available for agency employees who are not working. The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
- If an employee is working, but on reduced hours, or for reduced pay, they are not eligible for this scheme. The employer will have to continue paying the employee through their payroll and pay their salary subject to the terms of the employment contract you agreed.
- Employers must be mindful not to discriminate in deciding who to offer furlough too. Equality and discrimination laws will continue to apply in the usual way. The issue of seeking to protect vulnerable workers has not been specifically covered in the guidance.
- To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication.
- There are specific issues that must be considered if an employee is on unpaid leave, on Statutory Sick Pay, has more than one job or takes part in volunteer work or training. For example, employees on sick leave or self-isolating should get Statutory Sick Pay but can be furloughed after this.
- Employees on maternity (or similar) leave can continue to draw SMP (or similar) payments and the normal rules continue to apply for up to 39 weeks.
- Employers need to make a claim for wage costs through this scheme. Employers will receive a grant of up to the lower of 80% of wage costs or a capped £2,500 per month, plus the associated employer NICs and minimum automatic enrolment pension contributions on that subsidised wage. Fees, commissions and bonuses are not included.
- An employer can choose to top up to 100% but does not have to under the scheme. Employers need to be mindful of any contractual entitlements.
- Where an employee has varied pay, the employer can claim for the higher of the same month's earning from the previous year; or average monthly earnings from the 2019-20 tax year.
- 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. However, they are entitled to be paid NMW for any time spent training.
- Furlough leave must be taken in minimum blocks of three weeks to be eligible for funding. Claims can be backdated until the 1 March if applicable, but employers can only claim once every three weeks.
- The government will issue further guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live.
- Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
- HMRC will retain the right to retrospectively audit all aspects of a claim.
- Employees that have been furloughed can still be made redundant while on furlough or immediately after. The normal redundancy rules continue to apply.