CJRS advice

Furlough advice from Tania Bowers, Legal Counsel at APSCo

What do you need to know about furloughing staff?

As a result of the negative impact of COVID-19, the Government has announced that businesses can ‘furlough’ staff that previously would have been laid-off, by accessing a grant which will reimburse 80% of a furloughed workers’ wage costs up to a cap of £2,500 per month through the Coronavirus Job Retention scheme. However, there are many nuances to the scheme that recruitment firms should be aware of. Here’s what you need to know.

Who does furlough apply to?

All UK businesses and employers are eligible as long as they had created and started a PAYE payroll scheme on 19th March 2020. The scheme is for full or part-time employees, agency workers, and workers on flexible or zero-hour contracts.

To be eligible, furloughed employees must have been on your PAYE payroll on 19th March 2020. If you have already made employees redundant since this time, you can furlough them as long as they are rehired.

How do I furlough my staff?

When furloughing employees, it’s important to follow the right procedure. Changing the status of employees remains subject to employment law and may be subject to negotiation, so companies will need to agree to this with workers. Once an employer has reached an agreement with staff about being furloughed, they should write to the affected individuals confirming that they have been furloughed and should keep a record of this.

What payments are included, and how can I claim salary from the government?

The Government has clarified that under the scheme you can claim for any regular payments you are obliged to pay, including wages, past overtime, fees and “compulsory” commission payments. However, discretionary bonuses (including tips), commission payments and non-cash payments are excluded. Note that Apprenticeship Levy and Student Loans should continue to be paid as usual, and the reimbursement does not cover these.

You will be reimbursed for 80% of a furloughed employee’s wage as in their last pay period prior to 19th March 2020, up to the £2,500 cap, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.

To claim a furloughed employee’s salary, employers will need to access the HMRC portal which is expected to be up and running by the end of April. Here, firms will be able to report which employees are affected and claim reimbursement.

To work out what amounts they are claiming, employers will have to calculate the NI and pension contributions for all employees. When the portal is operational, businesses will be able to apply with their ePAYE reference number, bank account number and sort code, and will need to specify:

· The number of individuals being furloughed
· The length of the claim period
· The amount claimed
· The employer’s contact details

Finally, while furloughed workers will receive either 80% of their regular wage up to a maximum of £2,500 per month, employers can choose to top up the remainder of the employee’s salary – but they are not obliged to.

My employee has two jobs, which one should be furloughed?

If your employee works for more than one employer and did so on the 19th March 2020, they can be furloughed by either or both employers for each job. Employees can also be furloughed in one job and receive a furlough payment via the retention scheme but continue working for another employer and receive normal wages.

What are the rules regarding annual leave and furlough?

The current guidance states that employees on furlough have the same rights, including holiday accrual, so for now, you should assume that holiday will continue to accrue normally. The Government has also announced amendments to Working Time Regulations to allow annual leave to be carried over for two leave years.

In planning furloughs, employers may ask staff to take a certain amount of leave before furloughing them, which is acceptable as long as they are given twice as much notice as the length of the leave that is requested. Based on EU case law, holiday pay must be based on normal remuneration for the first four weeks of annual leave.

Therefore, pay should be an amount proportionate to what employers would provide for normal holiday leave. This principle appears to be incompatible with the job retention scheme as the government reimbursement is only 80%. So, an employer may be able to recover part of any holiday pay that is owed during furlough – but this is yet to be clarified by the Government. However, this will need to be topped up to 100% of normal remuneration.

Can employees work for us whilst on furlough?

The guidance is very clear that employees must not work for you whilst on furlough. This includes providing any service or generating any revenue for your business. Employees can undertake volunteer work or training, as long as it does not provide services to, or generate revenue for or on behalf of your organisation. If an employee does undertake training while on furlough, they need to be receiving at least National Living Wage/National Minimum Wage, which means you may need to top up their pay if the 80% is below NLW/NMW.

Supporting businesses for the future

Ultimately, the job retention scheme is a much-needed intervention that will support many firms throughout the pandemic, and allow recruitment companies the best possible chance to keep operating once we are through the worst of COVID-19 and play their role in helping the UK get back on its feet. While the above is a brief overview of important aspects of the scheme we recommend anyone looking for further information to visit the government’s official guidance on the topic.

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