Hello and welcome to the second in my short videos on the employment implications of the Coronavirus. My name’s Paul Griffin and I’m Head of the Norton Rose Fulbright Employment Team in London. Today’s video is going to look at the Government’s Coronavirus Job Retention Scheme. The scheme is intended to help employers keep employees on the payroll and to try to avoid redundancies. Under the scheme employers can apply to HMRC for a grant to cover most of the wage costs ( that is up to 80%) of salary of workers who are temporarily not working but kept on the payroll, for up to a total of £2,500 per worker each month. The Government published further guidance on the scheme on 26th March and you can find that on the government website.
Who can apply under the scheme?
Any employer (regardless of size or sector type) who operates PAYE will be eligible for the scheme. In order to access the scheme an employer will need to designate affected employees as ‘furloughed workers,’ and notify the employees that they have been designated as such.
A furloughed employee is any employee, including zero hour workers, who are paid on the employers PAYE payroll. The important thing is that the employee must have been on the payroll on 28 February 2020. If you, as an employer had implemented a redundancy programme and made people redundant since that date, those employees can be rehired and placed on furlough. Anyone newly hired since 28 February can’t be placed on furlough nor can an employee who was already on unpaid leave on that date.
If an employee is on sick leave or self-isolating and is eligible for statutory sick pay then they should receive SSP for the period that they are on sick leave and then be furloughed at the end of that period.
While an employee is on furlough leave they can’t be carrying out any work for the employer. This includes providing services or generating any income. So if you have an employee who is on reduced hours or days they don’t fall under this scheme.
So how do you decide who to place on furlough? The guidance says that the employer has a discretion as to which employees it can place on furlough but, in doing so, any criteria it applies must have regard to equality and discrimination law. You also need to bear in mind the industrial relations aspects of placing some employees on furlough and requiring others to continue working. The minimum period of time that an employee can be placed on furlough is 3 weeks - so this would prevent say weekly rotation of employees on or off furlough.
While on furlough an employee can undertake voluntary work or training as long as it doesn’t generate revenue for the employer. One thing I should point out here is that if the employee carries out any online training for the employer during the period then they must be paid at least the National Minimum Wage of the National Living Wage during that period.
What level of salary can the employer claim for?
The scheme operates by an employer making an application to HMRC by way of an online portal. The new guidance clarifies that the grant applied for can cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. This means that the government will cover the wage costs such as NICs on top of the £2,500 or 80% for each furloughed worker.
The level of the employee’s salary is calculated as at 28 February 2020. Fees, commission and bonuses are not included. The guidance includes details of how to calculate the salary of an employee who has variable pay.
As an employee isn’t working during this time, the guidance has clarified that National Minimum Wage will not apply to the payments to the employee’s during that period (unless, as I’ve said, they are carrying out online training).
The employer can choose to top up the payment from the 80% so that the employee receives their full salary, but the employer will then be responsible for the National Insurance Contributions on that payment.
Changing terms and conditions
The Government makes it clear that placing an employee in furlough and so asking them not to work and changing the level of salary will be subject to existing employment law. This means that, depending on the terms of the employment contract, an employer may have to obtain the employee’s consent to such changes. Employers will need to consider how practically this can be achieved and whether collective consultation obligations will apply.
What should employers be doing now?
The online application is not yet in place and the government hopes that it will have the scheme up and running by the end of April. In the meantime employers need to be taking steps to take advantage of the scheme.
First, they need to determine which employees are to be placed in furlough. They also need to notify those employees that they are being designated as furloughed employees and keep a record of this communication. As I’ve mentioned, you may also need to seek consent to the change in their terms and conditions and consider how practically this consent is to be obtained.
Secondly, the employer must calculate the amount that it will claim for those employees. The guidance lists the information which the employer must provide in order to make an application. This includes: the ePAYE reference number; the number of employees being furloughed; the claim period (start and end date); the amount claimed; the employers bank details; and the employer’s contact details. So employers should be gathering all that information together now. A This means that you will be ready to ubmit this as soon as the portal is open.
This is an ever changing area and, so this video can only provide a brief overview of the scheme. We hope you found it useful and if you would like any more information on this then please contact me or one of the team at Norton Rose Fulbright. I will be issuing another video next week. Thank you