Hello – my name’s Paul Griffin and I’m head of the Norton Rose Fulbright Employment Team in London. I’ve spoken to you over the last few weeks about the UK Government Job Retention Scheme. I can now tell you all that the Scheme is open for applications. In this video, I’m going to look at what this entails and also explain some significant amendments which were made last week to the Government Guidance, as well as changes to the Guidance on 15 April, the UK Chancellor made a Treasury Direction under Section 76 of the Coronavirus Act 2020. This Direction is the legal framework under which the Job Retention Scheme is established and should be read together with the Guidance.
So let’s now look at the changes that have been made to the Scheme.
How long will the Scheme operate for?
One of the first things which I should mention is that the initial period of the Scheme has been extended by a month, so that it will now run for an initial period of four months, from 1 March 2020 until the end of June. This makes sense, as any large business who planned to make 100 or more people redundant at the end of the furlough scheme on 31 May, would have had to have started the minimum 45-day collective consultation on 17 April. To give more time for such decisions the Government has agreed an extension of the Scheme.
Which employees are eligible under the scheme?
In my previous videos I’ve told you that an employee had to be on the employer’s payroll on 28 February to qualify to be furloughed. This date has now been changed to 19 March 2020, the day before the Scheme was announced. As a result, this brings into scope those individuals who had previously fallen outside the Scheme because they had changed jobs after 28 February, but before the Scheme was announced. The salary reference date for calculating the claim for employees has also changed to 19 March. However, if the employer has calculated the claim based on the salary as at 28 February and this is different to the pay period up to 19 March, then the employer can choose to use the 28 February calculation for the first claim.
The change in date has also meant some further clarifications regarding unpaid leave. Although the Direction is not entirely clear on this point, the Guidance suggests that while an employee who was on unpaid leave after 28 February can be claimed for under the Scheme, this can only apply from the date that they are formally put on furlough instead of unpaid leave. If individuals were on unpaid leave before 28 February they can only be furloughed on the date that it had been agreed between the employer and employee that they would return from their unpaid leave or sabbatical. This is to prevent any abuse of the system.
Placing the employee on furlough
The Government Direction has raised some confusion regarding the agreement required for placing an employee on furlough. The Direction states that a furloughed employee must have been instructed to cease work and the employer and employee must have agreed in writing (which could be in electronic form such as an email) that the employee will cease all work in relation to their employment. Under previous versions of the Guidance, and as I have previously indicated, the employer was simply required to notify the employee that they were being placed on furlough. However, the Guidance now states that if confirmation is sought from the employee which is consistent with employment law, then that consent is valid for the purposes of claiming under the Scheme. While there must be a written record of the furlough arrangement, the guidance suggests that the employee does not have to provide a written response. Its therefore not clear whether an employee can impliedly give consent. Obviously, if there are changes to the employees terms and conditions, such as a reduction in wages, then employers should always seek express consent to those changes. Some employers, however, may not have sought agreement to the furlough arrangement and therefore on the strict reading of the Direction it may be that the employee is not strictly placed in furlough. Whether the employer can seek retrospective agreement to the furlough arrangement and therefore permit the employee to be furloughed is unclear. Further information is awaited on this point.
Annual leave and Statutory Sick Pay
At last, both the employer and employee guidance has included reference to holiday pay. The guidance confirms that employees can take holiday whilst on furlough but that the Working Time Regulations require holiday pay to be paid at the employee’s normal rate of pay. That means that if a furloughed employee takes holiday, the employer should pay the usual holiday pay and will only be allowed to claim for the 80 per cent. Some employers may decide that they cannot afford to pay the additional pay and the guidance does state that employers do have the flexibility to restrict when leave can be taken if there is a business need. This could apply for both the furlough period and the recovery period. If an employee usually takes bank holidays as leave then the employer would either have to top up their usual pay or give the employee a day of holiday in lieu. There are various issues as to whether you can require an employee to take holiday in these circumstances and employers will have to think carefully regarding issues of holiday during the furlough leave. You also need to remember that changes to the Working Time Regulations do mean that employees who have been unable to take holiday due to the coronavirus crisis can carry forward any untaken holiday for a further two-year period. This may not be the last word on holiday as the government has also said in the guidance that it is keeping the policy on holiday pay during furlough under review.
The Direction and the Guidance have also made some changes in relation to employees who are on SSP. In the Guidance it is suggested that if employees are on long-term sickness, then the employer can furlough those people if they are eligible to do so. However, the Direction implies that the period of furlough should not start until the person has ceased to be eligible for SSP. Those who are now eligible for SSP has also been extended by further amendments to the SSP legislation to include those who are classed as extremely vulnerable and at a high risk and are advised to remain at home for at least 12 weeks. This extension of SSP is intended as a safety net for individuals in cases where their employer chooses not to furlough them under the Scheme and does not have other suitable policies in place, such as the ability to work from home. The Guidance clarifies that an employer can claim back from both the Scheme and the SSP rebate scheme for the same employee but not for the same period of time.
Submitting the calculation
As I mentioned at the beginning of this video, the online portal has now opened for applications to be submitted. The Government has also now published a separate guidance note which provides details of how to calculate 80 per cent of the employee’s wages to claim through the Scheme. This can be found on the Government website and provides helpful advice on calculating the maximum wage amount which the employer can claim for, and some helpful worked examples of how to calculate the amounts for different pay periods.
The guidance provides further details of how details will be entered on to the system. If the employer has fewer than 100 furloughed staff then the employer will be asked to enter details of each employee they are claiming for directly on to the system. If there are 100 or more furloughed staff then the employer will need to upload a file with the information rather than input it directly into the system. The file should contain the same information which includes the name, National Insurance number, claim period and claim amount, and the optional requirement of the payroll or employee number. HMRC makes it clear that it is the employer’s responsibly to retain records and calculations of the claims and also to provide the employees with details of the claims that are made on their behalf. The employees should not contact HMRC.
The amended guidance also confirms that HMRC will audit the Scheme and ensure that it is not abused by employers. Payments under the Scheme may be withheld or will need to be repaid in full if the claim is based on dishonest or inaccurate information or found to be fraudulent. There will also be an online portal for employees or members of the public to report suspected fraud under the Scheme.
As ever if you would like any more information on the Scheme and how to make the applications, then please contact me or one of the team at Norton Rose Fulbright. I will be producing further videos on this topic and again hope that you all remain safe and well.