Updated 16th April 2020

What is Furlough?

It’s a new classification of employee/worker status as part of the Government Coronavirus Job Retention Scheme which sits alongside temporary lay off, this means that the employer can claim a grant from the Government to cover 80% of the employees’ wages up to £2,500 per month.

 

Who qualifies for Furlough?

  • Employees who are on PAYE on or before 19th March and which were on an RTI submission on or before this date
  • TUPE employees even if they joined after 28th February 2020 (if either the TUPE or PAYE business succession rules apply to the change in ownership)
  • Employees of zero hour or flexible contracts
  • Agency workers

 

How long will Furlough last?

The Government have stated that the Job Retention Scheme will initially last 3 months’ starting from 1st March but this may be extended.

 

How long can an employee be on furlough?

Employees will need to remain on furlough for a minimum period of 3 weeks, should the employer require the employee to return to work prior to the 3 weeks then they may still be required to pay them 80% of wages up to £2,500 per month for the period they were off work, the employer may not be able to claim this back from the Government, although this has not yet been confirmed.

The Job Retention Scheme is initially for 3 months starting 1st March 2020, however this could be extended.

 

How many times can an employee be placed on Furlough?

Employees can be placed on furlough more than once, one period of furlough (minimum 3 weeks) can follow straight after an existing furlough period.

 

What do I pay if my employees’ wages vary?

Average earnings should be calculated based on the higher of:

  • Previous average monthly earnings for the 2019/2020 tax year
  • Earnings in the same month last year

 

Do I have to top up my employees’ wages?

No. The Company can apply discretion and top up the employees’ wages, however there is no statutory or contractual requirement to do so.

 

Can an employee on sick leave be furloughed?

As the minimum period for furlough is 3 weeks an employee who is sick and their absence is likely to be for less than 3 weeks should be paid sick pay. Once the period of sick leave has come to an end the employee can then be placed on furlough.

Employees on long term sick or those who are ‘shielding’ in line with public health guidance can be placed on furlough. Shielding means employees who are extremely vulnerable and have been notified by the NHS to isolate for 12 weeks.

 

An employee has become sick whilst on furlough, what should we pay them?

The employee can remain on furlough and continue to receive 80% of their wages, however this is up to the employer. The employee still has a statutory right to be paid Statutory Sick Pay or a contractual right to company sick pay (if applicable).

The company will need to bear in mind that if they chose to place the furlough employee on SSP then they may no longer be able to claim the 80% of the employees wages through the job retention scheme.

 

Can an employee that is staying home due to caring responsibilities caused by COVID-19  be placed on furlough?

Yes, the employee can be placed on furlough. This includes employees currently at home looking after children.

 

Can an employee on unpaid leave be furloughed?

If the employees unpaid leave started prior to 28th February 2020 they cannot be furloughed, if the period of unpaid leave started on or after 28th February then they can be furloughed.

 

Can an employee volunteer elsewhere during furlough?

A furloughed employee can take part in volunteer work providing that it’s not for their employer and providing that they don’t receive any pay for the work they do. You may want to consider writing to the employee confirming they need to gain permission before they start volunteering.

 

Can an employee work for another company during furlough?

An employee can work for another company during furlough, however, you may want to think about your company policies at this time, such as requesting the employee to seek permission before seeking second employment and ensuring they’re not working for a competitor or a partner company. You should express to the employee that they must be available to return to work immediately should the company request.

 

The company cannot afford to pay 80% of the employee wages before receiving the funding. What can we do?

The company could think about changing the pay date to reflect the first furlough payment; however, this should be done by seeking employees permission, this can be done by writing to the employees affected to seek permission prior to implementing this. Be honest with your employees, inform them of the situation and that this is only a temporary measure.

 

Do we have to pay Minimum Wage employees 100% of their wages during furlough?

You can pay 80% of their wages during furlough even though this will bring them below minimum wage. This is because the employee must be paid minimum wage for the hours they work and during furlough they’re not working.  When the employee returns to work they must be paid their usual pay.

 

Do I have to write to the employees affected confirming they’re on furlough?

Yes, this should be done without delay. You should also seek the employees written permission to be placed on furlough as this is a change to their contract of employment and a deduction of wages

 

Does the company have to seek permission to pay 80% of the employees wages?

Yes, written permission is required. You could do this by adding a signature section to the bottom of the furlough letter.

 

How will annual leave by effected - eg if someone has leave booked in May, should this be cancelled?

HMRC customer services have tweeted to confirm annual leave can be taken during furlough and ACAS have also confirmed holidays can be taken during this period. But the employer must pay the employee 100% of their wages for the holiday period. While this isn’t confirmed by the Government the company may be able claim 80% of the holiday payment through the CJRS.

You could do the following:

  1. Let the employees have the holiday and pay 100% of their wages.
  2. Let the employees know that they are furloughed and as such are not on holiday so you will put the holiday back into their entitlement for use at a later date. Due to recent amendments to the Working Time Directive regulations 1998, (amended to The Working Time (Coronavirus) (Amendment) Regulations 2020) the employee is entitled to carry over their annual leave for the following:
    • A maximum of 4 weeks leave can be carried over to the following two leave years.

A maximum of 1.6 weeks can be carried over to the following leave year.

 

We have placed the employees on short time working (reduced hours) are they eligible for furlough?

The employee is not eligible for the furlough payment while on short time working, they will instead receive a pro rata payment of wages in line with the hours they are working. During furlough the employee cannot carry out any work on behalf of the employer.

 

An employee’s fixed term contract is coming to an end can we extend their contract and place them on furlough?

The employer can extend the employment contract and place the employee on furlough. You should discuss this with the employee prior to committing to this. Should the contract be extended to allow the employee to go on furlough then this should only be done for as long as necessary.

 

Can we claim 80% of an employees wages if they go on Maternity or Paternity leave?

You can only claim for this if the company offers enhanced pay during leave. Statutory maternity, paternity and other types parental leave and pay are unaffected during this time and remain unchanged.

 

An employee is due to return from statutory leave (maternity, paternity, shared paternity leave, adoption leave, sick leave, parental bereavement leave) can we place them on furlough and how do we calculate their pay?

You can place the employee on furlough once their leave comes to an end, providing that this is after 28th February 2020.

Furlough pay must be calculated against their usual salary (prior to statutory leave), if the employees pay varied prior to statutory leave, you could calculate their pay by using their average earnings from 2019-2020 tax year or use the same months earnings from the previous year.

 

We pay higher pension and national insurance contributions for the employer; can we claim this back?

You will not be able to claim for the enhanced contributions, however you will be able to claim the mandatory employer contribution.

 

Can we claim for wages paid from 1st March even if we didn’t furlough employees until after this date?

No – the claim should only be made for wages paid from the date that employees were placed on furlough/not required to attend work. If there were working before this date they should be paid salary as normal and the company cannot reclaim this money.

There are likely to be fraud checks carried out on the claims made to HMRC so it is not recommended to make a claim for time that the employee was working.

 

When is the system going to be ready for reimbursement?

It is anticipated that the system will be ready by the end of this month, we have heard that the 20th April is a date being suggested when the system will be live.

 

Can we dismiss an employee who refuses to go on furlough?

Yes, but only by way of redundancy and as long as the redundancy definitions are met and a fair process has been followed.

Redundancy payments cannot be claimed back through the scheme and cannot be reduced to 80%.

 

What do I do if I need to make redundancies?

The aim of the Coronavirus Job Retention Scheme is to avoid redundancies where possible, therefore the Furlough scheme should be used as a temporary measure to avoid redundancies.

If, once the furlough scheme is no longer in place, the company are in a position where they need to make cuts the option of redundancy can be explored. It is not advisable to make redundancies whilst the CJRS is in place.

 

Do we still have to pay company car allowance?

Employees who receive a company car allowance should still receive their allowance on top of the 80%.

 

Can an employee on a salary sacrifice scheme stop paying while on furlough?

An employee can stop participating in their salary sacrifice scheme during the period of furlough as this is a ‘life event’.

 

What happens if we ask an employee to come back before the qualifying 3 weeks?

If work becomes available then you can request an employee to come into work, however you will need to bear in mind that the company will still have to pay the employee 80% (capped at £2,500) for the furlough period but will not be able to claim this back from the CJRS.

The team at Honest Employment Law Practice are happy to help if you require further information on furlough and the Coronavirus Job Retention Scheme - please contact the team us via our website our call us on 01543 431050.