In light of the Coronavirus Pandemic, and specifically in relation to the current lock-down situation, the Government has launched a Coronavirus Job Retention Scheme. Tom Bourne-Arton of Farrar’s Building reviews the temporary scheme which is open to all UK employers.
The intention is that employers who would otherwise have had to make redundancies, or consider other payroll decreases, can instead furlough some or all of their employees for a period of time.
of the scheme will hopefully mean that for employers impacted by the current
situation (e.g. because they are not able to operate during the current
Coronavirus induced lock-down, such as pubs and gyms) can keep their employees without
paying them. Instead the Government will make payments to those employees
whilst they are furloughed. Once the lock-down is lifted those employees will
be ready to return to work without the employer having to go through any
recruitment process. The potential costs savings to businesses by using the
scheme is significant.
an employer has already made redundancies, but with hindsight would have
instead furloughed their employees, provided those redundancies were made on or
after 28th February 2020, it is not too late to rehire those
employees and then furlough them. Obviously this will have to be done with the employee’s
order to furlough your employees changes to their employment contracts will
need to be agreed. This cannot be done unilaterally. It may be that a
collective consultation process will need to be undertaken if sufficient
numbers of staff are affected. It is to be hoped that most employees will chose
to be furloughed than made redundant but that is not a given.
from the scheme will be made on completion of an application online. The online service is not yet up and running.
The Government hope that it will be ready to be used at the end of April 2020.
This does not mean that employers cannot furlough employees now. It just means
the applications for payments cannot be processed before the end of April 2020.
What this delay does mean, however, is that employers need to be doubly sure
that they comply with the scheme and satisfy the requirements as they will not
be told they do not by the Government for at least a month.
scheme was, and is, available to employers from 1st March 2020 and
it will be available for at least three months.
There are a number of limitations to the scheme, which include the following:
government payments are up to 80% of employees usual gross monthly wage, but
only up to a max of £2,500 per month, plus the composite NI and automatic
enrolment pension contributions. If an employee’s wage varies then they can
claim the higher of the same month’s earnings from the previous year (e.g. the
May 2020 payment can match the May 2019 payment) or the average monthly
earnings from the 2019/2020 tax year. If the employee has worked for less than
a year then an average of the monthly earnings from their start date should be
used. If the employee started in February 2020 (but before 28th
February 2020) then a pro rata average should be used.
calculating the “usual monthly pay” fees, commission and bonuses are not to be
and minimum automatic enrolment employer pension contributions will still have
to be paid by the employer. As above, those sums can be claimed from the
entire government payment has to be paid to the employee (no deductions can be
made by the employer).
is only available to UK employers that had created a PAYE payroll scheme by 28th
Employer must have a bank account (for the payment to be paid into).
scheme is for employees who are not working. If employees are working part-time
or on reduced hours then they cannot be furloughed and are not eligible for
payments through the scheme.
minimum period of furlough is 3 weeks per employee.
scheme is not available to employees employed after 28th February
scheme will not run indefinitely and when it ends employees will return to previous
Other considerations in relation to the scheme include:
the employer is a public funded entity then the expectation will be that they
continue to pay their staff without
furloughing them. Obviously many public servants are essential workers.
is no issue with the type of contract employees were on. The scheme is
therefore available to:
on agency contracts
on flexible or zero-hour contracts.
an employee is on sick leave or self-isolating they should be receiving
Statutory Sick pay. After the sick leave or isolation is over they can then be
furloughed (provided they are otherwise eligible).
someone works for more than one employer – such as many employees on zero hour contracts
– they can be furloughed by each employer. If this occurs then the cap applies
to each employer individually. Therefore someone who is very hard working and
has three different employers and receives more than £2,500 a month from each will
be entitled to £7,500 from the government when she/he is furloughed by all
furloughed employee can undertake volunteer work and/or training. Two
such volunteer work or training cannot be revenue generating for the employer;
the training is required as part of their employment then the employer needs to
pay them at least the national minimum wage for the time spent training, even
if this is more than 80% of their wage that will be subsidised.
an employer wants to furlough employees they should inform their employees in
writing and keep a record of that communication.
entitled to Statutory Maternity Pay, Maternity Allowance, contractual adoption,
paternity or shared parental pay will still be entitled to the same payments.
If the employer offers an enhanced, earnings related, contractual pay to women
on Maternity leave then they can claim through the scheme.
- An employer can choose to top up the payments made by the Government, but the NI and pension contributions associated with such payments cannot be claimed from the scheme. Therefore in these situations the employer needs to work out the NI and pension contributions payable on the monies received from the scheme, and then claim them through the scheme, the additional NI and pension contributions will then be payable by the employer.
Tom Bourne-Arton is a member of the Farrar’s Building Employment Team. Please direct any instructions or queries to the Clerking Team.
Author: Tom Bourne-Arton Farrars (firstname.lastname@example.org)