Coronavirus Job Retention Scheme: Expert Advice & Guidance

covid-19 advice

On 20 March 2020, the Chancellor Rishi Sunak announced support for employers and employees under a Coronavirus Job Retention Scheme. The detailed guidance has been released and we have summarised the details below:

  1. The scheme is open to all UK employers that had a PAYE scheme in place on 28 February 2020.
  2. Any organisation with employees can apply, so the scheme includes charities, recruitment agencies and public authorities. This stated, the government does not expect public sector employers to use it as long as central government continues funding wage costs in the normal way. With agency employees, the scheme is only available for agency employees who are not being provided with work.
  3. Employers can reclaim up to 80% of wage costs up to a cap of £2,500 per month, plus (not including) the associated employer National Insurance contributions and minimum auto-enrolment pension contributions that wage. Any fees, commissions and bonuses are not included.
  4. An employer can choose to top up the pay to 100%, but it does not have to be subject to employment law and renegotiating any contractual entitlements. Again, remember that an employee must consent to be “furloughed” on the lower pay unless the employer has an express lay-off clause in the contract.
  5. For employees who have variable pay, the employer can claim for the higher of (i) the same month's earning from the previous year (e.g. earnings from March 2019); or (ii) average monthly earnings in the 2019-20 tax year.
  6. Individuals are only entitled to the minimum wage for the hours they work. So, if they are furloughed and do not work, and 80% of their normal earnings would take them below the minimum wage based on their normal working hours, they still only receive 80% as they are not working.  However, they are entitled to be paid NMW for any time spent training.
  7. To be eligible, the employee must have been on the payroll on 28 February 2020.  Those who go on the payroll after this date will not be eligible for the grant. However, it can apply to any form of employment contract and will include full-time, part-time and employees on flexible or zero-hours contracts.  
  8. An employee who was on the payroll on 28 February 2020 and was subsequently made redundant can be ‘re-hired’ by the employer and put on the furlough scheme.
  9. Furlough leave must be taken in minimum blocks of three weeks to be eligible for funding, any shorter periods will not count for the grant. Therefore, you cannot rotate employees weekly, but there is nothing in the guidance which prohibits an employer rotating furlough leave amongst employees (provided each employee is off for a period of at least three weeks). There also does not appear to be any limit on the number of times an employee can be “furloughed”.
  10. The employee must do no work at all. If they work at all, for even a very short period during the entire three week furlough period, the employer will not be eligible for the grant. However, the employee may be able to undertake training and do volunteer work, provided they do not provide services to or make any money for their employer. The scheme will not apply to a reduced hours or short-time working scenario.  
  11. The employer must be careful not to discriminate in deciding who to offer furlough leave too. It is our view that giving priority to vulnerable workers (such as employees over 70 or with disability conditions) is unlikely to be discrimination and, if it is, then it will be justifiable.
  12. It is clear that employees on sick leave or who are self-isolating cannot be furloughed, but they can be put on furlough leave after they return.
  13. Employees who are ‘shielding‘ due to being in the vulnerable class can be placed on furlough.
  14. Employees on maternity (or other family leave such as shared parental leave or paternity leave) will continue to receive their normal statutory payments, although the guidance does not directly prohibit them from agreeing to return to work early and then being furloughed.
  15. The employer must designate the employee as a furloughed employee, which as above may require their agreement where the employment contract does not have a lay-off clause, and keep a record of the communications for inspection by HMRC, if needed.
  16. When the government scheme ends, the employer must decide whether the employees will return to work and, in some cases, employers may then have to consider making redundancies.    

We’d recommend employers read the full guidance.

Please note, all advice and opinions offered in this article are subject to change in line with the latest government advice

James Johnson

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