Coronavirus Job Retention Scheme – What does this mean and can it help my business?
In line with the recent announcements to assist Northern Ireland Businesses, the Government issued the Coronavirus Job Retention Scheme, with further guidance recently released. We have set out the key features of the Scheme and advised on the most frequently asked questions from Employers we have received since the announcement.
Significant Features of the Scheme:
• The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers. The scheme will be open for at least three months starting from 1 March 2020;
• The scheme is open to all UK employers that had created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account;
• Employers can claim for 80% of each respective furloughed employees’ usual monthly wage costs, up to £2,500 per month, plus the associated NICS and minimum auto enrolment employer contributions. While on furlough, the employee’s wage will be subject to usual income tax, employee NICs and other deductions.
• Employee’s regular wage does not include fees, commission and bonuses.
• Employers can choose to “top-up” a salary, but it has no obligation to do so and it will not be funded through the scheme;
• Furloughed employees must have been on the employer’s PAYE payroll on 28 February 2020 and can be full-time, part-time, agency contractors or on flexible / zero-hour contracts;
• The scheme also covers employees who have been made redundant since 28 February 2020, if they are rehired by their employer, but new employees hired after 28 February 2020 cannot be furloughed or claimed for;
• A furloughed employee cannot complete any service of work for the business during their period of absence;
• A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for the business;
• Employees must be furloughed for a minimum of 3 weeks;
• HMRC confirmed employees can be furlough by one employer and continue to work for another;
Frequently Asked Questions:
1. My Business Employment Contracts do not mention Furlough – What do I do?
The term “Furlough” is not contained within any UK legislation. As such it is highly improbable that any Employment Contract in Northern Ireland will have an express clause relating to the entitlement to furlough Employees.
Generally, most employment contracts will contain clauses to deal with Employees on a period of temporary lay-off. There has been much legal discussion as to whether these clauses would be sufficient to allow the Employer to place the Employee on furlough. It is likely that would indeed be adequate, but those clauses should be reviewed to ensure their interpretation. In any event it would still be our recommendation that agreement with the respective employees is obtained.
An employer could be in breach of the employment contract if it simply imposed furlough. It is our advice that the process of furloughing needs to be agreed and ideally signed between the employee and employer so the risk of a potential claim from the employee at a later date is reduced. Where there are multiple employees and only some are to be furloughed, the employer should be able to demonstrate those decisions have been taken on a fair, logical and non-discriminatory basis. Generally this will be based on business needs, however, we have dealt with this further below.
2. The scheme is not running yet – what should I do in the meantime?
The scheme is available to be applied retrospectively. In the interim, seek legal advice as to your employment contracts and the implementation process. This is an ever changing area and you should ensure that you are up to date with the most recent guidance. Generally, this may involve consulting with your staff and seeking agreement, providing notification that you are seeking to furlough them under the scheme.
3. How is the 80% calculated?
The employer can claim for employees’ salaries up to £2,500 per month plus employer NICs and minimum auto-enrolment contributions. The 80% will be paid through PAYE and subject to the usual deductions. Fees, commission and bonuses should not be included in the calculation.
4. Is the £2,500 cap gross or net?
Generally, (dependant on salary) from the employee’s perspective, the amount payable is the gross amount, subject to the usual deductions.
The Government have confirmed that they will also contribute the basic employer auto enrolment pension contribution of 3% and the employer’s National Insurance Contribution of up to 13.8% on top of the salary amount.
5. How do I make a claim and when can I submit a claim under the Scheme?
Employers will make their claim under the Scheme through a new HMRC portal. HMRC has advised the Scheme is anticipated to be functioning by the end of April 2020. Employers will need to provide the following information to submit a claim:
• ePAYE reference number;
• confirmation of the number of employees being furloughed;
• the claim period (start and end date);
• the amount claimed;
• bank account and sort code;
• contact name; and
• phone number.
Once HMRC has received the claim and confirmed eligibility for payment, the monies will be paid via BACS into the employer’s bank account.
Claims will be reviewed by HMRC and Employers must ensure that these claims reflect historical PAYE and other submissions to HMRC.
6. I intend to top up my Employees’ salary to 100% , can I only do this to some “Key workers”?
If you decide to top up Employees’ salaries, the excess amount will not be funded by the Scheme. You will have to bear those excess costs.
You should be consistent with your employees to ensure that you are not at risk of any potential discrimination. It would be our recommendation that all employees receive a uniform amount.
7.Can I decide which employees are to be furloughed and which should continue to work?
Yes, the Employer should decide on the circumstances of the business, and as such the business need. This may involve retaining the staff whose roles/skills are required for the remaining work. If you need to furlough some from the same group of employees that do the same work, you should consult with the staff and approach it in a similar way to a redundancy decision.
8. Can I furlough an Employee on sick leave?
Employees who are on sick leave or are self-isolating should receive Statutory Sick Pay. The employee can only be placed on furlough when the employee is no longer on sick leave or self-isolating.
If the Employee is shielding in line with the Public Health Authority’s guidance, they can be furloughed.
9.How do I assess payment for those employees who do not work regular hours?
Those employees salary is to be based on:
(1) the higher of the pay for the corresponding week or month last year; or
(2) their average earnings over a period.
The period of averaging is the average pay for the 2019-20 tax year, or the period of employment if the employment started later than April 2019.
10. What about Employees on maternity leave?
If the Employee is eligible for Statutory Maternity Pay or Maternity Allowance, the normal statutory provisions will apply. If the Employer offers enhanced maternity pay the enhanced element can be claimed through the Scheme.
11. Is it possible to alternate the staff members furloughed so they do one month on and one month off?
Furloughed Employee must not undertake any work in the business during their period of absence. At this stage the scheme does not clarify the position of rotational furlough. The guidance states that the minimum period of furlough is three weeks, it also states that an Employer is able only to make one claim in each three week period. It therefore appears the Employer may be able to furlough and reinstate staff, but you should seek legal advice as to the business’ individual circumstances.
12. Is it possible to furlough more employees if my business situation worsens?
Yes, this may be a multi-stage process given future workloads are unknown and it may be necessary to add to the number of employees furloughed, or to reintroduce employees to the workforce as demand increases (subject to the scheme remaining open).
https://www.gov.uk/coronavirus provides the latest government guidance.
Please note this is offered as general guidance only. Legal advice should be sought for the business’ individual needs. Contact a member of our Employment Team on 02890 32100 to discuss your respective business’ needs or email:
Seamus McGranaghan: email@example.com
Christina Lishman: firstname.lastname@example.org