How do I find out if my business is a key service/contains key workers?
- The eight sectors include: health and social care; education and childcare; key public services; local and national government; food and necessary goods; public safety and national security; transport; and utilities, communication and financial services
Are all my workers deemed key workers if my business is deemed a key service?
- Whilst your business may be in a key sector and prioritised by the government, not all workers in this sector are deemed key workers
- More guidelines are available on the government business support website. If you are not clear which of your employees are covered under the key workers remit, contact your local authority who will be able to advise further
What is the Coronavirus Job Retention Scheme, and are my employees eligible?
- The Coronavirus Job Retention Scheme is a government scheme to allow UK employers to access support to continue paying part of their employee’s salary throughout the crisis
- Following the government’s announcement of new lockdown measures across the UK from 5 November, the Job Retention Scheme has now been extended to 31 March, with the government covering 80% of all furloughed workers’ wages up to a cap of £2,500/ month
- Under the revised scheme, employers are able to furlough workers regardless of the restrictions on their business. Workers do not have to have been previously furloughed to be eligible for this revised scheme
- Following government guidance published on 9 June, parents on statutory maternity or paternity leave who return to work in the coming months will be eligible for the furlough scheme, even after the 10 June cut-off date for new applicants
- The government has also announced that businesses who no longer need CJRS grants they previously claimed have the option to voluntarily return them
How do I designate workers as furloughed?
- Furloughed means that employees must remain on the business’ payroll, rather than being made redundant. The standard furlough period is currently three weeks, and employees must also not be engaged in work for you during this time
- Following government guidance published on 5 November, employees are eligible for the extended Job Retention Scheme (open until 31 March) regardless of whether they had been previously furloughed.
- There is no mandatory process for deciding which employees will be furloughed. Employers will wish to ensure there is a clear business rationale for decisions about who to furlough in order to avoid allegations of discrimination and further arguments around the unfairness of any subsequent redundancies. This is especially important where there are a number of employees carrying out a similar role and only some of those employees are to be furloughed
- Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to furlough, equality and discrimination laws apply in the usual way
- Claims should be made through the HMRC application system. Once claims are submitted, firms can expect payments within six working days
- Following the payout, HMRC may run checks to employers issued the fund to ensure the claim is legitimate and guidelines are being adhered to
Do my employees apply directly, or is this the business’ responsibility?
- It is the employer’s responsibility to facilitate this grant for employees. All businesses are deemed eligible for the scheme, regardless of status or size
- To access the scheme, you must have designated workers as “furloughed” and officially notified them in writing of this. In most cases you will need their agreement unless their contracts give the employer the right to alter salary and hours
Does this scheme apply to agency workers, part time workers and those on zero hours contracts?
- Agency workers paid through PAYE are eligible for the scheme
- Those on zero hours contracts, or whose pay varies per month are also eligible
- For employees who have been employed for a full 12 months prior to the date of the claim, their wages should be considered as either average monthly earnings from the 2019-20 tax year, or the same month’s earnings from the previous year, whichever is higher
- If the employee has been employed for less than 12 months, you can claim for an average of their monthly earning since they started work
Are directors eligible?
- As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006
- Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned
- Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company
- This also applies to salaried individuals who are directors of their own personal service company (PSC)
What can furloughed workers do while they are furloughed?
- Furloughed workers cannot do any work for your business that “provides a service or generates revenue”. It’s important that furloughed workers don’t do any work for you because it could stop you being able to claim the grant, and employees asked to undertake work for their employer whilst furloughed are encouraged to report this to HMRC
- They are able to volunteer for other organisations, such as the NHS, and undertake voluntary training, provided it doesn’t generate any revenue for the employer
- The government has also confirmed that furloughed employees are allowed to work for other employers
- If employees have to undertake mandatory training while furloughed the guidance is that you must pay them at least the National Living Wage/National Minimum wage for the time spent training, even if this more than the 80 per cent wage subsidy
- HMRC reserves the right to recover money from businesses and take criminal action against employers who have intentions to defraud the scheme via asking employees to undertake work whilst receiving furlough payments
- Further guidance on this issue is available to view on the government’s website
Can I furlough only some of my workers?
- Yes. There may be workers who cannot do their job from home if their workplace is closed, while others can
- If furlough involves more than 20 people you will likely need to follow the collective consultation process, as with redundancy, to get their agreement
- You can rotate groups of your employees in and out of furlough if you need to. The minimum period of furlough is three weeks and currently the maximum is three months. So as long as they are furloughed for at least three weeks you can bring them back to work and put another group on furlough if you want to
How does furlough work with sick pay?
- The guidance says that employees on sick leave or self-isolating should receive Statutory Sick Pay (SSP) or any higher contractual sick pay entitlement but can be furloughed after this. This suggests that they can only be furloughed after the sick leave or self-isolation has finished
- If employees become sick while on furlough, they keep their entitlement to SSP. This is likely to be lower than their furlough pay, so this unlikely to be a common choice
- Employees who are on sick leave or self-isolating cannot be furloughed and should get statutory sick pay (£94.25 per week) or any higher contractual sick pay entitlement. However, once they are able to return to work, they are eligible for furlough. Vulnerable individuals who are being shielded at home can be placed on furlough
Who pays statutory sick pay?
- Employees are still eligible for up to £94.25 Statutory Sick Pay (SSP), which the employer must pay for up to 28 weeks. The provision of SSP has now been extended to those staying at home to care for those in their household
- SSP is now available from day one of the workers’ absence, rather than day four, available retrospectively from 13 March
- For businesses with fewer than 250 employees, the cost of providing 14 days of Statutory Sick Pay per employee will be refunded by the government in full
- Further guidance on this issue is available to view on the government’s website
What about tax and National Insurance?
- Payments made by the employer will be subject to the usual deductions for income tax and national insurance
- The extended Job Retention Scheme covers employees’ wages up to a cap of £2,500/ month. Employers are required to cover pension and National Insurance costs for furloughed employees
- Further guidance on this issue is available to view on the government’s website, with guidance on the extended Job Retention Scheme has also been published by the government following the announcement of renewed lockdown measures on 2 November
What about pension payments?
- The government will pay only the auto-enrolment minimum employer pension contribution. However, this is capped at the standard three per cent contribution of the £2,500/month grant available through the Coronavirus Job Retention Scheme
- If your employees work under a pension salary sacrifice scheme, the 80 per cent pay is based on the employee’s reduced salary. The government’s scheme will therefore only cover three per cent of the salary sacrificed amount. If the employer pays more than the standard three per cent rate, this will not be covered by the government
- From 1 August, employers will be required to cover furloughed employee’s pension contributions, as well as national insurance costs.
- Further guidance and insight on this issue is available from Irwin Mitchell