COVID-19: Updated Guidance for employers on the Coronavirus Job Retention Scheme. Updated 6 April 2020
COVID-19: Updated Guidance for employers on the Coronavirus Job Retention Scheme. Updated 6 April 2020
This note updates and supplements our earlier advice on this Scheme, which can be found here.
On Saturday 4th April the UK Government issued some further much needed guidance on the Coronavirus Job Retention Scheme (the Scheme). Important questions remain outstanding but this updated guidance does bring employers a step closer to understanding the applicability of the Scheme to their employees.
The key headlines from the very latest Job Retention Scheme guidance (issued Saturday 04/04/2020) are set out below.
Does our business need to be contemplating redundancies before furloughing employees?
The UK Government guidance to date has stated that the Scheme was intended as 'an alternative to redundancy, lay-off or short time working.' The Government then clarified that it is "designed to help employers whose operations have been severely affected by coronavirus." This has left many wondering what "severely affected" means and whether an employer needs to be at the brink; or to have been on the brink of redundancies or lay-offs before it can designate employees on furlough and benefit under the Scheme.
The latest guidance says that the Scheme is intended for use where an employer "cannot maintain your current workforce because your operations have been severely affected…" [emphasis added is our own]. This suggests that the Scheme should only be used where redundancies, or related measures would otherwise have to be effected. The guidance goes on to expressly state, however, that "all employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus".
Businesses that would otherwise have to make redundancies or implement temporary lay-off or short-time working (with the risk of redundancies arising) are clearly likely to fall within the Scheme and we recommend that the decision to furlough staff and the rationale for that designation are clearly documented.
As a word of caution, the government has already indicated that it may retrospectively audit employers that make use of the Scheme with the ability to seek reimbursement from employers who are determined to have abused the Scheme. Further, note our comment below on the need to keep records for 5 years in regard to Employee consent.
The government has further expressly confirmed, as already anticipated, that an employer is permitted to furlough only part of its workforce, whilst retaining the remainder at work; it is not necessary for the whole workforce to be furloughed as a group.
The process of furloughing
Our previous article (link above) discusses how furlough arrangements should be implemented. This latest guidance makes it clear that employers must seek to obtain the employee's consent before furloughing them and confirm, in writing, that they have been furloughed. A record of this communication must be kept for 5 years.
The difficulty in obtaining express written consent – at a time when many employees have already been furloughed (especially in the hospitality sector) is a common theme. There are a number of issues arising here, of which e-signatures, contractual obligations, verbal consent and implied consent are just some examples. These are complex legal issues often unique to each individual business and specific legal advice on each situation should be sought.
Can employees be rotated on furlough?
Yes. Helpfully the guidance has further confirmed that it is acceptable for employees to be rotated on multiple occasions, provided that each instance of furlough is for a minimum period of 3 consecutive weeks. When an employee returns to work they must be taken off furlough. Presumably the employee's consent may need to be obtained if they are then to furlough. If this sort of rotational arrangement is envisaged by an employer, it will be advisable to obtain a broad form of consent at the outset which covers this specific possibility within the entirety of the Retention Scheme.
Can employees be partially furloughed?
No. This was the government's position at the outset of the Scheme and the current guidance does not change it. If an employee is placed on furlough they cannot do any work for their employer for the duration of their furlough. An employer will be expected to either allocate business critical work to employees that are not furloughed or to use the rotational system referenced above to help manage its operational demands.
Furloughed employees can however take part in volunteer work, certain study leave and training (provided that this does not provide services or generate revenue for the employer).
What does "regular wages" include and exclude?
HMRC will reimburse 80% of an employee's 'regular wages', up to a limit of £2,500. Employer's NICs and minimum automatic enrolment employer contributions can be claimed on top of that amount. None of this has been changed by the latest guidance. What has helpfully been clarified is:
An employer can claim for any regular contractual payments, including wages, past overtime, compulsory commission payments and fees.
Discretionary bonus, tips, non-contractual commission payments and non-monetary benefits (eg health insurance, car allowance) are excluded.
Pension contributions over the minimum auto-enrolment employer contributions are excluded.
If the employer does not continue to pay the excess pension contributions, or have the employees' express agreement to cease doing that, this may trigger pension consultation obligations. Legal advice should be sought.
The key word (highlighted above) is contractual and we anticipate there will be debate around what elements of remuneration properly can be considered as contractual. The legal arguments which will be engaged will probably be the same as those utilised for the proper calculation of holiday pay – so Employers considering what elements of pay to apply for under the scheme might well use that approach as a basis. As the HMRC criteria remain open to interpretation, any communication issued to furloughed or designated employees should only state the employers 'expectation' in this regard. It is not something which can be guaranteed until we have better government guidance and/or the HMRC portal has opened and confirmed precisely which elements will be accepted on a business by business basis.
Clarification around the "28 February 2020" requirement
To qualify for furlough an employee must have been on the employer's payroll on or before 28 February 2020. The government has made it clear that employees that join the payroll after 28 February 2020 cannot be furloughed by that employer. The Chancellor has explained that this is to avoid opportunities for fraudulent claims (e.g. employers hiring friends or family members that would otherwise not have been hired) to be made under the Scheme.
For employers that had already made redundancies after 28 February 2020, the government has indicated that it is open to their employer to rehire these staff and immediately place them on the Scheme. Similarly if an employee had resigned after 28 February 2020, their former employer can rehire them and place them on furlough. The employer is not obligated to do this however. To the extent that an employer receives a rehire request but does not wish to do so, or is considering rehiring some employees but not others, it should give careful consideration to ensuring that there is no risk of discrimination claims as a consequence of its decision or selection.
If an employee had tendered their resignation but their notice had not yet expired, the employer can rescind the resignation or agree to an extension of the notice period, but again there is no obligation to do so.
Employers who agree to re-hire staff should approach this carefully in order to ensure clarity is maintained around the nature of the arrangement and what will happen once the Scheme ends. It should be noted that re-hired employees will accrue holidays and in certain circumstances may have continuity of service for the purposes of unfair dismissal rights. Again we recommend taking specific legal advice in this area.
Are 'workers' permitted under the Scheme?
The guidance has provided helpful clarification around individuals who are not employees but who are paid via PAYE.
The Scheme will cover fixed term workers, casual workers and zero hour contract workers, subject to the other rules on eligibility (particularly whether they were on the employer's payroll at 28 February 2020). The latest guidance further confirms that a fixed term worker's contract can be extended whilst that worker is on furlough without that action breaching the terms of the Scheme.
Limb "b" workers and salaried members of LLPs can also be furloughed, again provided they meet the other criteria for eligibility under the Scheme.
Where agency workers are paid through PAYE, they may be furloughed, including where they are employed by umbrella companies. Furlough should generally be agreed between the agency, as the deemed employer, and the worker.
The position on company directors has been clarified. They can be furloughed (appropriate internal company procedures should be adopted to approve and reflect this) but will be limited to only the discharge of statutory duties whilst on furlough "provided they do no more than would reasonably be judged necessary for that purpose."
If an employee is absent on sick leave, the guidance makes it clear that they cannot be furloughed whilst they are in receipt of SSP. Once SSP ends, they can be furloughed.
Shielding employees or those with Carer Responsibilities
Shielding is the term given by the government to categorise employees who have received a letter from the NHS indicating that they are to be regarded as "extremely vulnerable." That category of employee can (and arguably should) be furloughed. This has not changed following the new guidance. What the new guidance does however state is that for employees "who are required to stay home due to an individual in your household shielding and are unable to work from home, then you should speak to your employer about whether they plan to place staff on furlough". This is somewhat confusing as the government guidance on shielding states that members of the same household are not required to stay at home and shield. Further clarification is required.
Employees who cannot work because of caring responsibilities due to COVID-19 can be furloughed. The example given is employees that need to look after children.
In both instances the government guidance is that these categories of employees can be furloughed; not that they must be. We recognise that this is one of the most sensitive and complex areas for both employers and employees and would strongly recommend that any Employer facing these questions should take immediate legal advice, and keep any decision under regular review.
Working for a different employer
A furloughed employee is permitted to work for another employer, provided that there is nothing in their contract of employment that prohibits that. A furloughed employee in these circumstances could, for example, take up temporary work at a supermarket during the COVID-19 crisis. Employers should be clear with employees that it may end furlough at any stage and the employee will be required to return to their usual work in such circumstances.
Making a claim
The guidance states that an employer should make its claim using the amounts in its payroll either shortly before or during the running of payroll. Claims may be backdated until 1 March 2020, "where employees have already been furloughed."
Key areas that remain unclear
Whilst the latest guidance provides welcome answers to many questions, the following burning questions remain currently outstanding:
Holidays - The government has not yet provided categorical guidance on whether employees can take holiday during furlough, whether they can be required to take holiday during furlough or (if they can) how much they should be paid by the employer versus how much can be recouped through the HMRC Scheme.
Sickness during furlough - It is not yet clear whether an employee that falls sick during furlough should be transferred to sick leave/pay and, if so, whether that would break the 3 week consecutive minimum furlough period thereby affecting their salary payments during that entire 3 week period.
TUPE transfers - It remains unclear whether an employee that has transferred under TUPE after 28 February 2020 can be placed on furlough, because of course the requirement to have been on the relevant PAYE register remains the 28 February 2020.
We are continuing to closely monitor all updates from the government on these and all areas related to the Coronavirus Job Retention Scheme.