COVID-19: New Guidance for employers on the Job Retention Scheme
COVID-19: New Guidance for employers on the Job Retention Scheme
This note updates and supplements our earlier advice on this Scheme, which can be found here.
Additional Government guidance on the Coronavirus Job Retention Scheme has been issued today, 27 March 2020. Whilst the Scheme has been very much welcomed, the scant details provided left employers guessing at whether and how it might apply to them. The guidance now issued helps resolve many (but not all) queries related to the Scheme. One of the biggest questions remains: when will employers get access to the Scheme. For now the best estimate is late April 2020. More on that below!
Furthermore the government has announced that employees will be able to carry over up to four weeks' annual leave in the next two years. The Regulations have not yet been published but the amendment is intended to allow businesses greater flexibility with managing their workforce when the Covid-19 crisis has abated.
The key headlines from the very latest Job Retention Scheme guidance are set out below.
The Scheme is open to all UK employers who had a PAYE scheme in place on 28 February 2020. There is no requirement for the employer to be regarded as one of the "essential" businesses nor for the employer to demonstrate any financial hardship.
Employees on sick leave or who are self-isolating cannot be furloughed (presumably until such time as they come off sick leave/isolation). Employees who are shielding in line with public health guidance can be placed on furlough. Shielding is to ensure protection of employees on the critical or vunerable list.
A furloughed employee cannot do any work whatsoever for their employer. This does not include training and volunteer work provided that neither generate income for their employer. It does mean, for example, that an employee simply running payroll (for example) cannot be designated as furloughed. The rotational furlough principles set out below may help mitigate this however.
Employers can only claim the grant once every 3 weeks; not weekly.
Reimbursement of 80% of wage costs up to a cap of £2,500 – what's new?
As we have known since last Friday when the Chancellor announced the Scheme, eligible employers can reclaim up to 80% of wage costs up to a cap of £2,500 per month. Most commentators quite legitimately assumed that that was a gross sum. Wrong. The new Guidance makes it clear that employers can also claim for the associated employer National Insurance Contributions (NICs) and minimum auto-enrolment pension contributions on that wage.
Fees, commissions and bonuses are not to be included.
Block Furlough Leave and Rotating Furloughed Employees (Flexible Furloghing)
Furlough Leave must be taken in a minimum of three week blocks. This suggests (and we go no further than this as the guidance is not entirely confirmatory) that an employer can rotate employees on furlough, provided that each rotating furloughed employee has been out on furlough for at least 3 weeks before returning to the workplace. This should assist employers in essential businesses give their employees time off on furlough. Presumably the 3 week period has been selected in part to try to minimise the risk of an infected asymptomatic furloughed employee returning to the workplace. Clearly however that risk cannot be entirely eradicated.
For those employees whose pay varies on a weekly or monthly basis, the employer can use the following reference periods and can claim for the higher of:
the same month's earning from the previous year (for example earnings from March 2019)
average monthly earnings in the 2019-20 tax year
This is likely to be applicable to Casual Workers as long as they are paid through PAYE.
Do you need an employee's consent to furlough them?
There was some debate around whether employers could impose furlough on employees. The guidance makes it clear that any decision to designate employees must be discussed with them and any changes (ie designating them as furloughed and reducing their pay) made "by agreement". It also states that to be eligible for the grant, employers must have written to their employees confirming that they have been furloughed. We have a suite of documents that can assist you with your furloughing process.
The guidance goes further and states that "if sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment". This will therefore apply to employers with more than 20 employees at any one establishment. The wording is a little vague in referencing that it "may be necessary". Presumably this is to cover the scenario in which an employer has no time to collectively consult in light of financial hardship/looming insolvency issues. Hopefully more clarification will come from the government on this point in the coming days and weeks.
Who/how to select which employees will be designated?
If an employer is only furloughing part of its workforce the guidance stresses that "equality and discrimination laws will apply in the usual way". Employers should draw up and apply fair selection criteria in deciding who to offer furlough leave to. It is important that employers are careful not to discriminate against employees with protected characteristics. Whilst we cannot say this with absolute certainty, prioritising vulnerable workers (by which we mean those with underlying conditions or those over 70 years of age) is unlikely to be discrimination as (a) the prioritisation of the elderly is likely to be objectively justifiable and (b) those who suffer from an underlying medical condition should reasonably be excluded from retention for business critical roles.
The guidance says it expects the HMRC portal to be up and running at the end of April. Where possible employers will fund salaries in the meantime and then claim them back through the portal. If the employer cannot afford to continue to pay salaries what should it do?
Three options are (1) seek to get its employees agreement to defer salary payments (clearly this may present challenges for the employees) (2) terminate the employment contracts and re-engage when the portal is up and running (risky in terms of claims, liability for redundancy payments) or (3) urgently seek a loan through the government's Coronavirus Business Interruption Loan Scheme or their bank. The last of these is the least risky and should be pursued wherever possible.
There will be quite a bit of administrative work required so employers should now use the intervening time to collate the information that will be needed for the portal.
To read the Government guidance in further detail, please click here.
Coronavirus support package for UK self-employed
In addition, the Chancellor has announced key details for a support package available to self-employed individuals. Many of our clients will engage with consultants, contractors and Personal Service Companies (PSCs) and as such this support package and supporting guidance issued by the Government will be of real assistance.
Some key questions which consultants or contractors may ask include the following:
How much support is available?
First payments under the grant may not be realised until June. There is a probability that it can be backdated to March subject to eligibility criteria being satisfied, but it does suggest that the maximum grant could be as high as £7,500.
The last three years’ tax returns will be the key evidence of earnings on which an assessment will be made. HMRC will take an average of your last three years’ profits as a self-employed person.
When will the support package be available?
Unfortunately, this will not be an immediate payment and the grant may not be awarded until June. But it will then be backdated to March, which suggests the maximum grant could be as high as £7,500.
How long will the support package be available to the self-employed?
The scheme is designed to last three months, but will be reviewed and could be extended.
How to apply?
HM Revenue & Customs will administer the scheme and contact eligible individuals with a form to fill in and send back.
Is the support package taxable?
The Chancellor announced the grant was taxable. So when it comes to your next tax return, the likelihood is that if you have returned to earning a decent sum, then some of the grant will be clawed back through the tax system.
Does the support package apply if tax returns have been submitted late?
The chancellor said he will accept “late” tax returns for the next four weeks only.
What is the position with Personal Service Companies?
The Treasury said: “Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the coronavirus job retention scheme if they are operating PAYE schemes.”
What is the position for individuals who have recently become self-employed?
If a tax return as a self-employed person has not been filed, they are not covered by this scheme. Individuals must instead apply for Universal Credit. The Chancellor said he had no choice but to use HMRC tax returns as the way to operate the scheme, and that 95% of the self-employed would be covered by it.
For further guidance on the Government's support package for the self-employed, please click here.