Your questions on the Government Job Retention Scheme answered
Recently, the Government announced plans to help employers keep staff during the Covid-19 pandemic. This is called the Job Retention Scheme.
We’ve gathered all the key information on how it works and put together this guide for employers. Please keep in mind that this guide maybe be updated, depending on any changes to Government advice.
WHAT IS THE JOB RETENTION SCHEME?
The scheme involves employers temporarily changing the status of employees so that they don’t work but are kept on the books to be brought back in when there is work for them to do. These employees are then known as ‘furloughed workers’.
Employers who do this can get a grant from the Government to cover 80% of furloughed employees’ wages, up to a maximum of £2,500 per employee per month.
AM I ELIGIBLE TO APPLY FOR THE SCHEME?
All UK organisations with employees can apply, including:
- recruitment agencies (agency workers paid through PAYE)
- public authorities
For full time and part time salaried employees, the employee’s actual salary before tax (as of 28 February) should be used to calculate the 80%. Fees, commission and bonuses should not be included.
Private and public sector organisations who are receiving public funds for staff costs or are receiving public funding specifically to provide services in response to the Covid-19 pandemic are not expected to furlough staff.
These organisations should use those funds to continue paying employees.
HOW DO I GET THE GOVERNMENT GRANT?
You will need to submit information to HMRC on who your furloughed workers are.
Once HMRC have received your claim and you are eligible for the 80% wage cost grant, they will pay it via BACS payment to a UK bank account.
The Government are creating an online portal to submit the information to. You can only make one claim at least every 3 weeks.
WHAT INFORMATION DO I NEED TO PROVIDE TO HMRC?
When submitting information to HMRC you will need:
- your ePAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 weeks)
- your bank account number and sort code
- your contact name
- your phone number
You should make a claim in accordance with actual payroll amounts at the point at which payroll is run or in advance of an imminent payroll.
The grant will be a reimbursement to you (the employer) so you should make the wage/salary payment to the furloughed worker as normal.
IF I PUT EMPLOYEES ON FURLOUGH AND I GET A GRANT TO COVER 80% OF THEIR WAGES, DO I HAVE TO MAKE UP THE OTHER 20%?
No, there is no requirement to do this but of course you can if you want to.
WHAT ABOUT TAX, NATIONAL INSURANCE AND PENSIONS?
The wages of furloughed employees will still be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on their earnings, unless they’ve chosen to opt-out of their workplace pension scheme.
Once you’ve decided which employees you are going to furlough and you’ve worked out how much of each employee’s salary you can claim for, you must also work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.
You (as the employer) will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on earnings on behalf of their furloughed employees.
Voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards) will not be covered by the scheme.
HOW DO I DECIDE WHO TO FURLOUGH IN MY BUSINESS?
If you are only furloughing a portion of your workload, then think carefully about whose skills will be needed most throughout this difficult period.
There is no maximum or minimum number of employees who can be furloughed in a business.
While you might think the best thing to do is furlough employees labelled as high risk by the Government, forcing them on to furlough without their input (and so forcing them on to 80% wages) may result in discrimination claims.
So, it may be best to ask for volunteers across the workforce and if there are any high-risk employees (who had previously been risk assessed as fine to work) who want to put themselves forward for furlough.
ARE THERE ANY EMPLOYEES I CAN’T FURLOUGH?
In theory any employee can be furloughed. This includes full time, part time, zero hours and variable hours, but they must have been on your payroll on 28 February 2020. Any new employees taken on since this date cannot be furloughed.
Staff need to be on PAYE for you to be able to claim the grant for their wages. Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February 2020.
Employees on sick leave or self-isolation can be furloughed after their period of sickness or self-isolation ends.
If your employee has more than one employer, they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.
Remember, as the employer it is your choice who you choose to furlough, and employees cannot insist on it.
DO I NEED AGREEMENT FROM EMPLOYEES TO FURLOUGH THEM?
In all cases, you should discuss the situation with employees on a one-to-one basis so that you can explain what is happening and come to an agreement around designating them as furloughed.
Guidance says that your ability to furlough an employee depends on their contract. It’s not likely that employee contracts will include a specific right to use furlough. However, employee contracts may include a right to lay off employees on no pay already.
So, this is likely to make the discussions around furlough a little bit smoother when you’re laying out the two options.
While the drop to 80% salary with a £2,500 cap may not initially be an attractive option to employees, it’ll probably be seen as the better choice when it’s explained that redundancy is the only other option available.
You may agree that 100% pay is maintained for your employees during furlough, but you will need to pay the extra 20% for each.
Above all, it’s very important that you get agreement to the reduction in pay, otherwise this may give rise to claims of breach of contract or constructive dismissal. Once you’ve come to an agreement with your employee, you should confirm their temporary furloughed worker status in writing.
WHAT IF I’VE ALREADY MADE SOME EMPLOYEES REDUNDANT?
If you’ve made employees redundant since the 28 February 2020, you can agree to bring them back and place them on furlough.
WHAT IF 80% OF WAGES FALLS BELOW NATIONAL MINIMUM WAGE/NATIONAL LIVING WAGE?
National Minimum/Living Wage (NMW/NLW) is a rate payable for hours worked. As no hours are being worked by the employee, it does not matter if 80% of wage falls below the minimum hourly rate.
IS THERE A MINIMUM FURLOUGH PERIOD?
Yes. An employee must be furloughed for a minimum of 3 weeks for you to be able to get the grant to cover their 80% wages.
You can designate an employee as furloughed more than once which in theory means that you can bring them back after a period of at least 3 weeks to perform some work, and then designate them as furloughed again.
There does not need to be any gap between furlough periods, either.
WHEN MY EMPLOYEES ARE ON FURLOUGH, CAN I BRING THEM IN ON A COUPLE OF DAYS IF I FIND WORK FOR THEM?
Once employees are on furlough, they will not be able to work for you during that period. So, this counts out a couple of days here and there, or a more regular ‘short time’ working arrangement.
They can do online training or volunteer subject to public health guidance, as long as they are not making money for you or providing services to you.
For example, if employees need to complete training courses whilst they are furloughed, then they must be paid at least the NMW/NLW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
Because you can place employees on furlough more than once, you can bring them in if there is work to do, but the period of furlough must stop for this to happen.
You can then agree to place them on furlough again. Each period of furlough must be at least 3 weeks long.
WHAT ABOUT EMPLOYEES ON MATERNITY LEAVE?
Employees who are about to go on maternity leave will go on leave as normal. However, if their earnings have reduced due to a period on furlough prior to the start of leave, and specifically during the period used to calculate their entitlement to Statutory Maternity Pay, their entitlement may be affected.
Those already on maternity leave will stay on it until they wish to return, at which point you need to assess whether there is work for them or reach an agreement with them to be ‘furloughed’.
Individuals must take at least 2 weeks off work (4 weeks if they work in a factory or workshop) immediately following the birth of their baby.
Employees who qualify for Statutory Maternity Pay will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower).
The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020. If you offer enhanced contractual pay to women on maternity leave, this is included as wage costs that you can claim through the Scheme.
WHAT ABOUT ANNUAL LEAVE & HOLIDAY?
The Government has introduced a temporary new law to deal with Covid-19 disruption.
Employees and workers can carry over up to 4 weeks’ paid holiday over a 2-year period, if they cannot take holiday due to Covid-19. For example, this could be because:
- they’re self-isolating or are too sick to take holiday before the end of their leave year
- they’ve been temporarily sent home as there’s no work (‘laid off’ or ‘put on furlough’)
- they’ve had to continue working and could not take paid holiday
Some employers will already have an agreement to carry over paid holiday. This law does not affect any agreements already in place.
If an employee or worker leaves their job or is dismissed during the 2-year period, any untaken paid holiday must be added to their final pay (‘paid in lieu’).
If your employee no longer wants to take time they’d previously booked, for example because their holiday’s been cancelled, you can still tell them to take the time off.
If your employee wants to change when they take this time off, they’ll need to get agreement from you (their employer).
AM I ALLOWED TO ASK EMPLOYEES TO TAKE ANNUAL LEAVE/HOLIDAY?
You do have the right to tell employees and workers when to take holiday if they need to.
If you decide to do this, you must tell staff at least twice as many days before as the amount of days they need people to take.
For example, if you want to close and put employees on annual leave for 5 days, you need to tell everyone at least 10 days before.
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This publication has been written in general terms and we recommend that you get professional advice before acting or refraining from action on any of the contents of this blog post. Office Power Ltd. accepts no liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.