In response to widespread business disruption as a result of the Coronavirus crisis, on Friday 20th March the Chancellor announced a new Job Retention Scheme whereby 80% of wages of workers who would otherwise be laid off/made redundant will be funded by the Government.
Kirsty Duck, HR Consultant at face2faceHR in Chippenham provides us with the answers to some frequently asked questions.
How does it work?
The idea is that you designate employees who would otherwise be made redundant or laid off as ‘furloughed workers’ instead, and claim back some of their salary from the Government so you can continue to pay them.
Which staff are eligible?
Workers on your PAYE scheme are eligible, which include full time, part time, and zero hours staff.
You can only put staff on furlough who were on your PAYE scheme as of 28th February 2020. If they started work after that date, you cannot claim in respect of their pay if you choose to put them on unpaid leave or terminate their employment due to lack of work.
The scheme is designed to be used to retain workers who would otherwise have lost their jobs as a result of a lack of work because of the coronavirus outbreak. If staff cannot work due to other reasons, such as their children’s school being closed, they should be allowed to take unpaid leave or annual leave.
What funds can I claim back?
You will be able to claim back 80% of monthly wage costs, or a maximum of £2,500 if this is less, plus Employer’s NI contributions and pension auto-enrolment contributions.
You should not include bonuses, commission or other fees in your calculations, only basic salary.
You will not be able to claim for pension contributions over the minimum auto-enrolment rate if you usually make additional voluntary contributions.
What about the other 20% of salary – do I need to pay this?
You don’t have to, although you can if you wish.
What if my worker has variable pay?
If they have been employed for at least a year prior to when you make the claim, you can either use the same month’s earnings from the previous year, or their average monthly earnings from the last tax year, whichever is higher. If they’ve not been employed that long, you can use their average since they started work.
If I only pay 80% this will put my workers below minimum wage, does this matter?
No, this is fine, because National Minimum/Living Wage requirements only relate to hours actually worked. Your furloughed workers will not be doing any work so minimum wage doesn’t apply.
Is the furloughed amount taxable?
Yes, the wages received during the furlough period are subject to tax and National Insurance as normal, and to auto-enrolment pension contributions.
How long do I furlough the workers for?
It must be for at least three weeks, so you can’t put them on furlough one week and then bring them back into work the following week.
Do I have to furlough everyone?
No, many businesses will need to keep some staff working so you can furlough some and not others.
I already made some people redundant, can I put them back on the payroll and furlough them?
Yes you can, as long as they were on your payroll on 28th February.
I have reduced the hours of staff because I have some work but not as much – can I use the furlough scheme to make up the difference in pay?
No, the scheme is for employees who would otherwise be made redundant/laid off without pay, not for those whose hours are being reduced.
Can furloughed employees come in and do some work if I need them to?
No, once they are furloughed they can’t work for you during the furloughed period.
However, if you need them to do some training, this is fine, although they must receive at least the relevant National Minimum Wage rate if they do so, even if this means they will get a total of more than the 80%.
I want to be fair – can I switch employees over from being furloughed and working week-by-week?
An employee must be furloughed for at least three weeks. There is nothing in the guidance to suggest you cannot bring them back and then furlough them again for a further three weeks, doing a swap with other workers, but once the HMRC portal is up further information may make this clear.
I have several employees wanting to be furloughed as they prefer to be at home receiving 80% of salary. How do I choose?
Normally when you are making people redundant or similar, this is not what people want so you have to be careful to select fairly, using lawful criteria. This is an unusual situation in that you may have people queuing up for furlough. While there are currently no selection criteria established for anything like this, you should be fair, and ensure that whatever selection process you use isn’t (or couldn’t be perceived as being) discriminatory in any way.
What do I do about staff who are off sick?
If you have staff who are on sick leave, or self-isolating in response to public health guidance, they are entitled to Statutory Sick Pay, however when their sick leave/self- isolation ends, if there is no work for them, they can go on furlough at that point.
if you have employees who are “shielding” in line with public health guidance, they can be furloughed.
What do I do about staff who are on family leave?
Those staff who are on maternity leave, paternity leave, adoption leave or shared parental leave continue to be paid as they normally would be. If you are paying them more than the statutory minimum, you can include this in the wage costs you claim back.
While staff are furloughed, what happens to their terms and conditions?
They will remain employed and continuous service will continue, together with associated employment rights such as statutory sick pay and family leave pay.
During a period of ‘lay off’, terms and conditions such as holiday continue to accrue as normal, so the assumption is that the same will apply during a furlough, although this has not been made specifically clear.
My employee has another job, do they have to be furloughed from both?
Each job is separate, so you can furlough someone and they can continue working their other job. They can also do volunteer work.
How do I place staff on furlough?
If you have the right in the contracts of employment you use to ‘lay-off’ staff, you can invoke this clause to furlough workers, the only difference being you will be paying them 80% and reclaiming the money, rather than leaving them unpaid as you normally would.
Without a lay-off clause you will need to seek consent of employees to go on furlough, through consultation. This will be a change to their contract of employment and should be implemented with care just as any other change to terms and conditions.
Once you have agreement you will need to write to staff confirming that they are on furlough.
How do I claim the money?
To make a claim you will need the following details: ➢ Your ePAYE reference number ➢ How many staff are being furloughed ➢ The start and end dates of the period you are claiming for ➢ How much you are claiming
➢ Your bank details, contact details and telephone number