CORONAVIRUS JOB RETENTION SCHEME (“CJRS”) FOR “FURLOUGHED” EMPLOYEES: 15 APRIL 2020
The Scheme: This scheme permits and offers financial support to employers who place employees on temporary suspension of duties (known as furlough).
Summary: Guidance has been issued on 15 April 2020 to accompany the previous iterations of the furlough scheme announced on 9 April 2020 and 26 March 2020, to accompany the UK Government’s initial announcement on Friday 20 March that it would allow all UK employers to claim reimbursement from HMRC for a large part of their employees’ salary. This briefing replaces our previous note of 1 April 2020.
- All UK employers who operated a PAYE payroll scheme on 28 February 2020 are eligible.
- The scheme covers all (full-time and part-time) PAYE employees, employees on agency contracts and employees on zero-hours contracts. This means that the employer can only include employees who had joined their payroll by 19 March 2020. Anyone hired after that date will not be eligible.
- The revised guidance states that the scheme is designed to support employers whose operations have been “severely affected by coronavirus”. Whilst evidence of reduced work/redundancy is not strictly required before an employer decides to furlough individuals, the Government has indicated that it will audit to check for abuse and erroneous/fraudulent cases (with scope for clawback of the subsidies).
- HMRC will reimburse 80% of furloughed employees’ usual wage costs to the employer, up to a cap of £2500 (gross) per employee per month plus the associated Employer National Insurance Contributions and minimum automatic enrolment pension contributions on that wage. This is a grant, not a loan, so it does not need to be repaid.
- The employer may choose to “top up” the residual 20% of the employees’ wages, but is not obliged to do so.
- For PAYE employees, the employer should use the actual gross salary before tax for calculations, as of 19 March 2020 (unless the employer had previously made calculations on the employee’s salary as at 28 February 2020).
- It is important to note that employees are not permitted to do any work for the employer during a period of furlough. They can do volunteer work, or training, if this does not provide services to or for the employer, or generate revenue for the employer.
- The employer will select which employees it wishes to designate as “furloughed workers”, and notify them of that fact. A fair, non-discriminatory selection process must be followed whilst choosing which employees to furlough.
- In most cases, employees’ consent would be required (unless their contract permitted these types of amendment). This should be a relatively attractive proposition for employees, particularly if the other options were compulsory redundancy or unpaid leave.
- The agreement should be documented in a letter, and signed by the employee and the employer. Employers should keep a record.
- The employer will submit information to HMRC about the employees that have been furloughed and their earnings via a new, online portal (which will hopefully be operational in April 2020.)
- The employer will pay the employees via payroll. Payments to furloughed employees will be taxable i.e. subject to Income Tax via PAYE and National Insurance Contributions.
- The employer will receive reimbursement from HMRC. HMRC has said it should be ready to issue reimbursement by the end of April 2020.
- An employee must be furloughed for a minimum period of 3 weeks. A furloughed employee can then return to work, and be put on furlough again later (if required).
- Collective consultation obligations will apply (according to usual employment law principles) if the employer proposes to dismiss as redundant 20 or more employees in a 90-day period. Please contact us for further guidance.
When will the scheme be operational?
It expected to be up and running by the end of April, so that the April payroll can be reimbursed through the scheme. Claims can be backdated to 1 March 2020 (but only if the employees were not working). Employers do not need to wait until the scheme is up and running to place employees on furlough.
Duration: the guidance states that the scheme is intended to run from 1 March 2020 for three months (until 31 May 2020), but may be extended. Employers may want to retain the right to curtail furlough leave sooner, if business conditions improve.
Recently dismissed employees: An employer who has dismissed employees by reason of redundancy during March 2020 could reinstate those employees to the payroll as “furloughed workers” (and claim reimbursement of their salaries).
At the end of furlough: The idea is that the employees will be able to return to work. However, if the business has not recovered sufficiently, then the employer will be able to make employees redundant, subject to the normal employment law principles. There is no requirement to guarantee their continued employment. Please contact us for further guidance.
Comment: CJRS is a helpful, temporary measure to help employers to continue to pay salaries for this initial period, whilst assessing what level of workforce can be sustained more permanently moving forward.