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The Coronavirus Job Retention Scheme is designed to help businesses that would otherwise be forced to lay off staff in the face of the unprecedented disruption caused by COVID-19.
All businesses with a PAYE scheme in place on 28 February 2020, regardless of size or sector, can benefit from the scheme, where the Government reimburses employers up to 80% of their employees’ wages, to a maximum of £2,500 per month, plus employer national insurance contributions (NICs) and auto-enrolment pension contributions.
Businesses have to “designate affected employees as furloughed workers and notify your employees of this change”. However, employers still have to heed employment law, which means that, having designated those employees whose jobs were at risk, they will need to agree with those employees that they will be “furloughed”. Given the extraordinary situation prevailing at the moment and given the alternative to being furloughed, it is likely most employees will agree to the terms.
Workers who do not agree will either have to take unpaid leave for an indeterminate period, or employers are likely to have to go down the redundancy route. It should be noted furloughed workers are designated by the employer – an employee cannot “self-designate”.
Businesses that have made people redundant since 28 February 2020 can re-employ them and then furlough them. (Editor’s note: the eligibility cut-off date was extended by HM Treasury to 19 March 2020 as Vet Times went to press). To qualify for payment under the scheme, an employee must be furloughed for a minimum of three weeks. This is to prevent employers putting staff on a furlough “rota” that is one week on furlough, one week off.
Who can be furloughed?
Normal employment law still applies, so employers must not discriminate when deciding who to furlough. Employees returning to work after a period of sickness absence or self-isolation can be furloughed; however, they cannot be furloughed while they remain on a period of sickness absence or self-isolation.
Furlough will only take effect when this period comes to an end. Employees who are “shielding”, however, will be eligible to be furloughed. Employees on maternity leave can be furloughed if they agree to return to work early or change to shared parental leave. Alternatively, they can remain on statutory maternity pay where this is applicable and will not be furloughed until their return.
When agreeing changes and moving to furlough status, it is important to remember normal employment law processes apply. Employers must be careful not to discriminate against any employees when deciding who to offer furlough to.
Furloughed workers remain
employed, but must not work
Assuming the designated employee has agreed to be furloughed, he or she cannot undertake any work for his or her employer at all. If employees continue to work, even reduced hours, they are not eligible for the scheme. The good news for furloughed staff is they can volunteer or undertake training, providing neither activity generates income for their employer.
How it works
While furloughed, the Government will pay related employment costs, including pension contributions and NICs (but not commission or bonuses), in addition to wages. All furloughed workers will remain employed by their employer for the duration of the scheme.
Employers can make up the missing 20% of their employees’ salaries, but that is their choice (or ability to pay). No legal obligation exists for employers to top up the salary to 100%, but contractual clauses regarding withholding pay and deductions should be taken into account.
The employment status of furloughed employees will change, but their employment record remains continuous. Employers need to give HMRC a list of furloughed employees. Employers pay their workers as usual, via PAYE, and then apply for funding, every three weeks (not weekly), to cover 80% of their wages (up to £2,500 of gross pay).
Businesses will receive a grant from HMRC to cover 80% of an employee’s regular wage, up to £2,500 per month maximum, plus the associated employer NICs and minimum auto‑enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.
The HMRC system through which payments can be made should be up and running by the end of April.
The scheme is expected to run for three months, subject to review. For latest details, visit www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
For more from Wright Hassall, visit www.wrighthassall.co.uk
This article first appeared in Veterinary Times Volume 50, Issue 17, Page 17.