Since the government announced its plans to support wages during the coronavirus pandemic, which has forced many in the jewellery trade to close their businesses entirely, there have been a lot of questions about the job retention scheme and exactly what the term ‘furlough’ means.
The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. It is designed to support employers whose operations have been severely affected by coronavirus.
Employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period.
The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020. UPDATE: The government has now extended the eligibility date to March 19.
Here, Professional Jeweller has gone through a list of resources to answer some of the most frequently asked questions about the scheme, which is expected to be operational from late April…
Are all employers in the UK eligible for the Coronavirus Job Retention Scheme?
Yes, all UK businesses are eligible to participate. The government has specified that the scheme will apply to any employer in the UK, irrespective of whether it is small or large, charitable or not for profit.
What do employers need to do?
The employer will need to designate affected employees as “furloughed workers,” and notify employees of this change. The employer will then need to provide certain details to HMRC through a new online portal.
When will the online portal be set up and when will I receive my first payment?
This has not been confirmed by government, but we know HMRC is working at pace to set up the new online portal to allow businesses to register. The process will be simple and easy to complete and will allow companies to register their e-payroll number and bank account details and submit the gross rebate claim. It is believed that the outline scheme will not require individual employee details to be uploaded or individual claims submitted. It is anticipated that this will be established in April to allow first payments to be made by the last week in April ie monthly payroll run.
Are staff who were taken on after 1 March covered?
The guidance makes clear that staff who were hired or contracted after 28 February are not covered by the scheme. You may choose to furlough them to protect their employment status and to provide them with certainty about their job at the end of the crisis, but you may not make a claim to recover their salary or employment costs. For these workers, you may choose to furlough at a reduced set of hours or salary or even on the basis of no pay or you may choose to make a payment to them, this measure will simply protect their job and ensure that they are retained by you. These workers would still be eligible for enhanced UC and housing benefit support.
I have a number of staff who were hired and contracted before 28 February but only started work 1 March – are these staff covered?
The guidance refers clearly to contract or hired by 28 February and, provided that you have a clear audit trail to demonstrate that this was the case and that they had started working, then they are capable of being furloughed.
What happens during the period of furlough leave?
The crucial point here is that the employee will not be able to undertake any work for their employer during the period in which they are on furlough. The aim of the scheme is to support workers who would otherwise be facing redundancy or unpaid layoff. This means that furloughed workers must stop working immediately. If an employer still wants an employee to perform certain aspects of their role or some of their duties, the scheme will not be suitable. An employee can, of course, have some workers furloughed, and others paid by the company still. If any workers have multiple jobs, them working for another employer during a furlough period will not invalidate your furlough claim.
Is there a means testing which would be applied?
No, the furlough scheme is not subject to any form of means testing – any worker at any level who is unable to work and would otherwise lose their job is capable of being furloughed and you will be able to recover 80% of their salary up to a maximum of £2,500 pcm. The only requirement relates to them being employed
How is existing salary to be calculated?
The salary will be an average of pay made over the last financial year April 2019-March 2020 or year to date, if they have been employed for less than 12 months. We expect further guidance around this for variable hours staff and those who have been employed only during the first quarter of 2020.
What is the difference between a furloughed worker and a “laid off” worker?
This is a good question and the terminology being used can be confusing. Many people assume that being “laid off” means that the employment has been terminated and the employee has lost their job permanently. However, under UK employment law the term “lay off” actually indicates a temporary period of not working. This is generally unpaid (subject to the right to guarantee payments) and the employee remains employed throughout the period of lay off.
In reality, lay off and being a “furloughed worker” appear to be the same concepts. In both cases the employee will not be undertaking any work for the employer for a period of time, but their employment will be continuing. The crucial difference is that, under the new government scheme a furloughed worker will remain paid during this period. Laid off workers are usually not paid.
Does the employee have to consent to being a furloughed worker?
The answer is that it depends on a number of factors including:
- the employment contract
- the kind of work the employee does and if pay depends in part on the employee being able to work (such as sales staff earning commission on sales or placements)
- if the employer is topping up to full pay.
Advice should be sought on your specific situation. However, in broad terms, a payment of less than 100% of wages will normally represent a unilateral change to an employee’s contractual terms. Such a change would need consent unless the employer was going to follow a longer route for trying to force a contractual change.
In practice, employees are likely to accept furloughed status. For most, it will be a more desirable outcome than a redundancy situation.
The situation may be more straightforward if the employer is topping up the employee’s wages to 100%. In this case, there often won’t be a breach of contract by reason of a unilateral reduction of wages (unless there is a right to work).
Employees have a legal right to be paid but only a limited number of employees have a right to work, and it’s generally limited to those employees whose earnings are dependent upon them working, for example those who need to work in order to earn commission. However provided that your employees don’t fall within the category of employees who have a right to work, then sending an employee home on full pay won’t generally be a breach of contract. Therefore for these employees you should be able to impose furlough leave.
I had to lay staff off during March – can I now take them back on?
Yes, the guidance makes clear that staff made redundant due to COVID 19 can be reemployed and then furloughed. For these staff, their employment will be deemed to be continuous and any employment costs paid during this period recovered.
Could an employer enhance the scheme to offer their employees an increased payment?
Yes. Employers are not obliged to do so but they could, of course, opt to top up the scheme for an employee. The government and trade unions will encourage employers to pay 100% of wages wherever possible, albeit this is not compulsory.
What about individuals who have been on sick pay or otherwise not working full time over the calculation period – is there an alternative mechanism to be used?
Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.
Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this. Employees who are shielding in line with public health guidance can be placed on furlough.
Will tax, NI and pension still be deducted from furloughed worker payments?
The payment to the employee must be made through the payroll and therefore subject to the normal tax deductions. Your employees may wish to opt out of any pension deductions made under auto enrolment but unless they do, this should also be deducted. So you claim for gross salary and pay out net to them. You are able to claim back the employer NI and pension contribution.
Am I supposed to pay my staff ahead of the rebate being received in April?
Unfortunately the timing of the scheme going live will cause a problem for businesses and staff which operate a weekly payroll and there will be a delay with payment always being received in 3 week arrears. There is no requirement for you to make payment in advance providing you amend your contract terms. It may be possible for you to propose to your staff that they move to monthly or fortnightly payroll during the furlough period, but we appreciate that this will be challenging for many individuals.
What other help will government make available to bridge the gap between pay and process of claim?
When operational, the scheme should provide a rapid process and payment of claims and is designed to be paid ahead of an imminent month end payroll. The challenge comes from weekly payroll. Other than seeking worker agreement to change this, some companies may receive cash grants through the business rates system (premises of less than £51k RV receive £25k grant for each such premises) and the business rates holiday and VAT deferment as well as potential rent deferment may help manage this in April. Otherwise commercial lending or CBIL may be required to ease cashflow and allow payments to be made in advance.
What information will need to be submitted to claim relief for a specific employee?
To claim, you will need your ePAYE number, the number of employees being furloughed, the claim period (start and end date), amount claimed, bank account and sort code, contact details. You do not need to provide specific employee details and you make the claim on behalf of the business. HMRC will pay the claim into your bank account by BACS
Can furloughed workers volunteer for activities?
Yes, workers undertaking voluntary activities or duties during furlough eg helping out NHS, social care, local government, retail and delivery would not invalidate their furlough.
What happens about maternity leave and pay?
Individuals who are on or plan to take Maternity Leave 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. This is a health and safety requirement and must be provided for Employees who qualify for SMP, 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 earnings related contractual maternity pay, this is included as wage costs you can claim through the scheme. The same principles apply where your employee qualifies for adoption, paternity or shared parental pay.
What do I need to do about National Living Wage/National Minimum Wage?
Individuals are only entitled to NLW or NMW for the hours they are working and furloughed workers, who are not working, must be paid the lower of 80% of their salary or £2500 even if, based on their normal working hours, this would be below NLW/NMW
What about directors, can they be furloughed?
Yes, providing they are not working (no more than fulfilling director’s statutory obligations) directors can be furloughed and will receive the lower of 80% of salary of £2500 pcm. This would also apply to owner operators paid through the payroll.
What about post relief – are there conditions/requirement about continuing employment for furloughed staff after the scheme ends?
No. Nobody knows what state the economy will be in at the end of the crisis and there are no ongoing obligations to provide employment at the end of the process. When the scheme ends, you will need to make a decision, depending on your circumstances, whether employees can return to their duties or whether it is necessary to change the term of their employment or consider redundancy. At that point, normal employment law will cover their situation. Employees that have been furloughed have the same rights that they did previously in terms of unfair dismissal, redundancy payments and SSP or parental leave/pay entitlement.