- Government expects the scheme to be up and running by the end of April.
- Claims can be backdated until the 1 March, if applicable.
- Employers can claim a grant for 80% of an employee’s “regular salary or wages“.
- The employer does not need to demonstrate that it would otherwise have made the furloughed employee redundant. As long as the need to furlough arises as a result of coronavirus or coronavirus disease.
- Regular salary or wages does not include performance related bonus or discretionary payments (including tips), any conditional payments (eg where a threshhold must be met) and any non-financial benefits and salary sacrifice that reduces an employee’s taxable pay. It may however be possible to change salary sacrifice arrangements ahead of furloughing an employee and HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements. Qualifying costs and expenditure are covered in detail at para 7 & 8 of the Treasury Direction (see link)
- Apprenticeship levy and student loans are not covered.
- Grant will be prorated if an employee is only furloughed for part of a pay period.
- Claims can be made from the date that the employee finishes work and starts furlough (not before)
- Claim is subject to a cap of £2,500 a month plus employer NI and minimum automatic enrolment employer pension contributions .
- Employers cannot claim for additional NI and pension contributions if it decides to top up pay above 80% or for pension contributions above the minimum contribution.
- Employers are not required to top up the 80% to ensure NLW/NMW is met (subject to the point on online courses below).
- Employers must pay an employee all the grant it receives for their gross pay, no fees can be charged from the money that is granted
- Grants cannot be used to substitute redundancy payments.
- Government will issue more guidance on calculating NI and minimum automatic enrolment employer pension contributions, before the scheme goes live.
- For employees with 12 months service employers can claim for the higher of either:
- the same month’s earning from the previous year
- average monthly earnings from the 2019-20 tax year
- If an employee has been employed for less than 12 months, claim for an average of their monthly earnings since they started work.
- If an employee only started in February 2020, use a pro-rata for their earnings so far.
- Employers are not obliged to top up wages to 100%. If they do then employer NI Contributions and automatic enrolment contribution on the top up part will not be funded through this scheme.
- Employers must furlough an employee for a minimum period of 21 calendar days. Employees can be furloughed multiple times but each period will need to last at least 21 days.
- All UK employers with a UK bank account who had “created and started” a PAYE payroll scheme on or before 19 March 2020 can utilise the scheme.
- In TUPE transfer situations that post date 19 March the new employer can claim as long as the former employer had a qualifying PAYE scheme in place.
- Employers include businesses, charities, recruitment agencies (agency workers paid through PAYE), public authorities and administrators.
- Public sector organisations, employers who receive public funding for either staff costs or to provide COVID-19 response services not expected to use scheme.
- Furloughed employees (and workers) must have been on PAYE payroll on 19 March 2020
- Scheme applies to full-time employees, part-time employees, fixed term employees (contracts can be extended during furlough), employees on agency contracts (including those employed by umbrella companies), employees on flexible or zero-hour contracts, apprentices, office holders, company directors, salaried members of LLPs and limb b workers.
- only undertake work to fulfil a duty or other obligation arising from an Act of Parliament relating to the filing of company’s accounts or provision of other information relating to the administration of the director’s company
- Individuals can furlough employees such as nannies.
- There is specific guidance on processes to be undertaken when furloughing office holders, company directors and salaried members of LLPs.
- Where limb b workers (dependant contractors) pay tax through self assessment rather than PAYE, they may be eligible for the Self-Employed Income Support Scheme.
- Employees made redundant since 28 February 2020 can be rehired and furloughed.
- Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.
- Employees on sick leave or self-isolating get Statutory Sick Pay, but can be furloughed after this.
- Whilst short term illness/self-isolation should not be a consideration in deciding whether to furlough an employee, employers can furlough employees for business reasons even if they are currently off sick in the same way that they would furlough other employees. In these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee.
- Employers are also entitled to furlough employees who are being shielded or off on long-term sick leave. It is up to employers to decide whether to furlough these employees.
- When an employee is on furlough, you can only reclaim expenditure through the Coronavirus Job Retention Scheme, and not the SSP rebate scheme.
- Employers with caring responsibilities can be furloughed.
- For employers who offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that employers can claim through the scheme.
- Same principles apply to contractual adoption, paternity or shared parental pay.
- Furloughed employees can not undertake any work for or on behalf of the employer. They can also not undertake work for anyone connected with the employer or otherwise works indirectly for the employer.
- Directors may only undertake work to fulfil a duty or other obligation arising from an Act of Parliament relating to the filing of company’s accounts or provision of other information relating to the administration of the director’s company.
- Employees are permitted, if contractually allowed, to work for another employer whilst on furlough. They will not have a P45 and will need to complete a starter checklist form.
- Furloughed employees can do voluntary work or training (if not providing services to or generate revenue for, the employer).
- Employers must ensure that employees who are required to do online courses (or continue with training eg apprentices) when furloughed are paid at least the NLW/NMW for the time spent training.
- If an 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.
- The furloughed employee’s wage will be subject to usual income tax and other deductions.
- Decisions on who to offer furlough to is subject to discrimination laws in the usual way.
- Employers and employees must have agreed to the furlough arrangements in writing (email is okay) with the employees agreeing to cease all work in relation to their employment. Employers will need to retain a copy for five years.
IF YOU WOULD LIKE ACCESS TO A PRECEDENT FURLOUGH LEAVE AGREEMENT LETTER THEN CLICK ON THE LINK BELOW
