Answers to frequently asked questions around furlough leave (Based on CIPD guidance.)
What if employees have some work but not enough?
If employees have some work but not enough then they cannot be furloughed under the job retention scheme. Employees are not allowed to carry out work for the employer during the furlough period. The scheme is only aimed at supporting staff who would otherwise be dismissed or otherwise left without pay.
If employers’ priority is to obtain the payments under the scheme, then reducing everyone’s hours equally will not work. Employers can arrange staffing needs differently, for example:
- Keeping some (perhaps essential) people working full-time on normal pay and others not working on furlough pay.
- Alternatively, employers can rotate the furlough by having some employees on furlough and others fully working. Then after at least three weeks those fully working can be on furlough and the others start working again.
Employers should consult staff to find a solution that works for everyone. If employers decide a reduction in hours or pay is the only solution, then employees will need to agree and this will fall outside the coronavirus job retention scheme payments.
We have some employees on furlough and think that they might be doing basic admin, for example, replying to emails (customer care not revenue generating) and data cleansing on the database. Can they do that?
When employees are on furlough, they must not to do any work for their employer that:
- makes money for the employer or any organisation linked or associated with it
- provides services for the employer or any organisation linked or associated with it.
If an employee is still working (even if pay and hours are reduced) then the employer cannot furlough them and claim the government grant under the scheme. Even tasks such as basic administration, replying to customer care emails or briefing colleagues with handover information are services. Even if these tasks are not revenue generating, they may count as work. Furloughed employees can’t provide services for their employer even if it’s in a different role, unless the official advice changes.
Furloughed employees can take part in training. They can also work or volunteer for another organisation. Apprentices can be furloughed in the same way as other employees and can continue to train if furloughed.
Whilst it may be difficult to check if work is being undertaken, HMRC expressly retain the right to retrospectively audit all aspects of employers’ claims. Employers who flout the rules will be committing a criminal offence and will jeopardise all the payments under the coronavirus job retention scheme.
What if the employee has a second job?
If a furloughed employee works elsewhere there are two main possibilities.
Employees who continue an existing second part-time job
Employees with two or more jobs are eligible for the scheme. The government has confirmed that each job should be treated separately. So, if an employee has more than one employer, they can be furloughed from one job, or both jobs. The £2,500 cap will apply to each employment individually. If the employee only works elsewhere outside the hours of the job they have been furloughed from, then no problems would arise.
Employees who take on elsewhere during their normal contractual hours
The amended government guidance has now confirmed that employees can be furloughed in one job and receive their 80% furlough payment and can start working for another employer during the hours they would normally be working for the employer who has furloughed them. They will receive the furlough payments from the first employer and their normal wages from the new employer.
Whilst working elsewhere is permissible under the coronavirus job retention scheme; whether the employer agrees to this is a separate matter. The employer and employee’s agreement depends upon a number of issues, including the competitive nature of the business and the terms of the original contract.
During furlough an employment relationship continues so there is a potential legal argument the employee should not be working elsewhere during those contracted hours. In many employment contracts there is either an express or implied term that the employee should loyally and faithfully work for the original employer and not work elsewhere. It could technically be breach of contract with that employer to work elsewhere. Ultimately what happens will be a question of negotiation between the original employer and employee, which are likely to require changes to the contract of employment.
Employees have to consent to being furloughed (unless there are lay off provisions in their contract) so employees could say they only agree to being furloughed and taking a 20% (or more) pay cut if the employer agrees to them working elsewhere during their normal working hours. Employers will have to think carefully about how best to proceed; employers could ask employees to agree new or reconfirmed restrictions on working elsewhere, especially if for a competitor. The safest course of action is to agree with the employee the nature and length of any other work that may be done, ideally in writing. The employer may agree to furloughed employees working in, for example, the food, health and social care sectors or other essential services during the pandemic. Another option would be to refuse any requests for employees to work elsewhere but top up the salary to 100% during the furlough period.
If employers refuse any requests to work elsewhere and only allow furlough on 80% pay or move to redundancy, then there is a risk of breach of contract claims or that the selection criteria may come under scrutiny especially if there are other employees still working on 100% pay.
Legal advice should be taken for changes to terms and conditions and you should stay up to date with the latest government advice.
If employees do not agree to be furloughed can we dismiss by reason of redundancy?
Yes, if employees do not agree to be furloughed employers can dismiss by reason of redundancy if the redundancy definitions are met and a proper process followed.
Some employers may feel that the long-term effect on their business will be inevitable closure or rationalisation. If employers feel furlough is likely to be followed by redundancies it may help to select employees for furlough using a process similar to redundancy selection. This would involve using objective criteria, such as a scores matrix based on skills, productivity, previous appraisals etc.
Can employers backdate the furlough period to 1 March for all employees, even those who have been working since then?
No employers cannot backdate the furlough period for all employees. The scheme is only backdated to 1 March to cover employees who have already been made redundant as a result of the coronavirus restrictions.
Employers are only eligible to claim the reimbursement once they have agreed the furlough with employees and they have stopped working.
Do employers just make one claim for all employees under the Coronavirus Job Retention scheme?
Employers make a collective claim for the group of furloughed employees under the scheme, but it is anticipated that employers may need to make more than one claim throughout the period of furlough.
It’s anticipated that employers will submit one claim at least every three weeks. Three weeks is the minimum length of time an employee can be furloughed for.
Employers have to pay over the entire grant received for gross pay to the employees plus any top up employers are choosing to pay.
More information is available on the government website.
Are payments to the furloughed workers under the Coronavirus Job Retention Scheme a loan or a grant?
Under the Coronavirus Job Retention Scheme, all UK employers who would otherwise have dismissed employees during this crisis can access payments for part of the employees’ salary. This is a grant which employers do not have to pay back. The scheme will run for three months (but may be extended as necessary).
HMRC will pay 80% of furloughed workers wages, up to a cap of £2,500 per month.
What happens about employer National Insurance and pension contributions for furloughed employees?
Employers are still liable for employer NI and employer pension contributions on behalf of their furloughed employees but can claim for these under the scheme. The reclaimable NI and pension elements are based on the furlough salary, not normal salary.
The reimbursement from HMRC covers wages equal to the lower of 80% of the employee’s regular salary or £2,500 per month, plus the associated employer NI and pension (minimum automatic enrolment) contributions.
Whilst minimum automatic enrolment employer pension contributions can be claimed for as well as the 80% salary any employer contributions above the mandatory contribution are not covered.
If employers choose to top-up the 20% of salary above the 80% grant, then employer NI and pension contribution on the top-up amount will not be funded through the coronavirus job retention scheme.
HMRC guidance is available on the government website.
What about non-monetary benefits and salary sacrifice schemes?
Employees can stop participating in salary sacrifice schemes if there is a ‘life event’. HMRC have confirmed that the pandemic counts as a life event so salary sacrifice arrangements can be changed, amounting to a variation of the employment contract.
Non-monetary benefits (including taxable benefits in kind and salary sacrifice schemes and pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary to work out the 80% furlough pay. So, the value of health insurance or a company car would not increase the amount on which the 80% is based.
If the employer provides benefits like this to furloughed employees, the benefits should still be given in addition to the furlough wages.
As there’ll be a delay to payments do employers have to pay first and claim later?
Yes, employers must pay the employees first and wait for the claim to come through.
Employers will need to fund 80% of furloughed employee’ wages up to £2,500 a month and then calculate and retrospectively claim that amount back. Employers can use normal payroll systems, deducting tax and national insurance under the PAYE system.
Although the scheme is hoped to be fully operational by the end of April it is already too late for the March payroll. There may be glitches with the April payments too. If employers need short term cash flow support, they may be eligible for the Coronavirus Business Interruption Loan Scheme.
Can an employer delay payment of March wages until April?
There are no special rules or guidance about delaying payment of wages due before the April government payments arrive. Employers can use the business interruption loans to bridge the cash flow until the employer is reimbursed by the government.
Alternatively, any delayed wages could be dealt with by agreement with the furloughed employees. If the employer is really struggling the employee may accept payment by instalments pending arrival of the government payments, but the employee has to agree to this.
Theoretically employees who are paid late could issue breach of contract or unlawful deductions from wages tribunal claims. Both issuing the claim and mandatory Acas pre claim conciliation can be undertaken remotely due to coronavirus. However, the scheme payments will come through in April and this is likely to be before the Acas pre-claim process could be concluded and proceedings issued.
HMRC has set-up a dedicated helpline (0800 024 1222) for employers and employees in financial difficulty.
What if the employer gets the 80% and the employee still works anyway?
An employee who is furloughed must not work for the employer at all to be able to claim the salary reimbursement from the government. The grant does not cover the wages of employees who work reduced hours due to the virus. So, it is in the employers’ interests to ensure the employee does not do any work.
Furloughed employees can do volunteer work or training without jeopardising the furlough payment, as long as they don’t provide services or generate revenue for the employer.
HMRC retain the right to retrospectively audit all aspects of employers’ claims. Employers who are found to be abusing the scheme could potentially face criminal prosecution for fraud. Presumably if HMRC discover one employee has in fact been working during the period of furlough this would put the entire grant received for other employees in jeopardy as well. There is also always a risk that HMRC will investigate if another employee or third party notifies them that there has been a breach.
The employee can hold a separate employment with a different and unconnected employer which will be unaffected. See the question ‘what if the employee has a second job?’ for more information.
Can furloughed workers cash in holiday to top up their 80% salary pay?
The government guidance does not address if furloughed workers can cash in holiday to top up their 80% salary pay, if the employer has chosen not to top up the pay anyway.
Depending on the wording of the contract, most employees have to agree to being furloughed, especially if the employer is not topping up their pay. Therefore, an employee who is worried about the drop in income may propose taking holiday between two dates on full pay, but then only agree to being furloughed before or after that time. If the employee does this, then the employer should pay full salary for the holiday part of the period.
Employers can of course refuse employees’ holiday requests, so an employer can say no to a request for holiday in what would otherwise be a furlough period. The employer must give as much notice of a refusal as the amount of leave requested, so two weeks’ notice if the leave requested was for two weeks. However, employers may prefer employees to use up their holiday allowance rather than storing it up. There are special coronavirus rules on the ability to carry holiday forward into the next leave year; see the FAQs on this.
If employees book holiday time after being placed on furlough employers can claim for 80% of the holiday pay through the grant, in the same way as wages or salary. It seems that the employers have to top the holiday pay to the full salary amount.
Can employers require furloughed employees to use up their holiday leave during furlough?
Yes, employers can require furloughed employees to use up their take holiday leave during furlough. Employers may want to do this to reduce outstanding annual leave to be taken once the lockdown ends and businesses return to normal.
Standard employment law provisions (which are not frequently used) state that employers can require force workers to take holiday as long as they give twice as many days’ notice as the period of leave the worker is required to take. For example, if the employer requires the worker to take two week's annual leave at a certain time, it must give the worker at least four weeks' advance notice (or whatever is outlined in the employment contract).
So, an employer could furlough the employee and require a proportion of that to be annual holiday as long as the requisite notice is given.
Updated Acas guidance clarifies that employees can ask for and take holiday leave as usual while on furlough. However, this is a complicated issue, particularly in relation to pay, and employers should seek specific advice.
The furlough scheme is set to run until 31 May 2020, meaning there will be four bank holidays during this time (10 April, 13 April, 8 May and 25 May). Employees who are usually entitled to take bank holidays as holidays will still be able to do this while they are on furlough, unless the employer agrees something different.
Do employers have to pay full holiday pay if holiday is taken during a furlough period?
Yes, employers have to pay full holiday pay if holiday is taken during a furlough period.
Based on extensive previous case law, holiday pay must be based on normal remuneration. This applies for at least the four weeks EU minimum leave and includes overtime, allowances, compulsory commission and bonuses, meaning employees do not get less pay when they are not working. However, discretionary bonuses and discretionary commission payments (including tips and tronc payments) and non-cash payments should currently be excluded, although the guidance on this may change.
Normal remuneration is assessed over an average of 52 weeks from April 2020 (formerly 12 weeks) so annual leave during furlough must be based on normal remuneration. Although it is more expensive to have an employee on holiday rather than furlough, the advantage for the employer is that the employee’s remaining holiday entitlement between now and the end of the holiday year is reduced.
In the absence of express guidance employers who force furloughed employees to take holiday can claim the 80% grant money from HMRC for employees on holiday leave as they are not at work and not working. However, it seems employers have to top the holiday pay to the full salary amount in contrast to the furlough period where they can choose to top up pay (or not). This need to top up applies for at least the four weeks EU minimum leave. For the remaining 1.6 weeks there is a potential legal argument that an employer could get the employee to consent to just being paid the 80% but employers should probably pay the full amount for the entire holiday period too.
The guidance is not clear on the relationship between furlough and holiday, the interrelationship is untested and legal advice may need to be taken if a problem arises.
Can I place an employee on furlough instead of Statutory Sick Pay?
Employees on who are on sick leave or self-isolating should get Statutory Sick Pay. Employers can place them on furlough leave after the sick pay period if there is no work for them to do and they would otherwise be laid off or made redundant.
The government guidance says that employees who are shielding themselves in line with public health guidance can be placed on furlough. This means employees who are extremely vulnerable (for example, due to organ transplants, lung cancer, severe chest conditions or immunosuppressed conditions) and who have been notified by the NHS to isolate for 12 weeks.
Can employees staying at home to look after young children be placed on furlough? What about those on maternity, paternity and adoption leave and pay or shared parental rights?
Employees staying at home to look after young children are thought to be included in the furlough system in preference to being made redundant.
Employees eligible for statutory maternity pay or maternity allowance can claim up to 39 weeks of statutory pay or allowance as normal. The same principles apply for normal paternity, adoption or shared parental pay rights.
If the employer offers enhanced contractual rights these are included as wage costs that can be claimed through the scheme. The same principles apply to other types of family leave.
Employers with staff on maternity leave can reclaim 92% of SMP back in the normal way. (This is 103% if small employers’ relief applies). Employers cannot claim the 8% balance of SMP through the furlough scheme because the guidance does not yet say this is an option.
Switching between maternity and furlough
Some employees may wish to curtail their maternity leave to switch to furlough if that pays more than maternity (or adoption or shared parental) pay. If the employer and employee agree to furlough this seems to be permissible. Ending maternity leave early normally requires eight weeks’ notice but employees and employers can agree to waive or shorten the notice period. The maternity leave will then have ended although if the maternity leave is under a contractual scheme the employer can agree to resume it later on.
If the furlough leave then ends, leaving the employee faced with a total period that is shorter than their original maternity leave period, it should still be possible to take Shared Parental Leave until the child is one year old (or one year from the date the child was placed for adoption).
Can we place employees who are shielding on furlough even if there is work for them to do?
Yes, employers can place employees who are shielding on furlough even if there is work for them to do. If shielding employees can work at home, then they can continue to do this unless they become unwell. However, if there is no work to do at home, the shielding employees can be furloughed.
The subsequent government advice supplementing the coronavirus job retention scheme has confirmed that the employers can claim the furlough grant for those shielding employees; they do not have to be placed on sick pay.
Can employers place new employees on furlough immediately and receive an 80% contribution towards their pay?
No, if an employee starts a new job the employer cannot immediately then furlough that new employee and claim reimbursement of 80% of their pay under the coronavirus job retention scheme. The scheme is only open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020. The relevant employees must have been on the payroll on that date and would otherwise be dismissed as redundant or laid off.
The situation covering new employees would be relatively unusual but some employers may have a recruitment process already underway and have made job offers which have just been accepted. The following applies:
- Employees hired after 28 February 2020 cannot be furloughed or claimed for under the scheme.*
- Employees on unpaid leave cannot be furloughed, unless placed on unpaid leave after 28 February 2020.
- Employees already made redundant or laid off between 28 February and 20 March (when the scheme was announced) are eligible under the scheme if reinstated.
- Employees on schedule to be made redundant after 20 March 2020 can be furloughed instead of proceeding with the redundancy process.
*If new employees were not on this employer’s payroll on that date they do not qualify for the scheme with their new employer. An option may be to persuade their old employer to reinstate them so they can be placed on furlough by the previous employer, if the former employer will agree to this. This seems to be permissible within the rules and applies both to employees who were dismissed as redundant as well as those who left voluntarily.
The scheme will then cover the cost of wages backdated to 1 March. This ensures that those people who already been made redundant as a result of the coronavirus are covered.
Can we place staff who were on suspension for a disciplinary matter on furlough?
Employees who are suspended on a disciplinary matter remain employees and can be placed on furlough. However, many complexities will result from this.
In any circumstances employers should only have been using suspension with reasonable cause and in accordance with a right to suspend on full pay in the contract of employment. Any suspensions should be as brief as possible, so ideally the employer should resolve the suspension situation promptly.
The employer should not choose employees to furlough just because they were suspended. However, as long as the employer cannot maintain their current workforce because operations have been severely affected by coronavirus then employees can be furloughed, including those who were on suspension.
Employers must select employees for furlough in a fair way to avoid claims of unfairness or discrimination. There are no set requirements for selecting employees, however it is sensible to apply some objective selection criteria, similar to a redundancy exercise.
Unless there is a layoff clause in the employment contract employers must obtain the employee’s agreement to being furloughed and to the reduction in pay. Some employees with pending disciplinary or grievance proceedings will ask what will happen with those proceedings before agreeing to the furlough period.
Employers must decide how to handle disciplinary or grievance proceedings when furloughing a suspended employee and decide which employees (ideally those not on furlough) and witnesses are available to assist with running the process. Ideally the employee’s consent should be obtained if hearings are undertaken remotely.
If employees are on furlough leave can they participate in disciplinary and grievance processes?
Employees who have been furloughed cannot generate revenue or provide services to the employer during the furlough leave period. This creates a problem for some employers operating their disciplinary and grievance processes:
Managers: Line managers and HR managers who are on furlough leave would be unable to supervise a disciplinary and grievance process. This would amount to working or providing a service to the employer. Only those employees who are not on furlough should run the process.
Employees who are the subject of the proceedings: Employees who are being disciplined or who have raised a grievance can probably participate in their own hearing even if they are also furloughed. Although guidance is awaited it seems unlikely that participating in one’s own grievance or disciplinary process is providing services to the employer.
Witnesses: Problems arise if evidence is needed from furloughed employees. In the absence of any specific guidance, staff who are witnesses in proceedings involving a colleague could be providing services to the employer in breach of the furlough restrictions. To avoid this risk employers may prefer to place the proceedings on hold until any furlough period has ended or take the witness off furlough.
Employee’s companion: Employees are entitled to have a union representative or colleague ‘present’ at a grievance of disciplinary hearing, even if this is an electronic presence in a remote hearing. It is arguable that a union representative is providing services to the employee, or the union, and not to the employer. So, the union representative performing those duties may not amount to them carrying out ‘work’ for the employer during furlough. For other companions who are colleagues are they are providing services to the employer by facilitating the continuance of the process? Clarification from the government is needed on this issue.
It would be logical that employees who provide witness statements and evidence for use in disciplinary proceedings should be allowed to do so without jeopardising the furlough payment. However, employees who are being disciplined may have bad feelings towards the employer and could trigger an HMRC investigation by saying that the employer’s witnesses are working breaching the terms of their furlough. Until there is specific guidance, there is a risk that employers who use furloughed staff as witnesses could be accused of breaching the furlough restrictions. To avoid this risk employers may prefer to place the disciplinary proceedings on hold until any furlough period has ended or simply take the witness and other participating staff off furlough. Alternatively, they may decide to run the risk and then if HMRC do investigate, try to argue retrospectively that the witnesses were merely giving evidence and not providing services.
Which special categories or atypical employees can be furloughed under the Coronavirus Job Retention Scheme?
A wide range of individuals, including some who do not necessarily have employee status in employment law, can be furloughed under the Coronavirus Job Retention Scheme. The defining criteria is that they must have been paid via the employer’s PAYE payroll on 28 February 2020.
Employers may wish to furlough the following categories of working individual and recent government guidance has clarified the position:
Agency workers: agency workers who are paid through PAYE can be furloughed. Agency workers should perform no work on behalf of the agency while furloughed, this includes not working for the agency’s clients. They may work for another entirely separate agency and different clients during the furlough period. The furlough should be agreed between the agency and the worker. The need to furlough may be triggered by any end clients and should be discussed with them.
Apprentices: employers must cover any shortfall between the furlough grant and the appropriate apprenticeship or national minimum wage or national living wage for their training time.
Carers: Employees with caring responsibilities who have jobs that can’t be done at home and can’t attend the workplace can be furloughed. This includes, for example, employees who need to look after children due to school closures.
Casual workers: casual workers on the PAYE system can be furloughed.
Company directors: company directors can be furloughed by the board of directors. The furloughed director can still perform their statutory duties but must not do any revenue generating work for the company.
Fixed term contracts: Workers on fixed term contracts can be furloughed. If the fixed term contract ends without being extended or renewed the employer can no longer claim a grant for that individual. However, the contracts can be renewed or extended during the furlough period without prejudicing payments under the scheme.
Foreign nationals: Holders of non-UK passports working for UK employers with UK payrolls and bank accounts can be furloughed. For details of special coronavirus visa extensions and temporary video call checking systems during recruitment see our FAQs on right to work checks.
Limited Liability Partnerships: Salaried members of LLPs who are classed as employees for tax purposes can be furloughed. The furlough should be a formal decision of the LLP. The member must not work for the LLP during furlough. Their ‘salary’ is any profit allocation but not including payments based on individual performance, or the overall performance of the LLP. Non salaried LLP members cannot be furloughed although the self-employed scheme may apply.
Maternity, paternity, adoption, or shared parental leave: Employers with staff on maternity leave can reclaim SMP back in the normal way. Any enhanced contractual maternity etc. pay can be claimed through the furlough scheme. Some employees may ask to switch their maternity (or paternity, adoption or shared parental) leave and pay to furlough leave. This appears to be possible if the employer agrees. See our separate FAQ for the detail on this.
Office Holders: office holders, including company directors and LLP members, can be furloughed as agreed between the office holder and the business that operates PAYE for their payments.
Part-time workers: including those with more than one job can be furloughed for one job or all jobs. Employees can receive a furlough payment from one employer but continue working for another employer who pays full wages. The £2,500 cap applies to each employer individually. For example, an employee with two jobs which are both furloughed can have 80% of salary reimbursed with a cap of £5,000. See the separate FAQs on part-time workers and working elsewhere.
Redundant employees: provided they stopped working for the employer or after 28 February employees who were made redundant can be re-engaged to go on furlough.
Self-employed workers: those who do not receive PAYE salaries may qualify for similar income support under the self-employed scheme.
Self-isolating employees: those self-isolating on medical advice can get Statutory Sick Pay (SSP). They cannot be furloughed while on SSP, but they can be furloughed once they are no longer receiving it.
Shielding employees: employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) can be furloughed if they are unable to work from home and would otherwise have to be made redundant.
Short time or reduced hours working: employees working reduced hours, receiving reduced pay, will not be eligible for the scheme as they are still working.
Sick leave: employees on sick leave or self-isolating for medical reasons can get Statutory Sick Pay (SSP). Employees on SSP cannot be furloughed until they are no longer receiving SSP.
Unpaid leave: employees that started unpaid leave after 28 February 2020 can be furloughed.
Umbrella companies’ employees: these employees can be furloughed. Any individuals employed by their own service or umbrella company that operates PAYE, can agree the furlough.
Zero hours contract: these workers (provided they are on the PAYE system) can be furloughed. Special rules apply to assist with the calculation of the 80 % of salary.
More information is available on the government website.
Are casual workers and zero hours contract workers covered?
The 80% wage guarantee will not cover zero-hour contracts or casual workers, unless they work on the PAYE system.
For casual and zero-hours contract workers who are on the PAYE system with variable hours, their previous pay can be used as a benchmark for furlough pay - see the question on calculating the figures for those who work variable hours for more information.
For casual and zero-hours contract workers who are self-employed a number of options are available:
- A self-employed support scheme to claim a taxable grant worth 80% of trading profits, up to a maximum of £2,500 per month, for three months (unless extended).
- Easier access to benefits to cover a drop in income. This includes removing the income floor for universal credit and moving the application process to an online and telephone process.
More information is available in our separate question on the self-employed and on the government website.
How do employers calculate the 80% figure for furloughed employees who worked variable hours?
Employers claim for the higher of either:
- the same month’s earning from 2019; or
- average monthly earnings from the 2019-20 tax year.
If the employee has been employed for less than 12 months before the claim, then the employer has to use an average of the actual monthly earnings since the employee’s start date.
For employees who only started during February 2020 the employers will have to use those earnings on a pro rata basis.
What about irregular salaried employees?
Irregular salaried employees can be paid based on a previous earnings average. For employees who have been employed for a full 12 months prior to the claim, the amount is the highest of:
- the same month’s earning from the previous year; or
- average monthly earnings from the 2019-20 tax year
For employees who have been employed under a year, the employer bases their 80% on the average of their monthly earnings since their start date. If the employee only started part way through February, the employer will have to calculate the amounts based on a pro-rata calculation for their earnings so far.
Are migrant workers covered by the coronavirus job retention scheme?
The scheme applies to any UK organisation which created a created a PAYE payroll scheme on or before 28 February 2020 and has a UK bank account.
There is no detailed HMRC guidance on this as yet but, applying normal legal principles, any workers on UK contracts, working in the UK and paying UK PAYE can be placed on furlough regardless of their passport or country of birth. HMRC have confirmed that those with work visas who have limited access to public funds will not be regarded as breaching their visa conditions if the employer claims funds for them under the furlough scheme. Employees on all categories of visas can be furloughed.
Employers who furlough migrant workers in preference to others or who retain migrant workers in the workplace could face race discrimination claims if the migrant workers are treated differently.
Are Tier 2 workers covered by the coronavirus job retention scheme?
Tier 2 is the main immigration route for working in the UK and enables skilled workers with a job offer in a wide range of skilled occupations (including IT, accountancy, teaching, and healthcare) to enter the UK on a long-term basis. The visa is linked to a specific job and the employer provides sponsorship. Tier 2 sponsorship has a minimum salary threshold of £30,000 but Tier 2 migrants must also meet salary thresholds for their specific job types, which are often higher.
Tier 2 workers and furlough
The government has not provided clarity on how placing Tier 2 migrants on furlough will work. The main problems are:
- The maximum payment a furloughed employee can receive is £2,500 per month (equivalent to about £30,000 pa), even if actual salary is higher than this. A Tier 2 worker placed on furlough may therefore find that they no longer meet the minimum Tier 2 salary threshold unless the employer is topping up payment beyond the 80% of salary. Further guidance is awaited.
- Foreign nationals with limited leave to remain are usually not entitled to publicly funded benefits but it appears the furlough scheme is an exception to this.
- Tier 2 sponsored workers can normally only have four weeks unpaid leave per year maximum, or they lose their sponsorship. The Home Office guidance confirms that in light of coronavirus, sponsors should not report absences related to coronavirus and should not withdraw sponsorship if a migrant is absent from work without pay for over four weeks. Although as Tier 2 migrants on furlough leave are on paid leave anyway it is not clear why an employee would be absent without pay or why the employer would withdraw sponsorship.
What happens to UK employees of an EU employer? Is there any provision for them under the scheme?
There is no provision for UK employees of an EU employer under the coronavirus job retention scheme. However, all EU countries have their own legislation governing the position. Different national governments have chosen state wage subsidies for workers’ salaries, tax breaks, and loans. In Germany, France, Italy and Spain for example different schemes have been set up to subsidise the income of affected workers employed in those countries. Whether UK workers are covered would depend upon the individual country concerned and individual advice should be sought.
We just made a group of employees redundant; should we reinstate them and put them on furlough leave?
Employers who have just made a group of employees redundant can reinstate those employees and put them on furlough leave.
The government has confirmed the coronavirus retention scheme covers employees who have already been made redundant after 28 February 2020, if they are rehired by the same employer. It is not mandatory for employers to reinstate employees and place them on furlough, but for redundancies that are still in the pipeline, there is a risk of unfair dismissal claims if the furlough option is not considered along with all the usual method of avoiding redundancies.
Employers should remember that as part of the redundancy process they have to explore alternatives. Bearing in mind that the aim of the scheme is to ensure that employers who cannot afford to pay staff wages do not make redundancies, employees could at least argue that any redundancy decisions made between the scheme being announced on the 20 March and during the three month period of the scheme, would be unfair.
Employers who decide they have no alternative but to press ahead with redundancies now, despite the existence of the scheme, should fully consult and keep careful records to show why the redundancies will still be needed despite the scheme’s availability.
When the government ends the job retention scheme at the end of May (unless extended) employers can decide whether there is sufficient work for employees to return. If the work has ceased or diminished, or is expected to cease or diminish, then redundancies can be implemented at that stage following full redundancy procedures for notice, consultation and selection.
What if employees are already dismissed; can they be reinstated to get the furlough salary?
Yes, some employees who are already dismissed can be reinstated to get the furlough salary.
Employees made redundant before 28 February
These employees will not be eligible to claim under the scheme.
Before this date employees are unlikely to have been dismissed due to the virus anyway. If staff were made redundant or laid off before that date (or at any time) for a reason unrelated to the coronavirus outbreak, they are not eligible claim under the scheme even if they are reinstated.
Employees made redundant since 28 February 2020 (as a result of COVID-19)
Employees who have been made redundant since 28 February can be reinstated and placed on furlough.
If the employees were not redundant but were on unpaid lay-off they should still be on the payroll and can simply be changed to being a furloughed worker.
Redundancy payments, payments in lieu of notice, holiday pay on termination and severance payments may need to be reversed by agreement. Perhaps these can be offset against future salary payments and deducted from their salary for subsequent months if this is agreed as part of the reinstatement. If holiday pay received on termination is repaid, then holiday entitlement would need to be reinstated.
If furloughed workers do not book any holiday time does holiday leave accrue?
Yes as employees remain employed during furlough leave statutory holiday will accrue during the furlough period.
The statutory minimum holiday of 5.6 weeks per year will accrue, but the precise amount of holiday left will depend upon how much holiday the employee has already taken. If the employer provides contractual holiday, above the statutory amount, employers can ask the employees to agree this will not accrue during furlough. However, the right to accrue annual leave under the Working Time Regulations will continue unless the employee books part of the furlough period as leave.
What happens to workers who have been unable to take their statutory annual leave entitlement due to the coronavirus lockdown or because they have been needed to work?
Workers who have not taken all of their statutory annual leave entitlement by the end of 2020 due to COVID-19 have a new legal right be able to carry it over into the next two leave years. Employers’ leave years will vary; in some cases this period aligns with the calendar year, in other cases the financial year, the academic year, or the anniversary of when the employee started employment.
UK workers are usually entitled to 28 days holiday per year including bank holidays. This entitlement cannot normally be carried forward into the next leave year unless the employee:
- agrees this with the employer; or
- is on long-term sickness absence; or
- is on maternity leave and unable to take all of her entitlement as a result.
Payments in lieu of holiday are usually disallowed unless the worker is leaving the employer. However, this has been changed under amendments to the Working Time Regulations.
To prevent workers losing their holiday and to enable key workers to keep working, the normal rules on carrying over annual leave have been modified. This will support provision of staff in key sectors (such as food and healthcare) during the pandemic without them losing out on holiday entitlement.
Employers can now allow up to four weeks (not the full 28 days) of unused leave to be carried into the next two leave years. The rules say that it must be ‘not reasonably practicable’ for the worker to take some, or all, of the holiday to which they are entitled due to the coronavirus. If so, they can carry four weeks forward for two years. The remaining 1.6 weeks of holiday can be carried forward by one year by agreement.
These amendments to the Working Time Regulations 1998 apply to all employees. Workers who do not have employee status such as agency workers, and some casual and zero-hours contract workers are also included (see Working Time (Coronavirus) (Amendment) Regulations 2020). The only exceptions are those covered by regulations other than the Working Time Regulations 1998 including some merchant seamen, fishermen, and civil aviation staff, some armed forces staff and doctors in training to whom special rules apply.
The normal obligations on employers to ensure workers take their statutory entitlement in one year or incur a financial penalty are also lifted.
What if we want to bring employees back from furlough early (because other people get sick)? Do we lose the ability to claim three weeks of 80% and need to increase their pay for those weeks?
If employers bring employees back from furlough early because other people become sick the employer will lose the ability to claim three weeks of 80% and will need to increase the employee’s pay for those weeks.
Staff can be furloughed and return to work and then be furloughed again for as long as the scheme is operational. However, each furlough period must be for a minimum of three consecutive weeks. If an individual is only furloughed for one or two weeks and is then summoned back to working (either working from home or in the workplace) then the employer cannot claim under the scheme for the contribution to pay for that period.
If this continues can employees go on and off furlough?
Yes, if this continues employees can go on and off furlough. Employees must be furloughed for at least three weeks, so, employees can be moved in and out of furlough on a three week or longer basis.
Obviously if the employer’s business is one where employees have no alternative but to physically attend work on a regular or occasional basis, then longer rotations are better. This decreases the risks of spreading the infection.