During the COVID-19 pandemic, the Mitchell Charlesworth Payroll Services team are currently receiving an extremely high volume of queries from employers who are broadly asking the same questions, which we seek to address here. However, the caveat applies that as there is very little by way of clear answers to some of the questions, and information should be verified by your employment lawyer or HR advisor before taking any action.
I have a worker who is not ill but has had to socially distance themselves under government guidance owing to an underlying medical condition and they cannot work from home. Are they to get Statutory Sick Pay?
SSP does not apply in this situation. A realistic option is to furlough the worker under the government’s coronavirus job retention scheme.
What does ‘furlough’ mean as defined by the Coronavirus Job Retention Scheme?
Furlough is an arrangement with a worker where you pay them without them having to work. The government will fund up to 80% of monthly wage costs (maximum £2,500) plus the associated Employer National Insurance and Employer Auto Enrolment Minimum Pension contribution for each worker. This will be in place for 3 months from 1st March 2020.
As a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can choose to top up an employee’s salary if they desire, but it is not reclaimable under the CJRS grant, neither is any employer pension contribution that is higher than the auto enrolment minimum. By way of explanation, when you pay a worker you incur other costs such as Employer’s National Insurance and potentially Employer Pension Contributions. The government’s reimbursement through the scheme appears to include these extra costs. Therefore, if you pay your worker £3,125 as furlough and claim back 80%; £2,500 you may still have a further 17% (say) to fund for employer’s national insurance and pension contributions.
Having this in mind, you may want to discuss or negotiate with a worker or group of workers the amount they are to be paid during furlough. As normal employment rights still apply, if undertaking this process with a group of 20 or more workers then you will have to enter a consultation process. It is imperative therefore that you take advice from your employment lawyer or HR advisor before taking any action.
I want to furlough a worker. Can Mitchell Charlesworth to do this for me?
You must determine which workers to furlough and write to them as outlined by ACAS https://www.acas.org.uk/coronavirus/if-the-employer-needs-to-close-the-workplace.
We do not have a template letter. You should instead obtain a template letter from your employment lawyer or HR advisor.
Once you have attended to the furloughing formalities above, (only where we look after your company payroll for you) you should then advise the Mitchell Charlesworth payroll team of the following:
Employee’s Full Name (i.e. John smith) – Date Furlough Started (i.e. 1st April 2020) – Furlough Amount this month (i.e. £2,200)
I do not have sufficient cash to pay the furlough, what can I do?
Speak to your usual Mitchell Charlesworth partner to discuss your options and speak to your bank. Liquidity is very important, and the government have introduced a range of measure to help business of all sizes.
How do I claim furlough money back from the Government?
The government expect the scheme to be up and running by the end of April 2020 There is no mechanism for claiming CJRS before the scheme is up and running.
It will require employers to make a submission of data to a government portal. The first payments are expected late April/early May.
I pay staff hourly. How do I work out what a standard week is or what 80% is?
If an employee has been employed for a full 12 month period prior to the claim, employers can claim for the higher of either:
- The same month’s earnings from the previous year
- Average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, employers can claim for an average of their monthly earnings since they started work.
If the employee only started in February 2020, employers should use a pro-rata for their earnings so far to claim. Again, we strongly recommend that you speak to an employment lawyer if you have any uncertainty around this.
What is Lay Off and statutory guarantee pay?
It refers to short term laying off of workers when there is no work. The employee is entitled to “guarantee pay” from the employer during lay off or short-time working. The maximum is £29 a day for 5 days in any 3-month period – so a maximum of £145. https://www.gov.uk/lay-offs-short-timeworking
However, Lay Offs entitles a worker to claim redundancy pay if they have been laid off without pay or put on short-time and receive less than half a week’s pay for 4 or more weeks in a row or 6 or more weeks in a 13-week period.
Therefore, unless you are considering redundancies, lay offs may not be suited to your business.
Again, we strongly recommend that you speak to an employment lawyer before taking this course of action.
Can directors be furloughed?
Further guidance was released late last week to clarify who is eligible under the Coronavirus Job Retention Scheme and also how the monthly salary will be calculated. Crucially, It was confirmed that if a director receives a salary, then they could be furloughed and the amount they are paid subject to PAYE would be eligible under the scheme. It is only the salary amount that would be covered, it does not include bonuses or commissions. If the employee’s salary has varied, then the employer can claim the higher of either the average based over the last twelve months, or the same salary paid last year. For completeness, any dividends paid from the company is not covered.
Can employees work when furloughed?
The government guidance to employees states: “To qualify for this scheme, you should not undertake work for them while you are furloughed. This will allow your employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month.”
A furloughed employee cannot undertake any work. But what happens if there is only one director who may also be the only employee, as is the case in many personal service companies?
There has been a lot of speculation over the weekend which seems to suggest that where the company has only one director, that the director can together with other employees be furloughed. Although under the scheme an employee is not permitted to carry out any work for the company, the director can still undertake their statutory duties.
At this stage, HM Revenue & Customs have not confirmed that this is the case, and we will update you as soon as further information is available.