Further guidance was issued over the weekend (4/5 April) concerning the Coronavirus Job Retention Scheme and furlough. We have highlighted the key points below:
- Those who left their jobs after 28 February and their new positions have fallen through as a result of COVID can be re-hired by their old employer and furloughed
- Those who were made redundant after 28 February as a result of COVID and before the new measures were introduced can be re-hired and furloughed
- Those who were put on unpaid leave after 28 February as a result of COVID can be furloughed
- Employees on sick leave cannot be furloughed until their period of sickness has come to an end and they return to work. Employees who are unable to return to work due to caring responsibilities (i.e. school closures) can be furloughed
- Employees who are ‘shielding’ can be furloughed if they are unable to work from home and you would otherwise have to make them redundant. We do anticipate further guidance in this area.
- Employees on fixed term contracts can be furloughed until the end of the contract period. If the employer wishes to renew the contract the furlough can still apply to the new term without breaking continuity of the original 3 month maximum term
- How much can be claimed for employees? The lower of 80% of employee’s wage up to a maximum of £2,500 per month based on, the salary for full-time and part-time salaried employees as of 28 February 2020. For employees whose pay varies then where the employee has been employed for 12 months+, the employer can claim for either the higher of the same month’s earnings in the previous year or average monthly earnings for 19/20 tax year.
- If the employee has been employed for less than 12 months employers can claim for 80% of their average monthly earnings since they started work
- Where the employee only started in February 2020 employer should calculate pro-rata for their earnings to date, and claim 80%
- What is to be included in ‘wages’? Any regular payments that employers are obliged to pay employees including wages, past overtime, fees and ‘compulsory’ commission payments.
- What is not included in the definition of ‘wages’ – fees, discretionary bonuses and commission payments (although see distinction above) cannot be included in a furlough claim.
- What about benefits in kind and salary sacrifice schemes? HMRC’s definition of ‘salary’ does not include the cost of non-monetary employee benefits including taxable BIKs, nor does it include benefits included through salary sacrifice schemes that would reduce an employee’s taxable pay
- Can employees decide to withdraw from any salary sacrifice schemes? Under normal circumstances, no, unless during a ‘life event’ (i.e. divorce, birth of a child etc). However HMRC have defined COVID-19 as a ‘life event’ meaning that employees can now be released from schemes in order to maximise their salary under furlough.
- Can apprentices be furloughed? Yes, providing that their furloughed salary (including time taken for training, which under previous guidance, counts towards paid employment) does not take their salary to below national minimum wage (which were increased on 1 April 2020) in which case employers will need to top up wages to ensure that the appropriate minimum wage is paid for 100% of the training time.
- Can employers rotate employees on and off furlough? Yes.
- Furloughing of Directors and Directors of Personal Service Companies (PSCs) – HM Revenue & Customs confirmed that the Coronavirus Job Retention Scheme will also apply to all public sector workers, described as contingent workers, including those being paid through an umbrella or their own personal service company. Should the worker be unable to work from home or are unable to work due to sickness, self-isolation or the temporary closure of offices then they should continue to be paid the lower of 80% of their pay rate or £2,500 per month. The worker will either need to have to complete a timesheet in the usual manner, or if they are being employed via an umbrella company, the supplier will have to raise an invoice but for the adjusted 80%. The director of the PSC operating in the public sector can not also be furloughed from their PSC. In addition, if the worker is claiming statutory sick pay, then the amount they will receive under the Job Retention Scheme will be adjusted accordingly.
The government’s full update can be read here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme.