[There is a further update to this post, click here]
On 4 April 2020 the Government updated its guidance on the Coronavirus Job Retention Scheme.
This expanded text has helped clarify some element of the scheme, but it does not answer all of the questions that have arisen since the first version of the guidance was published on 26 March 2020.
The opening paragraph contains a subtle change to the scope of the scheme. The wording addresses employers in the following way: If you cannot maintain your current workforce because your operations have been severely affected by the coronavirus COVID-19), you can furlough employees…. Previously, maintenance of the workforce was not mentioned, with only a reference to the scheme being designed to support employers whose operations have been severely affected by coronavirus. The new wording appears to be more in keeping with the announcements by Government that the scheme is there to keep people in employment where employers may otherwise have to consider making some employees redundant.
First, it is worth looking at some of the elements that have not changed:
- The scheme is, currently, in place only for a period of three months starting from 1 March 2020 and the minimum period for furlough is three weeks.
- An employer must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account. New wording now refers to having enrolled for PAYE online.
- A claim can only be made for furloughed employees that were on the PAYE payroll on or before 28 February 2020.
- If employees were made redundant, or they stopped working for an employer on or after 28 February 2020, they can be re-employed and put on furlough.
- Employees on unpaid leave are only eligible if they started the unpaid leave after 28 February 2020.
- Employees on reduced hours or reduced pay cannot be included in any application for a grant under the scheme.
- An employee must perform no work for their employer. Training is still possible and, now, positively encouraged. Voluntary work is also still possible.
- Employees on sick leave or self-isolating are not eligible for the scheme.
- Those on maternity leave etc can be placed on furlough but any claims through the scheme can only be for enhanced contractual pay. Normal rules apply for statutory entitlements.
- Employees who are shielding can be furloughed so long as they are doing so in line with public health guidance.
- An employer does not have to top up the amount received by the grant under the scheme.
With the broader wording some points have been clarified and confirmed, where previously an element of interpretation was required.:
- Individuals who are employers can furlough employees so long as they are paid through PAYE. Previously, the guidance was silent on whether such employers could be included, though it was thought that they could.
- Foreign nationals are eligible. Again, there was previously nothing to say they could not be if eligible in every other respect but there is now clarification.
- Employees who have caring responsibilities arising from the coronavirus are now specifically mentioned and can be furloughed under the scheme. The prime example is those employees who have to look after children.
- If contractually allowed, employees are permitted to work for another employer whilst they are on furlough. Nothing appeared to prevent this previously but now clarification has been provided. The process to be followed by the new employer is sign-posted by the guidance.
- Employees on a fixed-term contract can be furloughed. Again, there was nothing previously to say that they could not, however, we now know that contracts can be extended or renewed during furlough.
- Guidance has now been provided with respect to office holders (including company directors), agency workers and those classified as workers rather than employees. There was no real doubt that the latter would be eligible, so long as they are paid through PAYE, but if clarification was required, we now have it.
- The make-up of the 80% (up to the monthly cap of £2,500) has been clarified.
- The grants will be prorated if an employee is only furloughed for part of a pay period. This was understood to be the case but not expressly stated.
- An employer can also reclaim 80% of compulsory (presumably meaning contractual) commission back from HMRC, as well as basic salary. However, this can only really refer to actual commission rather than anything that may be projected during a period of furlough.
- Past overtime can also be included in the calculation.
- “Fees” (which remains undefined) can be reclaimed up to 80% whereas previously they could not.
- The 80% does not include non-monetary benefits, including taxable benefits in kind. This also applies to benefits provided through salary sacrifice schemes (eg pension contributions). If such benefits are provided, they must be maintained by the employer in addition to what is paid under the scheme. The current circumstances are now regarded as a life event that could warrant changes in salary sacrifice arrangements.
- Grants under the scheme do not cover the Apprenticeship Levy and Student Loans should continue to be repaid as usual.
- One key clarification is that employees can be furloughed multiple times. So, they can dip in and out of the scheme subject to the minimum period of three consecutive weeks.
A new addition to the guidance is the section about agreeing to furlough employees. The guidance points to the following steps:
- Employers should discuss matters with their staff and make changes to the employment contract by agreement.
- Eligibility for the grant is subject to employers confirming in writing to employees about being furloughed.
- A record of this communication must be kept for five years.
It should be noted that claims should be started from the date that the employee finishes work and starts the period of furlough. The date a decision is made to furlough should not be used and neither should the date that the employer confirms the furlough in writing to the employee. The emphasis is on the date the actual period of no work actually started.
So, what remains unclear?
Annual leave when on furlough.
Unfortunately, the guidance is still silent on this issue. There has been some guidance from ACAS but this has also been subject to recent change.
ACAS now says that employees can still request and take their holiday in the usual way. This includes the taking of bank holidays; two of these come up this month and there are two next month (note the first bank holiday in May is on a Friday!).
Where holidays have been previously booked, ACAS is of the view that an employer may still tell them to take the time off as holiday. Any change to the timing of the holiday will have to be by agreement. Holiday, in the end, is for time away from work. It is not attached to the idea that an employee should be able to travel to a holiday destination.
ACAS are not so certain when it comes to a requirement to take a day’s paid holiday on a bank holiday. They say as follows:
“Employees and workers may still be required to use a day’s paid holiday for bank holidays, including when they’re furloughed. If bank holidays are given on top of the 5.6 week’s paid holiday [the legal minimum], employees and workers should check their contract or talk to their employer about taking this holiday.”
“If employees and workers usually work on bank holidays but are currently furloughed, they should check with their employers to see if they have to take holiday on that day or if they can take the time off at a later date.”
ACAS acknowledge that employers still have the right to tell employees and workers to take holiday. To impose a holiday the statutory minimum notice is twice the length of the period of the holiday itself. Employers can also cancel pre-booked holiday if they give the same number of days’ notice as the holiday itself.
In their current guidance ACAS do not say that the right to impose holiday is curtailed when an employee is on furlough. Equally, they have not expressly come out to say that holiday can be imposed. However, query how an employee can choose to continue with pre-booked holiday if holiday cannot be imposed.
It should be noted that an employee can be on maternity leave and still be furloughed. However, they cannot be on sick leave and furloughed and the statutory maternity payments cannot be reclaimed under the scheme. It could, therefore, be that the Government is looking to prevent double recovery of monies from the state. From the guidance we have there is not a set principle that two forms of leave cannot be taken concurrently.
While there have been changes to the Working Time Regulations with respect to carry-over of a certain amount of statutory leave to the following two holiday periods (because of any impact as a result of coronavirus) there was no legislative change to address the taking, or not, of holiday during a period of furlough. This absence of legislation could be an indicator that nothing changes, and leave can be taken and imposed during furlough.
Ultimately, it is not clear if an employer can require furloughed employees to take annual leave or even if the taking of holiday could break the period of furlough. The latter would be a problem if it is in the first three weeks of furlough because then the period would not qualify under the rules of the scheme as we know them.
The risk averse employer, looking to take advantage of the scheme, may not want to allow any furloughed employees to take holiday. As furlough can be rotated it is possible that holiday could be imposed after the first three weeks with the employee being placed on furlough after that time. However, if the furlough period has to be evidenced this will mean withdrawing the employee from furlough and then coming to an agreement to place them back on furlough.
The less risk averse employer may just carry on with holiday arrangements as they are.
An alternative could be to place the employee on furlough and then designate the holiday period towards the end of that period (ie the two weeks at the end of May, assuming that the scheme will end then, with no extension). By that time it is hoped that the HMRC portal will have been open for a month and further details and guidance may be available from the Government. The designation of what is and is not holiday could then wait for another day.
An employee may want to keep their holiday in place so that they know that they will not be called back from furlough. If they have reserved a specific period as holiday they may want to keep it in place so that they know it is not subject to change.
If it is assumed that holiday can be taken and imposed (in the absence of anything specific to the contrary) then consideration has to be given to the level of pay when such holiday is taken.
An employee should receive their normal remuneration when on holiday. Arguably, if they have agreed to a reduction in pay (eg at 80%, in line with the limits under the scheme) then that could be regarded as the new normal remuneration. However, as the furlough scheme allows for certain elements (eg commission and bonuses) to be excluded from the calculations then this does change matters, as the calculation of holiday pay (for the 5.6 weeks provided under statute) does require looking back over a reference period (which is now 52 weeks).
Bearing in mind the uncertainty and need for further guidance it is recommended that specific legal advice is taken before making any moves with respect to holiday.
Are employees who TUPE into a business after 28 February 2020 covered?
It is arguable that they are not because they were not on the payroll on or before 28 February 2020.
We have a genuine loophole here.
Employees have all their contractual rights transferred under TUPE, with a couple of exceptions (eg pension and collective clauses), and also have continuity of employment from the previous employer, who, presumably, would have paid the employees on PAYE. However, the record of payments would move from one PAYE reference number to another. The guidelines refer to a claim being made: for furloughed employees that were on your PAYE payroll on or before 28 February 2020. In this case your refers to the current employer looking to make the claim.
The latest guidance also says: Employees hired after 28 February 2020 cannot be furloughed and claimed for in accordance with this scheme. Employees subject to TUPE are not necessarily hired by the new employer. They were hired by the previous employer, probably, on or before 28 February 2020.
Bearing in mind the uncertainty and need for further guidance it is recommended that specific legal advice is taken with respect to any employees who have been subject to a recent TUPE transfer.
PLEASE NOTE: The information in this blog is intended for reference purposes only and does not constitute legal advice. It is recommended that specific legal advice is sought before taking any action in connection with the subject matter of this blog post.