The job retention scheme is expected to be up and running by the end of April, according to the government, and HMRC guidance says it is “designed to support employers whose operations have been severely affected by coronavirus”.
There is no reference in the guidance to employers certifying that they are unable to pay staff costs because of the Covid-19 crisis or provide any form of evidence of their financial distress, or potential redundancies. It appears the government is taking a broad approach to the eligibility requirements for access to the scheme.
It is open to all UK employers operating PAYE on 28 February 2020, and furloughed employees must have been on the PAYE payroll on that date to qualify. Employees already on unpaid leave cannot be furloughed unless they were put on unpaid leave after 28 February.
Crucially, employees cannot carry out any work for their employer while furloughed.
The scheme also covers companies rehiring employees who were made redundant after 28 February, although there is no obligation on an employer to do this. Similarly, there is no obligation on an employee to agree to the withdrawal of a redundancy notice.
Here are some of the most common questions:
How do we put furlough in place for our employees? Do they need to agree to this?
Yes, employees need to agree. Employers will need to make any changes to employees’ employment contracts by agreement unless they have a contractual right to lay off. To be eligible, employers must write to their employees to confirm they have been furloughed and keep a record of this.
For how long can employees be furloughed?
The minimum length of time an employee can be furloughed for is three weeks. The scheme is currently operational for at least three months. Claims can be backdated to 1 March 2020.
Are casual employees included?
The scheme covers not just full and part-time employees but also those on agency contracts and flexible or zero-hours contracts.
How should employers calculate the amount of pay?
For full-time and part-time staff with regular hours, the guidance states that businesses will receive a grant from HMRC to cover 80 per cent of an employee’s regular wage or £2,500 per month – whichever is lower. It also states that the figure used should be the employee’s actual salary before tax, as of 28 February 2020.
Are employees on sick pay or other leave covered?
Staff on sick leave or self-isolating should receive statutory sick pay as a minimum but can be furloughed after this. If employees then need to self-isolate or become unwell once they are on furlough, they are entitled to receive statutory sick pay as a minimum.
How should furlough payments be treated by the business?
Payments received by companies under the scheme must be included as income in the business’s calculation of its taxable profits for income tax and corporation tax purposes.
Can employees take other jobs when the government is paying 80 per cent of their wages?
This will depend on whether an employer has an exclusivity clause in the contract of employment. If an employee has two jobs, they can continue to work in one role while being furloughed by their other employer from their other role, or they can be placed on furlough by both employers.
Melanie Lane and Catherine Taylor are employment partners at CMS