Scheme is open to all employers but those receiving continuing public funding to cover wage costs are not expected to use the scheme.
For information relating specifically to charities and social enterprises please see here.
HMRC published on 26 March 2020 further details of the Job Retention Scheme. This provides some much needed clarity for employers considering furloughing workers.
HMRC has confirmed that the scheme will last for at least three months starting from 1 March 2020 and will be in operation by the end of April. The scheme is open to any employer, including charities and public authorities, which started a PAYE payroll scheme on or before 28 February 2020. It will apply to casual and zero hours workers, along with salaried staff, as long as they were on the PAYE payroll on or before 28 Feb 2020. Employees can be furloughed for a minimum of 3 consecutive weeks.
What will employers receive on the Job Retention Scheme?
Employers who place staff on furlough will receive a grant from HMRC to cover "the lower of 80% of an employee's regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage". Employees' pay will continue to be subject to deductions for PAYE and employee National Insurance contributions.
For salaried staff, pay will be calculated as at 28 February 2020. For more details of how the pay of staff with variable hours will be calculated, please see below.
The guidance states that employers can also make claim against the wage costs of enhanced contractual maternity, adoption, paternity or shared parental pay through the scheme.
How will pay be calculated for those with variable pay?
There are a number of ways of calculating the pay of staff on variable hours. If the employee has been employed for twelve months prior to the claim, employers can claim for the higher of the same month's earnings from the previous year or 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 the employee's monthly earnings since they started work. Where the employee began work during February, employers should work out a pro-rata monthly average based on their earnings to date.
Do we have to pay the National Minimum Wage or National Living Wage (NMW)?
The NMW will not apply to furloughed workers because they will be carrying out no work during the furlough period. However, employees can be required to undertake training during furlough and, if so, the guidance states that they should be paid at least NMW for that time.
Does it apply to publicly funded employers?
Although the scheme is expressly available to all employers, including those in the public sector, the guidance states that it is expected that the scheme will not be used by many public sector organisations or by non-public sector organisations which receive public funding as they are in the main continuing to work and to be funded as normal during the crisis. However, where public funding has ceased for particular roles because of the Covid-19 crisis, such employers may well wish to access the scheme.
Who can be put on furlough?
It is important to note that the scheme is intended for use where employers do not have work for particular workers because of the Covid-19 pandemic. Furloughed employees will not be allowed to work for the organisation but will be able to carry out voluntary work as long as they do not provide services to or generate revenue for their employer. Employees who have been made redundant can be rehired and placed on furlough. Employees on sick leave can be moved onto furlough once they are fit to work and those who are shielded (those who have received specific medical advice to stay at home for 12 weeks) can be placed on furlough.
Employers do not need to make any distinction between workers and employees. The scheme covers those paid through payroll. Self employed workers are being supported under other schemes for which details are still awaited.
Communicating with employees
Employers will need to discuss the proposal with staff and gain their voluntary agreement to being placed on furlough. Letters should be sent to staff to confirm they are being placed on furlough. It is important to make clear that this is a temporary change to the employment contract which is subject to review and subject to the rules of the Job Retention Scheme.
There will of course continue to be many unanswered questions about the practicalities of the scheme. HMRC has promised further detail in due course.
There is no detail in the guidance at present, for example, on whether holiday will accrue during periods of furlough and, if holiday is taken during the furlough period, on the rate at which it should be paid. The question of whether someone on maternity or equivalent leave can give notice to return to work early and be placed on furlough is not covered. There also continues to be ambiguity about whether employees who are not sick but who are self-isolating for some reason (but who are not on the shielded list) could be placed on furlough.
The guidance makes clear that employers will be responsible for calculating the amount being claimed and that HMRC retains the right to retrospectively audit all aspects of the claim. It is difficult at this stage to know what information will be sought from employers for any such audit. It is therefore important that careful records are kept, including a paper trail of organisation decision-making and communication with employees.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.