The guidance for the CJRS is evolving at a rapid rate. We will seek to update these FAQs as quickly as possible as the situation develops.
The outbreak of Coronavirus responsible for COVID-19 has left every business with uncertainties. In an effort to manage the potential impact of the pandemic, the UK Government has put in place the Coronavirus Job Retention Scheme (CJRS) to protect against job losses. The Scheme allows employers to claim back a percentage of the wages of a furloughed employee (i.e. placed on a leave of absence) due to the pandemic. In this article, we answer your frequently asked questions (FAQs) regarding the CJRS based on HMRC's guidance.
What does furlough mean?
Furlough is a temporary leave of absence. Under the CJRS, employers are able to claim back a percentage of an employee's wages for retaining them and placing them on paid temporary leave rather than making them redundant.
For an employee to be furloughed, the employer must instruct them to cease work that makes money for or provides services for the employer's organisation or any organisation linked to or associated with the employer's organisation related to their employment. The reasoning behind the employee being furloughed must relate to circumstances caused by the coronavirus pandemic. An employee must be furloughed for at least three weeks or more for the employer to be able to make a claim.
The CJRS is a temporary scheme starting from 1 March to 30 June 2020, and employers can use this scheme anytime during this period. The Scheme may be extended past 30 June if necessary. What can employers claim under the scheme?
Employers are able to claim a grant of 80% of the wages (up to £2,500 per month) of furloughed employees, as well as the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions.
An employer can choose to top up an employee's salary beyond the 80% if they wish to. For full time and part time salaried employees, the employee's actual salary before tax, as of 19 March 2020 should be used to calculate the 80%. The employer can claim for any regular payments that they are obliged to pay the employee. This includes wages as well as regular non-discretionary overtime, fees and commission payments. Discretionary bonuses (including tips), commission payments and non-cash payments are not included.
While the employee's salary before tax as of 19 March is to be used to make the calculation, if a salary cut has been agreed since then, that is the salary that would be payable to the employee and so the revised salary would apply. Any salary increases after 19 March 2020 (even if agreed before this date) cannot be used to calculate the amount that can be claimed via the Scheme.
Can any employer apply to the scheme?
An employer is eligible for the CJRS if they had created and started a CJRS payroll scheme on or before 19 March 2020, have a UK bank account (where a BACS payment can be accepted). and are enrolled for CJRS online. Any UK organisation with employees can apply including businesses, charities, public authorities and recruitment agencies (agency workers paid through CJRS).
If a company is under the management of an administrator, the administrator can access the Scheme. HMRC has stated that they would only expect an administrator to access the scheme if there is a reasonable likelihood of rehiring the workers.
While they are potentially eligible, it is important to note that the government expects the scheme to not be used by many public sector organisations. If employers use public funding for staff costs, and they are continuing to receive this funding, then HMRC expects this money to be used to continue to pay staff as usual. This also applies to other employers that pay staff through public funding.
Which employees can be on furlough leave?
Employees and workers on any type of employment contract, including full-time, part-time, agency, flexible or zero hour contracts can be placed on furlough. An employee can be furloughed if they were employed on 19 March and on the employer's CJRS payroll on or before 19 March 2020. An employer will not generally be able to claim an employee's wages under the scheme if they were hired after 19 March 2020.
If an employee has been made redundant or stopped working for the employer since 28 February 2020 they can be rehired and placed on furlough leave. It is not a requirement that employers rehire redundant employees and place them on furlough. In this situation, an employer should seek specialist advice due to issues that may arise around redundancy payments, notice payments and continuity of employment.
If an employee went on unpaid leave on or before 28 February, you cannot furlough them until the date on which it was agreed they would return from unpaid leave.
Those that are registered as self-employed for tax purposes are not covered by the scheme.
Employees who are foreign nationals are also eligible to be furloughed. Employers can furlough employees on all categories of visa.
Are any non-employees eligible for the CJRS?
The grant can be claimed for some groups that are not considered employees if they are paid through CJRS. These include:
- Office holders
- Company directors
- Salaried members of Limited Liability Partnerships (LLPs)
- Agency workers
- Limb (b) workers
- Contingent workers in the public sector
Company Directors
If the furloughing of one or more individual company directors is decided by the board this should be adopted as a formal decision of the company. It should be noted in the company records and communicated to the director(s) concerned.
If a furloughed director needs to carry out duties to fulfil the statutory obligations they owe the company, they can as long as they do no more than would be judged reasonably necessary. They should not do any work that would generate revenue or provide services to or on behalf of the company.
This also applies to salaried individuals who are directors of their own personal service company (PSC).
Members of LLPs
For a member of a LLP to be furloughed, the terms of the LLP agreement (or any agreement between the LLP and the member) may need to be varied by a formal decision of the LLP. The formal decision may reflect that the member will perform no work for the LLP and reflect the effect of this on their remuneration from the LLP. If an LLP member is treated as being employed by a LLP, the reference salary for the CJRS would be their profit allocation, excluding any amounts determined by their individual performance or the overall performance of the LLP.
Agency workers
The furloughing of agency workers should be agreed between the agency (as the employer) and the worker. The agency workers should not carry out any work on behalf of the agency or the agency's clients.
Limb (b) workers
Limb (b) workers that are paid through CJRS can also be furloughed. If they pay tax on their trading profits through Income Tax Self-Assessment they may instead be eligible for the Self-Employed Income Support Scheme (SEISS).
The Cabinet Office has issued separate guidance on how payments to suppliers of contingent workers impacted by COVID-19 should be dealt with where the party receiving the contingent worker's services is a Central Government Department, an Executive Agency of a Central Government Department or a Non-Departmental Public Body.
Does an employer have to confirm an employee will be furloughed in writing?
The employer and employee should discuss and must agree on any changes to the employment contract.
The initial HMRC Guidance indicated that while agreement was needed this could be simply evidenced by a confirmation email from the employer. However, on 17 April, the HM Treasury Direction was published which caused much concern. Under the Treasury Direction to claim furlough, "the employer and employee must have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work". This is a significant wording change. The Treasury Direction appears to say that employers would need to ensure employees confirm their agreement to the furlough in writing. This may be done by a simple email, but nevertheless needs to be done.
Following outcries over the wording discrepancy, the 17 April revised Employer's Guidance was changed to include "there needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years."
While the HM Treasury Direction has not been revised, it now appears that the requirement is that employers must have the employee's agreement evidenced with a written record (for example an employer's confirmation email), but an employee's written response is not necessarily required.
In a 23 April change the HMRC Guidance, added that "collective agreement reached between an employer and a trade union is also acceptable for the purpose of such a claim." As such trade union sign off is sufficient.
The most recent version of the HMRC Guidance now reads:
"To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming through the scheme. Collective agreement reached between an employer and a trade union is also acceptable for the purpose of such a claim. There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years."
Can an employee refuse to be furloughed?
An employee can refuse to be furloughed but you cannot dismiss them on these grounds. They can be made redundant but this must be done in line with normal redundancy rules.
Can you furlough an employee on reduced hours?
If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this Scheme.
Can an employee still be made redundant after a period of furlough?
A furloughed employee can be made redundant once the furlough period has ended. A normal redundancy process would still need to occur beforehand.
What happens if an employee has more than one job?
If an employee has more than one employer, they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.
Can a furloughed employee get another job?
If their contract allows, a furloughed employee is able to take on additional employment as long as they are available to return to work when needed and undertake any required training. Any furlough agreement should address whether the employee can work for another employer while furloughed.
What if furloughing an employee puts their salary below the National Minimum Wage?
Employees are only entitled to the National Living Wage / National Minimum Wage / Apprentices Minimum Wage for the hours they have worked. Furloughed workers, as they are not working, can be paid the lower 80% of their salary even if this puts them below the appropriate minimum wage.
Any time spent training while on furlough is treated as working time for the purposes of minimum wage calculations and must still be paid at the appropriate minimum wage.
What happens if the employee's pay varies?
If an employee has been employed (or engaged by an employment business) for a full 12 months before the claim, employers can claim for the higher of either the same month's earnings from the previous year or their average monthly earnings from the 2019-2020 tax year.
If an employee has been employed for less than a year the average of their monthly earnings since they have been employed can be claimed.
If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
See the HMRC Guidance "Work out 80% of your employees' wages to claim through the Coronavirus Job Retention Scheme" for more detail.
What happens if you have employees on maternity leave, contractual adoption pay, paternity pay or shared parental pay?
Individuals who are on or plan to take maternity leave must take at least two weeks off work (four weeks if they work in a factory or workshop) immediately following the birth of their baby (the Compulsory Maternity Leave period). This is a health and safety requirement.
If the employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance. Employees who qualify for SMP will still be eligible for 90% of their average weekly earnings in the first six weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £151.20 a week.
If an employee is entitled to enhanced contractual maternity pay, this is a wage cost that the employer can claim through the CJRS. The same also applies if the employee qualifies for contractual adoption, paternity or shared parental pay.
Can you furlough an employee on sick leave?
On 19 April HMRC updated its statutory payments manual to provide that if employees are furloughed as part of the CJRS they do not qualify for SSP. This is consistent with the HM Treasury Direction. The manual is more persuasive than the Employer's Guidance which implies employees could go on SSP if they wished (though as the current rate of SSP is £95.85 per week, it is unlikely to arise).
Not revised in the HMRC Guidance is that it continues to suggest employers can furlough employees already on sick leave, the HM Treasury Direction however makes it clear that employees on sick leave can only be furloughed once that period of sick leave has ended.
Can employees use holiday leave instead of being furloughed?
The 'Work out 80% Guidance' and the 'Employee's Guidance' both state that workers continue to accrue annual leave while on furlough, and that they are entitled to "take holiday whilst on furlough. Working Time Regulations require holiday pay to be paid at the employee's normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the previous 52 working weeks. Therefore, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations."
But what is now 'usual pay'? Some legal commentators argue that under EU case law holiday pay must be paid at the normal full time rate. But the Guidance also states "the employer and employee can agree to vary holiday entitlement as part of the furlough agreement". If the employee agrees to furlough leave with a consequential pay cut then arguably that would be the usual pay for any leave taken during the furlough period.
Whether holiday pay should be based on pre-furlough or furlough pay rates remains difficult to call. Paying at furlough rate will carry a risk of future claims for unlawful deduction of wages (for the underpayment of wages). Of course, those claims could be settled in the future if and when (if – see below) the position is clarified. As HMRC also state in their guidance: "during this unprecedented time, we are keeping the policy on holiday pay during furlough under review".
Can you furlough employees who are shielding?
Employees that are shielding in line with public health guidance (or need to stay home with someone who is shielding) can be furloughed if they are unable to work from home and an employer would otherwise need to make them redundant.
Can you furlough employees that have caring responsibilities?
If an employee is unable to work due to caring responsibilities caused by the COVID-19 pandemic, e.g. looking after children, they can be furloughed.
Can apprentices be furloughed?
Apprentices can be furloughed in the same way as any other employee. They can continue to undertake training whilst they are furloughed. The apprenticeship levy should continue to be paid as normal, grants from the CJRS do not cover this.
Can an employee work or do training whilst on furlough?
A furloughed employee cannot continue to do any work for their employer which makes money for or provides services for the employer's organisation or any organisation linked to or associated with the employer's organisation related to their employment. They can take part in training as long as it does not provide services or generate revenue on behalf of the employer. If a worker is required by the employer to complete online training courses whilst they are furloughed they must be paid a least the National Living Wage/National Minimum Wage for the time they have spent training - even if this is more than the 80% of their wage that will be subsidised.
Employers will need to keep records of the time furloughed workers spend undertaking training for NMW and WTR rest break purposes.
Can an employee have their hours reduced and be placed on furlough?
If an employee is working with reduced hours or for reduced pay they will not be eligible for the CJRS. Employers will need to continue paying the employee through their payroll and pay their salary subject to the terms of the employment contract that was agreed.
Can you alternate furloughed employees?
Employers do not have to furlough all of their employees. The minimum furlough period is three weeks. It is possible for employers to furlough part of their workforce for three weeks and then furlough a different part of their workforce for the next three weeks to cover the same work.
Employees can be furloughed multiple times throughout the qualifying period but each instance must be for a minimum of three weeks.
Can an employee request furlough leave?
The guidance from HMRC is silent on this. There is nothing to prevent an employee requesting to be furloughed but the employer does not have to agree. It is the employer's decision whether to furlough an employee or not.
Does a business have to furlough an employee instead of making them redundant?
There is no requirement that an employer places an employee on furlough leave as an alternative to redundancy. However, there is no guidance as to whether refusing to place an employee on furlough leave and making them redundant could amount to unfair dismissal.
What happens if there was a TUPE transfer after 19 March?
If a TUPE transfer takes effect after 19 March 2020 then the new employer can claim for the employees of the transferred business if either the TUPE or CJRS business succession rules apply to the change in ownership.
How do employers make a claim through the CJRS?
Employers can only submit one claim at least every three weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.
See the now separate 'HMRC Guidance Claim for wages through the Coronavirus Job Retention Scheme' for detail.
Do furloughed employees lose any rights?
Furloughed employees have the same rights as they did previously. They are entitled to Statutory Sick Pay, maternity rights, other parental rights, redundancy payments and rights against unfair dismissal.
Furloughed employees will still need to pay Income Tax and National Insurance. They will also pay any automatic enrolment contributions on their qualifying earnings unless they have opted out or have stopped saving into a workplace pension scheme.
Employers will be still need to pay Employer National Insurance contributions on any wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has stopped saving into a workplace pension scheme.
Are CJRS grant payments considered as part of a business' income?
Any payments received by a business under the scheme are made to offset deductible revenue costs. They must be included as income in the business's calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.
Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.
Can furloughed employees still take part in work social activities?
Furloughed employees can still join in with social activities such as virtual meet ups as long as there is no discussion of work.
Do you have a FAQ on the Coronavirus Job Retention Scheme?
As the situation surrounding the COVID-19 pandemic continues to develop, we expect to see the guidance on the CJRS continue to change. Our team are advising a multitude of different clients on the employment law issues arising during this turbulent time. If you have further questions regarding the CJRS or are in need of advice, please do get in touch.
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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.
