Please note that this information is based on the situation at 12 noon on 4th April 2020. Most of the responses are based on the information set out in the most recently published guidance. Some of the information is based on my interpretation of the guidance. If you have any specific queries, please contact me on amanda@pillingerandassociates.co.uk
Which employees can be furloughed?
Only employees who were on the PAYE payroll on or before 28 February 2020 can be furloughed.
Employees hired after 28 February 2020 are not eligible.
Employees can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed.
Employees who are claiming pensions or other benefits are also eligible.
Importantly, employers can furlough employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home and they would otherwise have been made redundant.
In addition, the updated guidance has confirmed that employees who are unable to work because they have caring responsibilities resulting from coronavirus can be furloughed. For example, employees that need to look after children can be furloughed.
There is still no obligation on the employer to furlough these individuals though. It remains up to the employer.
Can an employer reinstate an employee who left after 28th February 2020?
Yes. It is now confirmed that an employer can reinstate an employee who was on their payroll on 28th February 2020 and then furlough them, so they are entitled to payments under the scheme. This applies regardless of the reason that the employee left. However, the employer is under no obligation to do so. Many employers are reluctant to reinstate employees as there are legal implications of doing so. These employees may be entitled to a further period of notice and it is likely that they will accrue holidays during any period of furlough.
If an employer reinstates an employee who has been made redundant, it is likely that the employee will be eligible for the scheme from the day that they were made redundant. If an employee is reinstated after resigning, it is unclear whether they will be eligible from the last date of their employment or from the date that they were reinstated.
Can we backdate the period of furlough?
It is possible to backdate a furlough agreement to as early as 1st March 2020 but it is important to remember that the employee should not carry out any work whilst designated as furloughed. The employer should therefore only backdate any agreement to the date that the employee stopped carrying out any work.
Can employees work for a different employer whilst furloughed?
This is probably the most common question I have been asked!
The updated guidance states that, if the contract of employment allows it, employees are permitted to work for another employer whilst furloughed.
For any employer that takes on a new employee, the new employer should ensure they complete the starter checklist form correctly. If the employee is furloughed from another employment, they should complete Statement C.
Employees should be aware that their main employer may take them off furlough on reasonable notice. They would then be required to return to work.
Can an employee carry out work for their employer as a volunteer whilst furloughed?
A furloughed employee can take part in volunteer work, provided it does not provide services to or generate revenue for, or on behalf of the employer. An employer can agree to find furloughed employees new work or volunteering opportunities whilst on furlough if this is in line with public health guidance.
If an employee is expected to volunteer to work for their employer whilst furloughed, this will be fraud.
Can an employer require their employees to carry out training whist furloughed?
Yes. Furloughed employees can engage in training, as long as in undertaking the training the employee does not provide services to, or generate revenue for, or on behalf of their organisation.
Where training is undertaken by furloughed employees, at the request of their employer, they are entitled to be paid at least their appropriate national minimum wage for this time. In most cases, the furlough payment of 80% of an employee’s regular wage, up to the value of £2,500, will provide sufficient monies to cover these training hours. However, where the time spent training attracts a minimum wage entitlement in excess of the furlough payment, employers will need to pay the additional wages.
Is it possible to designate apprentices as furloughed?
Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed.
However, employers must pay apprentices at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) as appropriate for all the time they spend training. This means the employer must cover any shortfall between the amount they can claim for the apprentice’s wages through this scheme and their appropriate minimum wage.
Can an individual employer furlough staff?
Yes. Individuals can furlough employees such as nannies, provided they pay them through PAYE and they were on their payroll on, or before, 28 February 2020.
What happens if an employee is on a fixed term contract that ends during the scheme?
Employees on fixed term contracts can be furloughed. Their contracts can be renewed or extended during the furlough period without breaking the terms of the scheme. Where a fixed term employee’s contract ends because it is not extended or renewed the employee will no longer be eligible.
There is no obligation on an employer to extend a fixed term contract and many may be reluctant to do so as this may have an impact on other employment rights.
Are agency workers eligible for the scheme?
Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through this scheme, including where they are employed by umbrella companies.
Furlough should be agreed between the agency, as the deemed employer, and the worker, though it would be advised to discuss the need to furlough with any end clients involved. As with employees, agency workers should perform no work for, through or on behalf of the agency that has furloughed them while they are furloughed, including for the agency’s clients.
Where an agency supplies clients with workers who are employed by an umbrella company that operates the PAYE, it will be for the umbrella company and the worker to agree whether to furlough the worker or not.
What happens if the 80% of salary results in payment below the National Minimum Wage (NMW), National Living Wage (NLW) or the Apprentices Minimum Wage (AMW)?
Individuals are only entitled to the NMW, NLW, AMW for the hours they are working or treated as working under minimum wage rules.
This means that furloughed workers who are not working can be paid the lower of 80% of their salary or £2,500 even if, based on their usual working hours, this would be below their appropriate minimum wage.
However, time spent training is treated as working time for the purposes of the minimum wage calculations. As such, employers will need to ensure that the furlough payment provides sufficient monies to cover these training hours. Where the furlough payment is less than the appropriate minimum wage entitlement for the training hours, the employer will need to pay the additional wages to ensure at least the appropriate minimum wage is paid for 100% of the training time.
Can employees take annual leave when on furlough, and what should they be paid?
Unfortunately, the guidance has still not clarified this position.
Based on the information available, I believe that employees can take annual leave during a period of furlough. I also believe that an employer can effectively force an employee to take annual leave, provided that they give twice as much notice as the period of leave (ie 2 weeks’ notice must be given if the employee is required to take 1 week of annual leave).
For any period of holiday during furlough leave, I believe that the employer will be required to top up the employee’s pay to their normal pay for that period. This should be calculated in the usual way, including commission and entitlements. Currently, there is nothing in the guidance to say that the employer is unable to claim the 80% under the furlough scheme for any period of holiday.
In the event that the guidance changes on this, employers will be obliged to allow employees to retake any holiday at a later date. As you will be aware from my previous updates, the government have introduced regulations allowing employees to carry forward holiday for 2 years, where they were unable to take it due to the coronavirus outbreak.
How do I claim furlough?
It is the employer who decides whether an individual will be designated as furlough. Confirmation should be given in writing and they should obtain the agreement of the employee. In the circumstances, it would be acceptable for that agreement to be by email.
Once the HMRC portal is live, the employer will need to provide appropriate information to make the claim. It is anticipated that the portal will be live by the end of April.
The employer will need the following information:-
- the ePAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
- their bank account number and sort code
- their contact name
- their phone number
The employer will need to calculate the amount they are claiming. HMRC will retain the right to retrospectively audit all aspects of a claim.
What sums can be claimed for under the scheme?
Salary
For full or part time employees on a salary, employers can claim for the 80% of the employee’s salary, as of 28 February 2020, before tax.
For employees whose pay varies, if the employee has been employed for 12 months or more, employers can claim the highest of either the:
- same month’s earning from the previous year
- average monthly earnings for the 2019-2020 tax year
If the employee has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work.
If the employee only started in February 2020, work out a pro-rata for their earnings so far, and claim for 80%.
Employer National Insurance and Pension Contributions
Employers will still need to pay employer National Insurance and pension contributions on behalf of furloughed employees, and, subject to the limitations below, these can be claimed under the scheme.
Employers cannot claim for:
- additional National Insurance or pension contributions they make because they chose to top up an employee’s salary
- any pension contributions that they make that are above the mandatory employer contribution.
Past Overtime, Fees, Commission, Bonuses and non-cash payments
The employer can claim for any regular payments they are obliged to pay to employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.
Benefits in Kind and Salary Sacrifice Schemes
The reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. These would include health insurance or a car.
If an employee has agreed to a salary sacrifice (including pension contributions) that reduce an employee’s taxable pay these sums should also not be included in the reference salary. It may be possible to amend the contract to cancel the salary sacrifice, but it is unlikely to be beneficial in the long term. Specific advice should be taken from accountants.
Please note that this information is based on the situation at 12 noon on 4th April 2020. Most of the responses are based on the information set out in the most recently published guidance. Some of the information is based on my interpretation of the guidance. If you have any specific queries, please contact me on amanda@pillingerandassociates.co.uk