What do we now know (and not know) about furlough?
Selena Baker, Associate Director of Greenaway Scott, summarises what we now know about Furlough leave and what has changed.
The 'coronavirus job retention scheme' (CJRS) has been set up to provide for payments to be made by HMRC to employers in respect of them incurring costs of employment in respect of furloughed employees arising from the health, social and economic emergency in the United Kingdom resulting from coronavirus. The scheme is the first of its kind in an entirely unprecedented situation and as such, there has been (and continues to be) outstanding questions on how it is going to work in practice.
As an example of the fast paced nature of these changes, since our last article, there have been four versions of the HMRC guidance on the furlough scheme and how it works, some including minor clarification and some making some quite substantial changes.
On 15th April 2020 the Treasury has issued a Direction to HMRC under powers conferred by the Coronavirus Act 2020, containing authority and instructions for making payments under the Coronavirus Job Retention Scheme. Although amendments are possible, we hope this will be the definitive guidance on how the Job Retention Scheme works.
What are some of the key changes (or clarification) from the recent updates to the guidance and directions?
- One of the key changes from the announcement on 15th April is that you can only claim for furloughed employees that were on your PAYE payroll on or before 19 March 2020 and which were notified to HMRC on an RTI submission on or before 19 March 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020;
- Employees who transfer under TUPE after 19 March can be placed on furlough in the usual way;
- Clearly confirms that employees that have been furloughed cannot do any work for their employer during a period of furlough, or any associated company of the employer;
- You have to furlough each employee for a minimum of three consecutive weeks;
- Employees can start a new job when on furlough (meaning they might end up earning 80% of the old salary and 100% of a new one). The guidance states "If contractually allowed, your employees are permitted to work for another employer whilst you have placed them on furlough." We think there may be difficulties with this in practice so we would suggest seeking legal advice if this question is raised by your employee/s
- Company directors can be furloughed. They can still perform very limited duties such as filing accounts.
- Employees can be furloughed multiple times, i.e. they can be furloughed, brought back to work, then re-furloughed (subject to each furlough period being at least three weeks).
- It was originally thought (and the guidance suggested) that the scheme would apply to employers who would otherwise have to lay off employees (without pay) or make employees redundant due to the effects of coronavirus (COVID-19) by allowing them to retain their employees (by furloughing them) and protect the UK economy. However, the updated guidance has made it clear that "It is designed to help employers whose operations have been severely affected by coronavirus (COVID-19) to retain their employees and protect the UK economy" and that all employers are eligible to claim under the scheme and that the government recognises different businesses will face different impacts from coronavirus. It is important to note however that HMRC will have the power to retrospectively audit employers (with records having to be kept for 5 years) and there have been clear messages that those abusing the scheme will be severely punished;
- You can claim for 80% of furloughed employees usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and pension contributions (up to the level of the minimum automatic enrolment employer pension contribution) on that subsidised furlough pay. There are different rules on commission and overtime dependent on the circumstances.
When will the portal be opening? Will it be able to cope?
HMRC have advised the Treasury Committee that the online portal is due to open on 20 April 2020 and that once submitted it is aiming to pay employers four to six working days after submission of their claim. If the online portal opens on 20 April 2020, this means that employers who submit their claim when it opens should receive their first reimbursements by the end of April 2020. Employers will then be able to claim 14 days before payments are due to employees.
Although we have heard that the numbers of furloughed employees has far exceeded the government expectations, the government have said that they did not have a definitive figure of potential applicants, and that to the contrary the number of people that have taken up the scheme is evidence that it is working. We have been informed that the portal has been 'stress tested' to a certain extent and that HMRC are hopeful that it will be able to cope with the amount of people attempting to upload their claims. The portal has had to be coded from scratch, with HMRC presumably working with a reduced workforce as most employers are, and so to set up the portal so quickly is hugely impressive.
Finally, what do we not know?
Whether an employee can (or be forced to) take annual leave during furlough, we believe the answer is yes, but we still do not have clarity on the position as yet. If the answer is yes, the other question is how much pay they will be entitled to during any period of annual leave and whether this 'breaks' furlough leave meaning it will affect the 3 week minimum furlough leave period needed to reclaim.
We believe it will be 100% salary but we have not received confirmation either way and the directions do not provide further clarity though we suspect the government will provide further updates. With the May bank holidays coming up, we are hoping for guidance as soon as possible so that employers paying their employees full holiday pay for the bank holiday do not inadvertently break or re-start the '3 week furlough clock'. Common sense (and ACAS) would suggest not, but we are still waiting for (even more) updated guidance on this point.
The information contained in this article is for information purposes only and is not intended to constitute legal advice. Should you require support and assistance on the employment law implications of the COVID-19 pandemic, the support available for businesses and HR queries, our experienced advisors will be able to provide practical advice to support your business through the process. For advice, contact our employment & HR team at firstname.lastname@example.org or call us on 029 2009 5500.