Furlough Scheme – An Update
Please note this is accurate at the point of writing; however, amendments may need to be made as the situation changes. For up to date advice, please contact us directly.
On Thursday, November 5th, it was announced that the Coronavirus Job Retention Scheme (CJRS), or Furlough Scheme (as it is more commonly called) was to be extended to March 31st, 2021.
This is the same scheme that the Government launched in March, that officially ended on October 31st and replaced by the Job Support Scheme from November 1st.
Why has the Furlough Scheme been reintroduced?
As a result of the lockdown restrictions introduced throughout the UK, the Government has decided to extend the Furlough Scheme.
Is all of the UK covered?
Yes. The new furlough scheme applies to England, Wales, Scotland and Northern Ireland.
What will happen to the Job
It has been postponed indefinitely and is replaced by the Furlough Scheme.
Which employees can be put on furlough?
To be eligible to be claimed for under this extension, employees must be on your PAYE payroll by 23:59 October 30th, 2020.
This means a Real-Time Information (RTI) submission notifying payment for that employee to HMRC must have been made on or before October 30th, 2020.
Further guidance on the scheme may be issued; however, if it operates in the same way as the previous furlough scheme in terms of scope, furloughed workers will include agency workers, officeholders (including company directors) and salaried members of Limited Liability Partnerships (LLPs).
How much can be claimed?
As per the previous scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.
This support level is 80% of the furloughed workers wage costs, up to a cap of £2,500 per month.
What does it mean to be a furloughed worker?
It is essentially an alternative to redundancy and being laid off, whereby you will be paid whilst you are off work without work to be done. If you are able to carry out your duties, you will not be classed as a furloughed worker.
Who can claim it?
All employers in the UK can claim it.
Can an employer insist on it?
The employee’s employment contract will largely dictate the answer to this. If there is a clause in the contract whereby the employee can be laid off, or where short-time working can be introduced, then the employer can insist on it. Without such a clause, the consent of the employee is required.
The majority of employees will consent to such a change as the main alternative if they do not is redundancy. If this is the case, the employer must follow a fair redundancy procedure.
Employees cannot elect to be a furloughed worker without their employer’s agreement.
Is there a selection process?
It is advised that an objective criterion similar to that of a redundancy situation is used.
Such a criterion to include can be appraisals or
work records. If an employee refuses to be categorised as a furloughed worker, then they could then be selected for redundancy based on the criteria above.
What about the additional 20% wage?
There is no obligation on the employer to top up the remaining 20%. Although in essence, this would then be a deduction of wages (and thus potentially a breach of contract) it is unlikely that an employee would succeed. To alleviate this, it is advisable to get written consent.
What will be included in the 80%
The Coronavirus Job Retention Scheme allows for 80% of wage costs to be recovered up to £2,500 per month per employee. There is no limit on the number of employees or the duration for as long as the scheme is available. Employers will still need to pay pension and NIC costs.
What about annual leave?
Annual leave is expected to operate during this furlough period as it did under the last furlough scheme, insomuch as annual leaves accrues during the furlough period as if the employee was in work.
What do employers need to do?
1. Employers and employees will need to agree to the employee being designated as a ‘furloughed worker’. This should be straightforward because this will no doubt be more attractive to employees than redundancy, lay off, unpaid leave or a reduction in pay.
2. It is then recommended that employers send a letter or email to the employee concerned and get them to agree to the change in status in writing (and the salary change from 100% – 80% if they are not going to be topped up)
3. Employers will then need to submit details to HMRC and transfer any employees on the Job Support Scheme onto the Coronavirus Job Retention Scheme if required.
4. Employers will still need to pay employees as per usual and claim back the 80% from the HMRC. Payments, if the last scheme is anything to go by, are prompt.
For advice on furlough workers or any other employment law question, you may have, contact senior solicitor Nia Godsmark on 01792 450010 or email [email protected]
We can offer advice, review existing employment contracts and help you through this challenging period without the need for a face-to-face meeting, so get in touch and arrange a free initial consultation.
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