COVID-19 Coronavirus Business Impact: UK Coronavirus Job Retention Scheme – further guidance issued

March 27, 2020

Introduction 

As previously reported here the Government announced its Coronavirus Job Retention Scheme (“the Scheme”) on Friday 20 March 2020.

Whilst the key features of the Scheme had already been outlined, presenting employers with many points of detail to take into account in considering how to apply and communicate the Scheme, the Government has now announced further detail about the Scheme here.

Important clarifications

The highlights of this most recent announcement, in terms of key new points of clarification with regard to the operation of the Scheme, are as follows:

  • The Scheme is confirmed to apply to zero hours workers as well as agency staff who are paid through PAYE by the agency.
  • The Scheme only covers employees who were employed as at 28 February 2020.
  • Furloughing must be for a minimum period of three weeks. Employers may therefore be able to rotate their furloughing arrangements across an affected group of employees.
  • No requirement has been imposed requiring the employer to show that a furloughed employee would otherwise have been made redundant.
  • Importantly, it is now clarified that the Scheme will cover employees made redundant since 28 February 2020 if they are rehired by their employer.
  • The 80 percent amount provided for by the Scheme is to be calculated for salaried employees by reference to the employee’s gross salary as of 28 February 2020 – importantly, without fees commissions and bonuses.
  • A method is provided for calculation of variable wages.
  • Employers can reclaim the income tax, national insurance contributions and minimum auto-enrolment pension contributions for which they are responsible in relation to the 80 percent reimbursement available under the Scheme but not any top-up element. Contractual enhancements of pay in respect of family leave also fall within the scope of the Scheme.
Even with this guidance employers will need to consider carefully the detailed implementation and documentation of furloughing arrangements upon which we would be happy to advise further. For example, one specific issue which has not been addressed in the latest guidance is the treatment of holiday entitlement during a period of furloughing.

Further points of detail now confirmed

By way of further detail this further guidance also confirms the following points:

Which employers are eligible
  • To qualify the employer must have a PAYE payroll scheme as at 28 February 2020.
  • Where a business is in administration, the administrator will be able to utilise the Scheme.

Which staff are covered?

  • To be covered by the Scheme, employees must have been on the employer’s PAYE payroll on 28 February 2020. Employees engaged subsequently are not covered.
  • Importantly, it is now clarified that the Scheme will cover employees made redundant since 28 February 2020 if they are rehired by their employer.
  • It is a condition of an employer's entitlement under the Scheme that the employer confirms in writing to the employee that the individual is furloughed and keeps a record. The latest guidance appears to suggest that the employee needs to agree to being furloughed.
Requirement of no work
  • As previously confirmed, an employee working reduced hours or on reduced pay is not covered under the Scheme. To qualify, an employee must not undertake work for or on behalf of the employer – it is clarified that this includes providing services or generating revenue.
  • A furloughed employee can take part in volunteer work or training, as long as this does not involve providing services to or generating revenue for or on behalf of the employer.
  • If employees participate in training while furloughed, they must be paid at least the National Minimum Wage/National Living Wage for the time spent training, even if this is more than the 80 percent of pay covered by the Scheme.
  • The minimum period of furloughing is three weeks which will presumably permit rotating furlough arrangements to be implemented.
Already absent employees
  • Employees on unpaid leave can only be covered by the Scheme if they were placed on unpaid leave after 28 February 2020.
  • Employees who are on sick leave or self-isolating should receive Statutory Sick Pay, but can subsequently be furloughed.
  • Employees who are “shielding” in line with public health guidance are covered by the Scheme as are those on sick leave or who are self-isolating, once they have received their SSP entitlement.
What will be reimbursed and must be paid
  • The employer must pay the employee the entire amount reimbursed in respect of employees’ gross pay – no fees can be charged in respect of payments made pursuant to the Scheme.
  • The Scheme will cover the lower of 80 percent of an employee’s “regular wage” and £2,500 per month.
  • The Scheme will also reimburse employers for the Employer National Insurance contributions and minimum automatic enrolment employer pension contributions for which they remain liable in respect of payments to furloughed employees falling within the scope of the Scheme. The Scheme will not, however, cover any such liabilities in respect of a top-up of salary.
  • For salaried employees – whether full time or part time – the employee’s actual gross salary as of 28 February 2020 should be used to calculate the 80 percent amount available for reimbursement. Fees, commission and bonuses should not be included.
  • As previously indicated, an employer may, but is not obliged to, top-up an employee’s salary.
  • Contractual enhanced pay to those on maternity, adoption, paternity or shared parental leave provided by an employer falls within the scope of the Scheme.
Variable earnings
If an employee has been employed (or engaged by an employment business) for a full 12 months prior to the claim, the employer’s claim can be for the higher of either
 
(a) the same month’s earning from the previous year or
(b) average monthly earnings from the 2019-20 tax year.
 
If the employee has been employed for less than a year, the Scheme will reimburse an average of the individual’s monthly earnings since they started work.
 
Claims process
  • In making a claim under the Scheme, which can be backdated to 1 March 2020, employers will need to provide:
    • the relevant ePAYE reference number.
    • the number of employees being furloughed.
    • the claim period (start and end date).the amount claimed.
    • bank account number and sort code.
    • contact name and phone number.
  • Only one claim will be possible at least every three weeks. Claims will need to be made in accordance with actual payroll amounts at the point at which the employer runs payroll or in advance of an imminent payroll.
  • Employers will need to calculate the amount being claimed and HMRC will be able to retrospectively audit any claims. Further guidance will be published as to how employers should calculate the amount they can reclaim in relation to minimum automatic enrolment employer pension contributions and employer national insurance contributions.