The Coronavirus Job Retention Scheme will provide a cushion to employees, workers and employers over the coming months, but how will it operate, what does ’furlough’ really mean and who is included and excluded? Helen Farr investigates
With many organisations being forced to cease trading to protect public health and others being forced to scale back operations dramatically, the impact on employers and employees of the coronavirus outbreak has been immense.
To provide security for those employees who find themselves unable to work, UK chancellor Rishi Sunak announced on 20 March 2020 that it would introduce a Coronavirus Job Retention Scheme. This introduced a legal mechanism that allows businesses to retain employees without the need to work but to still receive a minimum level of salary. The purpose is to reduce redundancies and to avoid people being laid off without pay. Lay off (without pay) is the usual vehicle open to employers when they wish to retain employees but have no work for them to do. Under the job retention scheme, all UK employers will be able to access support from the government to continue paying part of the salary of those employees who are on the PAYE payroll on 28 February but would otherwise have been laid off. These employees will be on “furlough”.
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During the period when employees are on furlough the government has committed to repaying 80% of all employment costs – to a cap of £2,500 per month. Government guidance has confirmed that it will also reimburse employer national insurance contributions and minimum automatic enrolment employer pension contributions made on the reduced salary; which is welcome news for employers.
There is nothing to stop employers “topping up” the difference between the amount they are reimbursed by the government and full salary but this will not funded through this scheme.
Employers are committed to pay salary pending reimbursement from the government and this may have an impact for those businesses who are struggling with cash flow during the current crisis. An online portal is being created to enable employers to reclaim this money from HMRC and the government has committed to the scheme being operational by the end of April. The initial scheme will apply for a 12-week period but may be extended depending on how the crisis develops.
Employers cannot force employees to be furloughed. The government is clear that changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation. Therefore employers cannot simply impose this change.
Negotiation is important. Some employees may prefer to be made redundant – especially if they have long service and hope to receive a significant redundancy payment. Equally, other employees may prefer to be furloughed rather than working reduced hours with the effect they are paid less than those colleagues who are being paid to “do nothing”. Another reason why it is important to negotiate the change in terms is that if a change is not agreed an employee could bring a claim for either breach of contract or unlawful deduction of wages if employers fail to pay full salary without the employee’s agreement to receive reduced salary.
Rishi Sunak announcing the government’s latest package of coronavirus measures
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There are a number of practical points that have arisen in relation to the operation of furlough including, how to choose those who are going to be placed on furlough and whether employees can be placed on furlough intermittently between periods of work? Employers must ensure that those who are selected to be placed on “furlough” are chosen in a non-discriminatory manner. The minimum period of furlough is three weeks and so it may be possible to have periods when employees are working and then placed on furlough.
On 19 March the government announced it would introduce a new scheme allowing employees to act as volunteers to assist with health and social care. Employees can give notice to their employer that they want to act as a volunteer for a period of up to one month and salary costs during this period will be reimbursed by the government. Ministers have clarified that furloughed employees can act as volunteers but only if it does not generate revenue for the organisation.
Job retention scheme links
Government guidance for employers on the job retention scheme
Check if you are covered by the retention scheme
Claim a grant through the self-employment income support scheme
Although the purpose of the Job Retention Scheme is to avoid redundancies, sadly things may change. There is nothing to prevent furloughed employees from being made redundant but businesses must follow a proper redundancy process including consultation. Any notice period should be paid at full salary as opposed to the reduced salary paid when on furlough.
The Job Retention Scheme only applies to those who are employed. Responding to public pressure on 26 March the chancellor introduced a similar scheme allowing those who are self-employed to make a claim for lost income for a similar three-month period.
Again the self-employed can apply to HMRC for a grant worth up to 80% of profits (calculated over a three-year trading period) up to £2,500 per month. The government has been keen to emphasise that the amounts available to the employed and the self-employed are the same.
This scheme is open to any self-employed worker with a trading profit of less than £50,000 in 2018-19 (or an average of £50,000 over the past three years of trading). For those trading for less than one year there is no help available under the scheme. Funds will not be available until early June but, once paid, funds will be backdated to 1 March 2020. The reason for the delay in payment has been attributed to the fact that the government has extended the period whereby the self-employed can file a self-assessment tax form to the end of April to ensure that the largest number of self-employed individuals can benefit from this scheme.
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Each business is unique and will have its own complexities but the guidance on how to claim for wage costs through the Coronavirus Job Retention Scheme provides much needed clarity for businesses. The scheme should also enable businesses now to take the steps needed to implement the best strategy to meet the needs of employers and employees during a time where uncertainty is rife for everyone.
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30 comments
Hi there, thanks for this article.
As only those who were on the payroll for their current employer by 28/02/20 qualify for the scheme, what happens with those that obtained a new job at a new employer from 01/03/20 onwards?
Thanks
Hi thanks for the article its very informative. I have been told I have been selected for Furlough and have been sent an agreement to sign and return which also includes a change to my contract because they are adding a Lay off Short Time clause to my contract. my employer has stated this must be signed to enable me to be furloughed. I think they are being very crafty and covering the backs as ultimately I cannot afford to stay on short time working silly hours after furlough and would then be forced to look for another job before they reach the point of making redundancies and therefore I would miss out (after more than 20 years service) on redundancy! I have not returned the agreement yet but feel I have no choice. They are using this as an opportunity to sneak in a lay off clause and ultimately cheat people out of redundancy which I am sure they will see as doing the right thing for the business but two fingers at their staff!!
Hello
They cannot change your employment contract without your permission.
I would ask for the agreement to be amended without the change and tell them you do not give permission for them to change your contract.
You will still be entitled to the retention scheme. You are right they are trying to blind side you for the companies benefit . Do not agree to what they have asked.
Hope this helps
Darren
Hello
What is the situation for the person who runs an in house payroll when a business is closed?
If they are furloughed, nobody gets paid.
If they work, even a few hours only to run the payroll, the business cannot claim the 80% of their pay.
A chicken and egg situation
Thanks
Afternoon
My partner has been approached about furloughing along with the majority of the company she works for’s sales team. How does her car allowance get dealt with under the furloughing rules? i.e. will she still receive her car allowance whilst being furloughed?
Thanks
Paul
did anyone get back to on this ?
Hi – my understanding is that car allowance does not form part of basic salary and therefore should not form part of the furlough payment.
Does that mean that the car allowance should be paid as well as the furlough payment?
I think you are wrong on this Vijay. Unlike a company car which is classed as a benefit in kind Car allowance is a cash benefit usually negotiated as a replacement for a company car. This payment, as it is contractual, is paid every month and therefore is taxed as part of the p60 gross annual salary with no distinction between the salary and the car allowance and as such should be considered when calculating the 80% furlough pay.Perhaps someone from the HMRC would like to comment to remove the confusion?.
Hi what happens if a person resigns whilst furloughed and obviously cannot work their notice thank you
I’m an agency worker P.A.Y.E , the company I work for has been forced to shut down due to coronavirus… we have been told we are not being put on JRS and haven’t been furloughed. Why would they do this. Leaving hundreds of us with no money coming in ?
What notice period you need to advise your company whilst furloughed. Will be the same that your contract?
I work for a company that employs 12 engineers. We all have the same terms and conditions. 2 years ago we were encouraged to give up a company vehicle. 3 of us provide our own cars and we receive a monthly allowance that is taxed. The allowance is paid monthly along with our salary. The rest of the engineers receive company cars as part of their salary package. We are all being furloughed. The rest of the engineers are keeping their company provided vehicles. But our allowance will no longer be paid. Is this not discriminatory?
Did you get a reply to this David? I’m in the same position. I have a car allowance buy others have company cars. My car allowance hasn’t been paid but others get to keep their cars
I’m in the same position I have a car allowance and healthcare allowance in addition to my salary and I’m being told I will receive nothing but my furloughed salary which is a lot less than my basic salary
My situation is the same as David’s I have a car allowance which stopped when I was furloughed but the company continued to pay allowance for people not furloughed is this discrimination
Hi did anyone get back to you on this, I’m in the same position
I was just wondering, if your pay varies from month to month, would I be entitled to get 80% of my pay from the month last year or the average (whichever is higher) or is this only for 0h contract employees? I am not on 0h contract but I worked shifts and earned different amounts per month. My employer is now telling me this is only for 0h contract employees but it does not state that anywhere on the gov.uk website. Many thanks
How would you advise to carry out the consultation period if someone is furloughed and their role is under threat of redundancy. Thanks for your advice in advance.
My employer has called my car allowance part of my salary, and is only paying me the £2500 from the govt They even reduced the amount that they are paying into my pension To say I’m steaming is an understatement, especially given that they are still paying contractors a full 40 hours a week, who do the same job as me. It’s unlikely that I will go back to work for this company.
Hi. Ive been on furlough for 3 weeks and now told have been let go. They owe me 7 days notice period and 8 days holiday and are trying to pay that at the furlough rate. Is this right?
Hi I’ve been furloghed for 1 month .I was due to be paid today but no wages or wage slip .contacted employer after finding a wage slip on a pay portal that was worked out on a previous month where I was in receipt of sick pay . Was told that all wages had been worked out on that month’s pay but due to not knowing whether or not they could claim through the retention scheme or not as they are a private nursery..and we might if at all get paid in two to three weeks time .Is this correct and legal or should we have been paid today and they claim it back .Bill’s to pay and no money so worried if I will get anything
Anyone advise me on this please. My manger decided to let me go, so o asked for a weeks notice and holiday pay however come the next payment date manager told me I would get the money from paye scheme and that he’s willing to furlough me, so I agreed … 3 weeks after this conversation ( middle of April ) I’m told he’s only just been able to furlough me, is this right? My manager says I’m furloughed only a small company so couldn’t pay me upfront, I’m now 7 weeks in and no pay, managers ignored my last message what do I do ?
My boss has put me on furlough from the start I cook for her and her husband and traveling every where with them
They would like me to return at the end of May on full pay working weekends for a full month on full pay
Return to my home for a week all payed on normal pay
When the furlough starts I was only on 60% is this correct
If you’re paye for agency they should furlough you. My friend gets it from Search agency
Please can anyone advise.me.
Received email today from my employer to inform staff that they will only be paying furlough payments until end of July. After that they can not afford the contribution they will have to contribute. Is this right ?
My daughter has been furloughed for about 2 months now and both pays are wrong she has contacted them about this and got a rude email back saying go to the job centre to sort it out and she won’t be claiming furlough for her no more. She hasn’t received any pay slips or signed a furloughed letter can the employer do this also the way iv read it is she is sacked is it worth speaking to acas on this
Hi everyone My employer refusing to furlough me. while I was in the payroll because my last payment was on the 20th March, but they made me redundant a week before. I finished with them on the 15th March.
Could you tell me if someone has a 40 hour contract can you be paid for 20 hours and have the balance hours be paid under the furlough scheme.
Thanks
Hello, I was placed on furlough from my part time retail job on 7th June & told it would then be reviewed on 31st July, I assumed that employers were not allowed to recruit new staff while they have existing staff on furlough, is this correct?