Below are some of the questions our teams are being asked most frequently about the Coronavirus Job Retention Scheme and furloughing.
What is the Coronavirus Job Retention Scheme?
The Coronavirus Job Retention Scheme (also known informally as the furlough scheme) is an initiative introduced by the UK Government in order to reduce lay-off and redundancy during the coronavirus pandemic. Workers who are designated as furloughed by their employer have agreed to take a temporary leave of absence from work, while remaining employed.
I see the word ‘worker’ being used throughout the guidance I am seeing from SELECT – what is the difference between an employee and a worker?
A person is described as a worker if, among other things:
- They have a contract or other arrangement to do work or services personally for a reward
- They only have a limited right to send someone else to do the work (subcontract)
- Their employer must have work for them to do as long as the contract or arrangement lasts
- They aren’t doing the work as part of their own limited company in an arrangement where the ‘employer’ is a customer or client.
An employee is a particular type of worker who enjoys enhanced employment rights, and is classed as an employee if, among other things:
- They are required to work regularly unless they are on leave
- They are required to do a minimum number of hours and expect to be paid for time worked
- They cannot send someone else to do their work
- The business deducts Income Tax and National Insurance contributions from their wages
- They get paid holiday
- The business’s disciplinary and grievance procedures apply to them
- Their contract, statement of terms and conditions or offer letter (which can be described as an ‘employment contract’) uses terms like ‘employer’ and ‘employee’.
Both categories described above are covered by the terms of the Coronavirus Job Retention Scheme.
Do I need to get agreement from my workers before I designate them as furloughed?
Yes, you will need the workers’ agreement before designating them as furloughed. It is anticipated that most workers for electrical contractors will agree to being furloughed, as the alternatives may include redundancy at a time when few electrical contractors will be hiring new staff.
Do I need to confirm the furlough arrangements in writing?
Employers must gain agreement from any worker that they intend to designate as furloughed. When you have gained this agreement verbally, you should then confirm this in writing with a notification of furlough status letter and the letter(s) and worker confirmation(s) in writing should be retained in your records for five years. Separate letters advising of subsequent furlough periods should be issued, and separate consents sought.
If I furlough all the workers in my business, who will carry out the emergency work that we expect to have to respond to throughout the next few months?
You need not furlough all of your workers – you can continue to offer work to some workers at full pay in the normal way if they are expected to work during this time. It is up to each employer how many people they would like to furlough; there is no minimum or maximum number permitted.
Can I furlough a worker more than once? If so, is there a minimum or maximum amount of time that a worker can be furloughed for?
Once designated as furloughed, a worker must remain furloughed for a minimum of three weeks. Workers can be furloughed multiple times, but each instance must be for a minimum period of three consecutive weeks. For example, a worker may be furloughed for three weeks, then work for a week, then furloughed again for three weeks. In this case letters advising workers of any furlough periods should be issued, and separate consents sought.
Is it possible to furlough a worker who is currently on sick leave? And what if an employee gets sick while on furlough?
A worker who is currently receiving SSP cannot be furloughed, but you can decide whether to place a sick worker on furlough or on sick leave, including those who are already on sick leave, including long-term sick leave.
If you place a sick worker on furlough, SSP is longer payable and the employee should receive furlough pay. You cannot claim for an SSP rebate and for a furlough grant for the same worker simultaneously.
Where a worker falls sick while on furlough, you can decide whether they will move on to sick leave or remain on furlough. You should bear in mind that a furlough period of less than three weeks will not be claimable through the furlough scheme.
How will the HMRC work out what 80% of a worker’s wage costs are?
For salaried workers, the amount claimable will be based on the worker’s salary as at 19 March 2020.
For workers whose pay is variable, and who have been employed by their current employer for one full year, the amount claimable will be based on the higher of either:
- The amount the worker earned in the same month last year, OR
- The average of the worker’s monthly earnings from the last year.
If a worker has been employed by their current employer for less than one full year, the amount claimable will be based on:
- The average of the worker’s monthly earning since their start date.
If a worker started work for their current employer in March 2020, the amount claimable will be based on:
- The worker’s earnings in March 2020, pro-rata.
Do businesses need to pay the other 20%?
Businesses do not have to pay the remaining 20% of workers’ wages but can do so if they wish.
What is the position regarding tax, employer National Insurance, and pension contributions?
The wages of employees who have been furloughed will remain subject to Income Tax and National Insurance as usual, as well as automatic enrolment pension contributions on qualifying earnings. Employers will be liable to pay employer National Insurance contributions on wages paid, as well as automatic enrolment pension contributions on qualifying earnings. The minimum automatic enrolment contributions can then be claimed back through the furlough grant. Employers continue to be liable for any contributions which exceed the minimum.
As the owner of the business myself, can I myself be furloughed?
If you are classed as an employee of the business and pay yourself through the PAYE system, then yes you can designate yourself as furloughed. Doing so means that you can no longer carry out work activities that make the company money, however directors can still carry out their legal duties while on furlough. If you are not classed as an employee of your business, then you would be seen as self-employed, and as such not eligible for the Coronavirus Job Retention Scheme. Please see SELECT’s information on the Self-Employed Income Support Scheme and the links therein to see if you would be eligible to apply.
I’ve already laid off/made someone redundant – can I change my mind and furlough them?
Yes, you can write to them to rescind your decision if they were laid-off or made redundant after 28 February 2020 and before 19 March 2020, to inform them that with their agreement you intend to designate them as a furloughed worker. The affected employee must have been on your payroll as at 28 February 2020.
Can foreign nationals be furloughed?
Yes – foreign nationals are eligible to be furloughed, and those working on all categories of visa are eligible too. Paying a worker and receiving a furlough grant to cover their pay is not classed as ‘access to public funds’.
What if my worker is on unpaid leave?
If an employee started unpaid leave after 28 February 2020, you can put them on furlough instead. If you put them on furlough then you should pay them at least 80% of their regular wages, up to the monthly cap of £2,500. If an employee went on unpaid leave on or before 28 February, you cannot furlough them until the date on which it was agreed they would return from unpaid leave.
Can a worker do one or two days’ work for their employers when they are furloughed?
No. A worker who is furloughed cannot undertake any work for their employer which will make the employer money. At most, a worker can be asked to undertake training, but only where it is safe and advisable under the current circumstances to do so. While undertaking this training, workers should be paid at full normal pay.
Can a worker do ANY work while they are furloughed?
Yes, furloughed workers can do volunteer work or carry out work for another company provided it is not against the terms of their contract, or is done with the employer’s consent. Workers should be aware that they may be asked to return to their duties by their employer at any time after three weeks has passed, since this is the minimum furlough period.
If I need someone to be available to carry out essential work for the business for only one or two days, and I don’t designate them as furloughed, should I pay them pro-rata?
No. If you don’t designate a worker as furloughed because you want them to be available to undertake urgent work, they remain entitled to their usual full pay throughout, even if you can’t provide them with work every day or at all.
What if I need to bring a worker back to work when only two weeks into their furlough period? Can I claim for a furlough grant pro-rata?
If you bring a worker back to work before they have completed three weeks of furlough, you will not be able to apply for a grant to cover the wages of your worker for those two weeks that they spent not working. As the employer you will be liable to pay full wages at 100%, even though no work has been completed by the worker.
Do employees on furlough continue to accrue holidays while they aren’t working?
Yes, workers remain employed by you and so will continue to accrue holiday at the normal rate. If a worker is furloughed, they can still request and take their holiday in the usual way; this includes taking bank/public holidays. Your workers must be paid at 100% of normal pay for any days they take as holiday – this means you may have to top up their furlough pay for the days concerned. Workers can now carry over up to four weeks’ paid holiday over a two-year period, if they cannot take holiday due to Coronavirus.
What if my employee is due to take family-related leave while on furlough?
As of 25 April 2020, furloughed employees’ Maternity Pay, Paternity Pay, Shared Parental Pay, Parental Bereavement Pay, and Adoption Pay will be calculated based on their usual full earnings rather than their furlough pay amount.
What if I’ve TUPE’d workers over from another company recently?
A new employer is eligible to claim under the CJRS in respect of the employees of a previous business transferred after 19 March 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership.
How long does the scheme run for?
The Coronavirus Job Retention Scheme started on 1 March 2020, and the UK Government has extended it in its current form until the end of July 2020. From August 2020 until the end of October 2020 it will continue, although the terms of the scheme may change.
When can I apply to HMRC to participate in the Coronavirus Job Retention Scheme?
HMRC opened the CJRS portal to applications on 20 April 2020.
What information will HMRC require in order for me to make a valid claim?
When the HMRC Coronavirus Job Retention Scheme portal opens, the following information will be required to make a valid claim:
- your employer PAYE reference number
- the number of employees being furloughed
- National Insurance Numbers for the furloughed employees
- Names of the furloughed employees
- Payroll/employee number for the furloughed employees (optional)
- your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
- your bank account number and sort code
- your contact name
- your phone number
You should keep a record of how you worked out the amount you intend to claim, in case of disputes at a later date.
What can I start doing now to ensure that I’m ready to make my claim?
If you are not already registered for ePAYE, you should do so immediately by going to Register for online HMRC services and making your registration application. Employers should begin gathering the information listed above now, to ensure your claim will be processed in a timely manner. Further information in the form of webinars may also be available on HMRC’s YouTube channel.
Please read SELECT’s What to do now – Claiming furlough grant guidance to ensure that you are well-prepared to make your claim.
If my claim is approved, when can I expect to receive the grant money?
HMRC have indicated that they hope the first furlough grant payments will be paid by 30 April 2020.
What if I can’t afford to pay wages until the grant comes in?
If you anticipate a cashflow problem until receipt of your grant and are unable to pay wages, you may wish to explore the Coronavirus Business Interruption Loan Scheme, along with other measures introduced to reduce financial pressures on businesses:
Loans are also available at a local level from various councils – please see your local council’s website, and https://findbusinesssupport.gov.scot/ for further details.
You should also ensure that you quick to make your furlough scheme application when the scheme opens.
What RTI submissions am I expected to make as a result of receipt of the furlough grant?
The government has issued guidance to employers around how to make Real Time Information submissions to HMRC depending on whether you have:
- continued to pay your workers at 80% or 100% throughout their furlough period and before the grant payment arrived
- paid your workers 20% of your intended 100% payments throughout the furlough period and before the grant payment arrived
- by express written agreement with your workers, not paid any wages throughout the furlough period until the grant payment arrived
Please see the official guidance given here to clarify how to report the payments you have made in the correct way.
Where can I find official guidance about the Coronavirus Job Retention Scheme?
Useful information can be found here: Coronavirus Job Retention Scheme
Where can I find further information about help for businesses during this time?
Please visit SELECT’s updated guidance on new funding announced on 15 April 2020 for more information about help available to businesses.