Furlough and the Coronavirus Job Retention Scheme

Furlough and the Coronavirus Job Retention Scheme.

Updated 15 June 2020 For the latest guidance, please visit https://uk.markel.com/insurance/ /getmedia/42d7a9b7-8215-431f-9f14-b8e932e2c435/Furlough-and- the-Coronavirus-job-retention-scheme

01 Flexible furloughing and tapering of the CJRS 3 24 Employees that are paid the National Minimum Wage and training 12 02 Changes to the CJRS to apply from 1 July 2020 3 25 Volunteer work during furlough 13 03 Closure of CJRS to new entrants 4 26 Consultation for furlough 13 04 Tapering of the CJRS 4 27 Terms and conditions of employment during furlough 13 05 Example of how to work out how much furlough pay you can claim for from September 2020 5 28 Notice pay where notice given during furlough 13 06 What happens if employers cannot afford to pay 29 Sick leave during furlough 14 employer N.I. contributions and pension contributions 30 Annual leave during furlough 14 from August 2020 and the minimum 10% employer contributions that apply in September and 20% 31 Supporting staff during furlough 15 contributions that apply in October 2020 for 32 Employees who may be placed on furlough under furloughed employees? 5 the CJRS 15 07 Eligibility 6 33 Where employees have been given notice of 08 Guidance on public funding and the CJRS 6 redundancy or stopped working for their employer on or after 28 February 2020 15 09 Childcare sector 6 34 Shielding employees 16 10 Social care sector 7 35 Employees with caring responsibilities 16 11 The definition of a furloughed employee 7 36 Apprentices 17 12 How to access the CJRS 8 37 Furloughed employees working as union or employee 13 Record keeping 8 representatives 17 14 Payment to employers 9 38 Redundancy consultation during furlough 17 15 Payment to employees 9 39 Disciplinary and grievance procedures during furlough 18 16 Company directors who are on the PAYE payroll of 40 Do employers have to make up the 20% short-fall their company 9 in pay for those workers on furloughed leave? 18 17 Company directors with an annual pay period 10 41 Do employees have the right to be placed on 18 Calculation of wages for furloughed workers for furloughed leave? 18 claim periods to 30 June 2020 10 42 Can the employer ‘rotate’ employees on furlough 19 Employees whose pay varies 10 leave and employees who are working where there is reduced work? 18 20 Past overtime, fees, commission, bonuses and non- cash payments and the definition of ‘non-discretionary’ 43 Can employees work for another employer when payments 11 furloughed, including a new employer? 19 21 Benefits in kind and salary sacrifice schemes 11 44 What about employees that employers have inherited following a TUPE transfer? 19 22 Returning to work from statutory leave 11 23 Statutory parental leave following furlough 12

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 2 Under the Coronavirus Job Retention Scheme (CJRS), which – From 1 July, agreed flexible furlough agreements can opened for claims on 20 April 2020 and remains open last any amount of time. Where a previously furloughed until 31 October 2020, after which time it closes, all UK employee starts a new furlough period before 1 July this employers are able to access support to continue paying furlough period must be for a minimum of 3 consecutive part of their employees’ salary for employees who are weeks. This is the case regardless of whether the 3 furloughed by reason of circumstances resulting from the consecutive-week minimum period ends before or after coronavirus epidemic. 1 July. – For example, a previously furloughed employee can start a new furlough period on 22 June which would have to 01 Flexible furloughing and tapering continue for at least 3 consecutive weeks ending on or of the CJRS after 12 July. After this the employee can they can then be flexibly furloughed for any period. However, after 1 July, employers cannot make claims that cross calendar months, so the employer will need to make a separate claim for the On 12 May 2020 the Chancellor announced the extension period up to 30 June. of the CJRS until the end of October 2020. – Although flexible furlough agreements (i.e. worked periods) On 29 May 2020, The Chancellor set out changes to the can last any amount of time, the period that employers can CJRS to apply as follows: claim for through the CJRS must be for a minimum claim period of 7 calendar days. 02 Changes to the CJRS to apply from Please refer to the below HMRC “example of how to calculate 1 July 2020 the amount you should claim for an employee who is flexibly furloughed”: – To support the transition back to work, from 1 July 2020, https://www.gov.uk/government/publications/find-examples- employees are permitted to work whilst on furlough to-help-you-work-out-80-of-your-employees-wages/example- provided, with the employer being able to claim the CJRS of-a-full-calculation-for-an-employee-who-is-flexibly- grant for their wages in respect of their normal hours furloughed not worked. Employers cannot claim via the CJRS for Please also refer to the below HMRC “example of how employees’ wages for the periods when they are carrying to calculate your employees’ wages, national insurance out work. Currently, furloughed employees must cease all contributions and pension contributions” for both claim periods work for a minimum period of 21 days as a condition for spanning June and July and for claim periods from July: employers claiming their furloughed wages under the CJRS. For the periods when employees are on furlough and not https://www.gov.uk/government/publications/find-examples- working, employers can claim 80% of normal wages up to to-help-you-work-out-80-of-your-employees-wages/ a cap of £2,500 per month as well as employer National examples-of-how-to-work-out-80-of-your-employees-wages- Insurance and pension contributions for the hours the national-insurance-contributions-and-pension-contributions employee does not work. The above publication also sets out how the tapering to the – For claim periods from 1 July 2020, employers will be CJRS applies. required to submit details of the usual hours an employee would be expected to work in a CJRS claim period (based The following HMRC guidance sets out how and when to on the number of hours the employee was contracted for report employees' wages to HMRC using the PAYE Real Time at the end of the last pay period ending on or before 19 Information system when you’ve claimed wages through the March 2020) and the actual hours worked, or hours which CJRS: . will be worked, to HMRC. From 1 July 2020, when claiming https://www.gov.uk/guidance/reporting-payments-in-paye- the CJRS grant for furloughed (unworked) hours, employers real-time-information-from-the-coronavirus-job-retention- will need to report and claim for a minimum period of a scheme week. From 1 July 2020, claim periods will no longer be able to overlap months. Also, from this date, the number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim under the current CJRS rules. Employers will be able to make their first claim under the new CJRS scheme from 1 July 2020.

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 3 03 Closure of CJRS to new entrants in relation to a furlough period of at least 3 consecutive weeks taking place any time between 1 March 2020 and The CJRS will close to new entrants from 30 June 2020. 30 June. This is subject the maximum cap the previous The final date by which an employer was able to furlough an employer was subject to. employee for the first time (i.e. where they have not previously However, where employees who have not been previously been furloughed) was 10 June 2020, in order for the current furloughed prior to July 2020 become extremely clinically 3-week furlough period to be completed by 30 June 2020. vulnerable (e.g. due to receiving a new health diagnosis) or Employers will have until 31 July 2020 to make any claims in become clinically vulnerable, or have remained on sick leave, respect of the period from 1 March to 30 June 2020. in receipt of sick pay only, they will not be eligible for furlough Parental leave new entrant exemption under the CJRS; although they may be eligible for sick pay where they are unfit for work or, in the case of a suspension In an exception to this, the government announced on of a pregnant employee for a health and safety reason, to 9 June 2020 that parents on statutory maternity and paternity suspension on full pay. leave, adoption leave, shared parental leave and parental bereavement leave who return to work from leave will be HMRC published the following new guidance document on eligible to be furloughed for the first time under the CJRS 12 June 2020 in relation to calculating claims under the new after the 10 June cut-off date. This means that employers who Flexible Furlough scheme from 1 July 2020, which sets out how have not furloughed employees on statutory parental leave to determine the length of your claim period, what to include previously are not prevented from doing so after 10 June 2020, when calculating wages and how to work out your employees’ as is now the case for any other employees. This is provided usual and furloughed hours: that: https://www.gov.uk/guidance/steps-to-take-before- – the employer has previously submitted a claim for any calculating-your-claim-using-the-coronavirus-job-retention- other employee in their organisation in relation to a scheme#variablehours furlough period of at least 3 consecutive weeks taking and has updated the following guidance document for claiming place any time between 1 March 2020 and 30 June; unworked hours under the Flexible Furlough scheme from 1 – the employee the employer wishes to furlough for the July 2020: first time started maternity, shared parental, adoption, paternity and parental bereavement leave before 10 June https://www.gov.uk/guidance/calculate-how-much-you-can- and has returned from that leave after 10 June; and claim-using-the-coronavirus-job-retention-scheme – the employee was on the employer’s PAYE payroll on or before 19 March 2020 and an RTI submission notifying payment in respect of that employee to HMRC was made 04 Tapering of the CJRS on or before 19 March 2020 TUPE new entrant exemption – From August 2020 HMRC will continue to pay 80% of wages up to a cap of £2,500 per month under the CJRS. Employers are eligible to claim under the CJRS for employees However, employers will need to pay employer National they have inherited via a TUPE transfer or where the PAYE Insurance and pension contributions. The government business succession rules apply to the change in ownership, estimates that for the average CJJRS claim, this represents where those employees transferred after 10 June 2020, 5% of the gross employment costs the employer would provided that: have incurred had the employee not been furloughed. – the employees being claimed for have previously had a – From September 2020, HMRC will pay 70% of wages claim submitted for them by their prior employer in relation up to a cap of £2,187.50 per month for the hours the to a furlough period of at least 3 consecutive weeks taking employee does not work. Employers will pay employer place any time between 1 March 2020 and 30 June National Insurance and pension contributions and 10% of – In these circumstances, the maximum number of wages (i.e. up to £312.50 per month) to make up 80% of employees that the new employer can claim for will be the the employee’s normal wages up to a cap of £2,500. The total of both: government estimates that for the average CJRS claim, – the maximum number of employees the new employer this represents 14% of the gross employment costs the claimed for in any one claim ending on or before 30 June employer would have incurred had the employee not been – the number of employees that are being transferred to the furloughed. new employer which have had a claim submitted for them

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 4 – From October 2020, HMRC will pay 60% of wages up to a R Ltd calculates how much it can claim for its employee’s cap of £1,875 per month for the hours the employee does furlough pay: not work. Employers will pay employer national insurance 1. Start with £1,500 - this is the minimum furlough pay contributions and pension contributions and 20% of (i.e. 80% of the employee’s usual wages) wages to make up 80% of the employee’s normal wages 2. Divide by 80 up to a cap of £2,500 per month i.e. the employer will be 3. Multiply by 70 - because the claim period is in September required to contribute up to up to £625 per month . The government estimates that for the average CJRS claim, R Ltd can claim a grant of £1,312.50 towards its employee’s this represents 23% of the gross employment costs the wages. R Ltd must pay the employee the minimum furlough employer would have incurred had the employee not been pay amount of £1,500, and can choose to pay more than this furloughed. but does not have to. Source: https://assets.publishing.service.gov.uk/government/ As with the current CJRS, employers can still top up their uploads/system/uploads/attachment_data/file/888764/ employee wages above the CJRS at their own expense. Where Factsheet_for_SEISS_and_CJRS_schemes.pdf employers are currently topping up furloughed wages but no longer wish to do so/can no longer afford to do so, depending In other words, the employee will receive 80% of their wages on the current wording of the furlough agreement, this is that they would have received had they worked the furloughed likely to constitute a variation of the furlough agreement and hours up to the cap of £2,500 per month, with the respective employers will need to enter into a new or varied furlough employer and Treasury contributions for September and agreement with their employees. October applying, as set out above. Employers should bear in mind that employees are entitled Accordingly, once the tapering of the CJRS begins from August to receive at least the National Minimum Wage rate for work 2020, employers are still required to top up employees’ carried out or for compulsory training. This will need to reflect wages to 80% of their normal salary up to a cap of £2,500 the April 2020 increase in the National Minimum Wage/ under the terms of the CJRS. Where employers wish to bring National Living Wage rates. furloughed employees back to work on reduced hours, where the employee’s existing contract of employment does not entitle the employer to reduce the employee’s working hours or work pattern, the employer will need to agree the new working 06 What happens if employers cannot pattern with the employee as a temporary variation of contract. afford to pay employer N.I. contributions In either case, the employer should give reasonable notice to the furloughed employee of the requirement to return to work and pension contributions from and of their new working hours to apply during furlough and August 2020 and the minimum 10% address any practical considerations. Any agreement regarding work during furlough should be confirmed in writing. employer contributions that apply in September and 20% contributions that 05 Example of how to work out how much apply in October 2020 for furloughed furlough pay you can claim for from employees? September 2020 As furloughed employees are still entitled to receive 80% of their wages up to a cap of £2,500 per month, these The government publication (https://www.gov.uk/government/ contributions are mandatory from August 2020 onwards. publications/find-examples-to-help-you-work-out-80-of- Where employers cannot afford to make these contributions, your-employees-wages/examples-of-how-to-work-out-80-of- they will need to consider removing employees from furlough your-employees-wages-national-insurance-contributions-and- entirely. In this scenario employers will need to consider pension-contributions) provides the following worked example: alternatives, such as short-time working outside the CJRS, where work is available. Where employers need to consider R Ltd’s employee has been furloughed continuously since redundancies, they should note that the minimum consultation 15 April 2020. The employee is paid calendar monthly. R Ltd period where making collective redundancies (please see below makes a claim for 1 September to 30 September. R Ltd has section on Redundancy Consultation During Furlough on p.21). calculated that the minimum furlough pay for this period is £1,500, which is 80% of the employee’s usual wages. The following guidance applies until the CJRS is modified from effect from 1 July 2020.

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 5 07 Eligibility This guidance states that those childcare providers can only furlough staff and claim through the CJRS where they meet All UK businesses that employ staff that were both on their certain conditions. These conditions are that: PAYE payroll and notified to HMRC on an RTI submission on – the employee works in an area of business where the or before 19 March 2020 are eligible for the CJRS (with the services are temporarily not required and where their salary exception of most public sector organisations – see below is not covered by public funding 3rd bullet point). In other words, a sole trader, partnership, – the employee would otherwise be made redundant limited company or limited liability partnership can claim the – the employee is not involved in delivering provision that CJRS grant. HMRC guidance has also confirmed that eligible has already been funded businesses include: – (where appropriate) the employee is not required to deliver – recruitment agencies (for agency workers paid through provision for a child of a critical worker and/or vulnerable PAYE) child – charities – the grant from the Coronavirus Job Retention Scheme – public authorities (although note that the government would not lead to financial reserves being created ‘expects’ that only in a small number cases will the CJRS Where the above conditions are met, educational and childcare be appropriate for use by public authorities; for example providers may only claim furloughed wages through the CJRS where organisations (and their employee costs) are not in respect of the proportion of the paybill which is privately funded by the government and whose staff cannot be funded (e.g. through the fees parents pay for childcare redeployed to assist with the coronavirus response. This beyond the free entitlements, rather than funded through also applies to non-public sector employers who receive the government’s free entitlements (or ‘DSG income’). Local partial or total public funding for staff costs. The Treasury authorities are able to move funding for the early years Direction that sets out the legal framework for the CJRS is entitlements between settings if necessary to make sure that silent regarding the restrictions on claiming for employees sufficient childcare places are available for vulnerable children whose wages are publically funded, so it is not clear at this and those of critical workers. Where providers have their early stage how this government expectation applies in practice, entitlement funding reduced in order to fund childcare places how it is to be enforced in respect of the CJRS or how this elsewhere will be able to increase the proportion of their salary impacts on other public grants received for services those bill eligible for the CJRS in line with the above government employers provide. sector guidance. Providers receiving increased DSG income to provide additional childcare for vulnerable children and children 08 Guidance on public funding of critical workers, the proportion of their salary bill eligible for the CJRS may be reduced accordingly. and the CJRS Childminders are less likely to be employers, and therefore are less likely to be eligible for support via the CJRS. Childminders The Procurement Policy Note 02/20 states that suppliers to may find the Self Employment Income Support Scheme more public authorities cannot be paid in full under a public authority relevant. contract when some or all of the employees working on the contract are furloughed under the CJRS. Eligibility for other Childminders and nannies can provide childcare to the children public funding schemes may be restricted where employers of one household from Wednesday 13 May 2020 where they furlough their employees. are not already looking after vulnerable children or those of critical workers. 09 Childcare sector From 1 June 2020, childminders and other childcare providers can look after children of all ages, in line with their current Ofsted registration, and within usual limits on the number of Government guidance published on 17 April 2020 has been children they can care for in accordance with social distancing, issued for early years’ child care providers who are employers the government’s “Covid Secure” guidelines and their own risk (such as nursery schools) in relation to claiming under the assessments. Employers will need to determine the availability CJRS where they receive early years’ public funding which pays of staff to work in the setting from 1 June 2020, consult with part or all of staff salaries, which is available here: https:// staff in advance of their return and give reasonable notice to www.gov.uk/government/publications/coronavirus-covid-19- end furlough where applicable. financial-support-for-education-early-years-and-childrens- social-care/coronavirus-covid-19-financial-support-for- Early years providers should refer to the following guidance: education-early-years-and-childrens-social-care https://www.gov.uk/government/publications/preparing-

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 6 for-the-wider-opening-of-early-years-and-childcare-settings- furlough. Due to the new requirement in the government’s from-1-june/planning-guide-for-early-years-and-childcare- updated guidance since 15 April 2020 that the employer settings#Section3 must also have made an RTI submission notifying HMRC of a payment in respect of the employee on or before the relevant date (which is now 19 March 2020) (as well as the employee 10 Social care sector being on the PAYE payroll by that date), this means that employees that were employed by 19 March 2020 but not paid Social care work, along with other sectors employing key by 19 March 2020 will be excluded from the CJRS. workers, has seen an upturn in work demands during the Claims under the CJRS can be backdated to 1st March 2020. coronavirus pandemic, meaning that furlough in most cases would not be appropriate. However, the Coronavirus (COVID-19): adult social care action plan states that where 11 The definition of a furloughed employee social care workers (including those on zero hour contracts) are unable to work for a long period of time, because they are Previous government guidance referred to employees being in a high-risk group, or because they are shielding during the eligible for furlough where they would otherwise have been outbreak, employers can furlough these workers, to ensure “laid off” (meaning made redundant). This is no longer the case that they continue to receive 80% of their normal income. as the CJRS has been widened to benefit eligible employees Skills for Care has published guidance agreed with The who cannot carry out any work due to the wider effects of the Department of Health and Social Care and the Treasury setting current coronavirus epidemic. agreed interpretation of the CJRS for those in the care sector. The legal framework for the CJRS states that an employee is a This is published in a document updated on 27 April 2020 furloughed employee if- entitled, “Adult Social Care: how we expect the sector to interpret guidance on the Coronavirus Job Retention Scheme”. a. the employee has been instructed by the employer to cease all work in relation to their employment (and the employer Unhelpfully, it states that this is not formally published and employee have agreed in writing (which may be by guidance but has been produced for “reference” by employers email also) that the employee will cease all work in relation and stakeholders in the care sector. It considers whether those to their employment), in care sector can be furloughed and claimed for under the b. the period for which the employee has ceased (or will have CJRS. This guidance states that furloughing in the care sector is ceased) all work for the employer is 21 calendar days or expected to be the exception rather than the rule, for example more, and for those that are shielding, or have roles where demand for c. the instruction is given by reason of circumstances arising those services has decreased or stopped and cannot be done as a result of coronavirus or coronavirus disease. from home e.g. those that provide day care services or work in charity shops. Taking this guidance together, it means that In other words the employer’s decision to place an employee workers in the care sector can be furloughed in exceptional on furlough can be pursuant to the wider circumstances of circumstances e.g. where they are shielding and cannot the coronavirus epidemic (for example where employees need work for this reason, albeit this is not reflected in official to shield, or look after dependants due to the circumstances government guidance to the CJRS. of the epidemic); and not only where those employees would otherwise be redundant. Other sector specific government guidance on the CJRS for employers that receive public funding that partially covers staff Unlike the Treasury Direction, the government guidance does wages is awaited. not expressly require a written furlough agreement or written confirmation of the furlough agreement, but states that to be On 15 April 2020, the government extended the CJRS to staff eligible for the CJRS grant, employers must provide written that are on the employer’s PAYE payroll on, or before, 19 confirmation to their employee that they have been furloughed. March 2020 and have been notified to HMRC via a Real Time The guidance states that this should be done in accordance Information (RTI) submission by that date (the previous cut-off with employment law considerations (e.g. by invoking an date was 28 February 2020). Employees that were employed existing lay off clause and confirming to the employee any as of 28 February 2020 and on the PAYE payroll (i.e. notified provisions to apply during furlough and/or seeking consent to HMRC on an RTI submission on or before 28 February) and to temporarily vary the employment contract during furlough were made redundant or stopped working for the employer where necessary, or seeking consent to furlough where there after that and prior to 19 March 2020, can also qualify for is no existing lay off clause). The update to the government the CJRS if the employer re-employs them and puts them on

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 7 guidance dated 23 April 2020 states that a collective It is easier to calculate the figures in advance, so that these can agreement reached between an employer and a trade union be inputted into the 3 fields for the 80% wage calculation, the is also acceptable as written confirmation that an employee employer’s National Insurance Contribution and the employer’s has been furloughed. The guidance states that there needs to pensions contribution figure. be a written record of the confirmation that the employee has Details of the information needed to make a claim can be found been furloughed, but the employee does not have to provide here: https://www.gov.uk/guidance/claim-for-wages-through- a written response. Accordingly, provided the employee is the-coronavirus-job-retention-scheme instructed to cease work in accordance with employment law provisions and the employer has written confirmation A step-by-step guide to making a claim is available here: that the employee has been furloughed, this would satisfy https://www.gov.uk/government/publications/coronavirus- the employee’s eligibility for the CJRS grant, subject to them job-retention-scheme-step-by-step-guide-for-employers meeting the other eligibility requirements. A record of this An online calculator is available for calculating the furloughed communication must be kept for five years. wages, including non-discretionary regular payments to be claimed. 12 How to access the CJRS Where employers use an agent who is authorised to act for them for PAYE purposes (such as an accountant), the agent will Employers will need to: be able to make a claim on the employer’s behalf. Employers are advised to ensure that HMRC have been notified of their – designate affected employees as ‘furloughed workers,’ and authorized agent for PAYE purposes so that the same agent notify their employees of this change - changing the status can be used to submit the CJRS claim. of employees remains subject to existing employment law and, depending on the employment contract, may be Where employers use a file-only agent (i.e. that files the subject to negotiation. employer’s RTI return but doesn’t act for the employer in – submit information to HMRC about the employees that other matters), they won’t be able to make a claim on the have been furloughed and their earnings through a new employer’s behalf and the employer will need to ensure they online portal (HMRC will set out further details on the have the information listed above from them to make the claim information required). HMRC will then pay the employee themselves. costs via BACS payment to a UK bank account. On submission of the claim, a note should be made of the claim – Employers can only submit one claim at least every 3 reference number provided, or the confirmation should be weeks, which is the minimum length of time an employee printed out, as the user will not receive an email confirmation can be furloughed for at any one time. In other words, of the claim submitted. A copy of the calculations used for the employees cannot be furloughed for less than 3 weeks at claim should be retained also, particularly as HMRC can later a time. audit the claims. Employers need to provide the following to make a claim via HMRC has confirmed that claims submitted will be paid within HMRC from 20 April 2020: 6 working days. 1. The bank account number and sort code for HMRC to use As stated above, HMRC has confirmed that HMRC will retain when paying the claim. the right to retrospectively audit all aspects of CJRS claims 2. The name and phone number of the person in the business made. for HMRC to call with any questions. 3. The Self-Assessment UTR (Unique Tax Reference), Where employees believe the CJRS is being abused by their Company UTR or CRN (Company Registration Number). employer (because, for example, employees are being required 4. The name, employee number and National Insurance to carry out work during furlough for their employer) they may number for each of the furloughed employees. report this to HMRC via on online hotline. 5. The total amount being claimed for all employees and the total furlough period, using the amounts in the payroll. For employers with 100 or more furloughed staff, they will 13 Record keeping need to upload a file with information for each employee using the following file types (.xls, .xlsx,.csv & .ods). To be eligible for the grant employers must confirm in writing 6. Employers (or their agents) will also need to sign up for to their employee confirming that they have been furloughed. a Government Gateway account if they do not already For this purpose, the date of furlough will be the date they have one. commenced furlough, rather than the date of any agreement to

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 8 furlough. A record of this communication must be kept for six or are being furloughed under the CJRS: https://www. years. The government has indicated that it may retrospectively thepensionsregulator.gov.uk/en/covid-19-coronavirus-what- audit employers who have claimed under the CJRS and may you-need-to-consider/automatic-enrolment-and-pension- claw back wages paid under identified fraudulent or erroneous contributions-covid-19-guidance-for-employers claims. Please note also that for employers that take on new This guidance states that the Pensions Regulator will not take starters that have additional employment and are furloughed regulatory action where the requirement cannot be complied by their other employer, the new employer should ensure with under pensions legislation to consult on certain changes their employee completes the starter checklist form for PAYE for a minimum period of 60 days, including where there is a and that the employee completes ‘Statement C’ of the form proposed decrease in the employer contribution, (which applies (https://www.gov.uk/government/publications/paye-starter- where the employer has at least 50 employees), where the checklist). change applies in respect of furloughed staff and only applies during furlough. 14 Payment to employers – Employees that have more than one employer can be furloughed for each job. Each job is separate, and the cap HMRC will reimburse 80% of furloughed workers’ wage costs, applies to each employer individually. up to a cap of £2,500 per month, which equates to the UK’s – Employees on sick leave or self-isolating, or shielding median salary of £30,000 per year. This cap does not include where they are extremely vulnerable and have been employer pension contributions and national insurance notified to do so in accordance with public health advice contributions on the furloughed wage. HMRC will also meet the and unfit for work should get Statutory Sick Pay (or national insurance costs and pension costs on the furloughed contractual sick pay, unless this has been renegotiated). wage as an additional amount to be claimed through the It appears from the government guidance that employees CJRS. The employer pension contributions that can be claimed may remain on furlough and receive furloughed wages are only in respect of the mandatory employer contribution whilst sick, unless the employer has chosen to pay through the automatic enrolment scheme of 3% of income Statutory Sick Pay rates during the sickness period (please above the lower limit of qualifying earnings. see below guidance on sick leave during furlough), albeit the Treasury Direction states that employees cannot Employers cannot claim for additional National Insurance or receive furloughed wages during the first period of sick pension contributions employers make where they chose to leave where the employee is eligible to receive SSP instead. top up their employee’s salary, or any pension contributions Whilst the updated government guidance on 15 April employers make that are above the mandatory employer 2020 has clarified that employees can take annual leave contribution. whilst on furlough, it is silent on whether or not 80% of Businesses that require short term cash flow support may be the annual leave pay which is paid during furlough can be eligible for a Coronavirus Business Interruption Loan. reclaimed as wages via the CJRS. It is likely, however, that annual leave pay can be claimed at 80% via the CJRS. As the payment to employers under the CJRS is a grant rather – Employees who have been furloughed can engage in than a loan, it will not have to be repaid to the government at voluntary work without risking their pay. any time.

15 Payment to employees 16 Company directors who are on the PAYE payroll of their company – Employees that have been furloughed will receive 80% of their salary (less the usual income tax and National As office holders, salaried company directors are eligible to be Insurance deductions) up to a cap of £2,500. furloughed and claim their wages through the CJRS. This also – Employees will also pay automatic enrolment contributions applies to salaried individuals who are directors of their own on qualifying earnings, unless they have chosen to opt-out personal service company (PSC). Government guidance states or to cease saving into a workplace pension scheme. that where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of The Pensions Regulator has published guidance reminding one or more of its individual salaried directors, the board can employers that their automatic enrolment duties continue decide that such directors should be furloughed. Where one or to apply, including re-enrolment and re-declaration duties. more individual directors’ furlough is so decided by the board, This is the case regardless of whether staff are still working

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 9 this should be formally adopted as a decision of the company, elements before tax, as in their last pay period prior to 19 noted in the company records and communicated in writing to March 2020 (where an employee has been paid for a whole the director(s) concerned. Therefore, company directors and pay period) should be used to calculate the 80%. This includes others, such as their spouses who are also drawing a salary via wages, past overtime, fees and compulsory commission PAYE and who have been on the payroll on or before 19 March payments. However, discretionary bonus (including tips) and 2020 and sent HMRC an RTI submission notifying their PAYE commission payments and non-cash payments should be payment on or before 19 March 2020, can claim for loss of excluded. “Regular” is defined by HMRC as those payments salary via for the CJRS in the same way as any other employee. which are not conditional on company or personal performance They would not be able to claim for loss of dividends under (e.g. commission or bonus payments), unless the payment the CJRS, of course and government guidance states that arises from “a legally enforceable agreement, understanding, those that pay themselves a salary and dividends through their scheme, transaction or series of transactions”. own company would not be covered by the Self-employment A worked example for a salaried furloughed worker whose Income Support Scheme in respect of that income. However, gross salary is at or above £2,500 (and therefore capped at a condition of furloughing is that the individual must not £2,500) would be as follows: undertake work of any kind for the company as an employee during furlough. Government guidance states that company Gross payment: £2,500.00 directors should also not do work of a kind they would carry out in normal circumstances to generate commercial revenue Employer NI: £243.98 or provides services to or on behalf of their company as a Employer pension: £59.40 condition of claiming under the CJRS. Company directors may, however, continue to carry out their company statutory duties, Total grant available such as preparing Companies House and HMRC filings during (that can be claimed from £2,803.38 furlough. HMRC): If, based on previous government guidance, the claim was 17 Company directors with an annual calculated based on the employee’s salary as at 28 February 2020 (and this differs from their salary in their last pay period pay period prior to 19 March 2020) employers can choose to still use this calculation for their first claim under the CJRS. The government updated their guidance on 30 April 2020 to confirm that directors who pay themselves once a year through the PAYE payroll are eligible to claim their wages through 19 Employees whose pay varies the CJRS, as long as they meet the relevant conditions. This includes being notified to HMRC on an RTI submission on or Whilst the government guidance does not expressly state before 19 March 2020, which relates to a payment of earnings this, these will include zero hour employees and workers and in the 2019/20 tax year i.e. earnings in the tax year from 6 those who receive variable contractual pay elements such as April 2019 to 5 April 2020. The requirement for there to be overtime, contractual commission and contractual bonuses payment of earnings in the 19/20 tax year applies for any that can be claimed under the CJRS. employee being claimed for under the scheme, irrespective If the employee has been employed (or engaged by an of how frequently they are paid (e.g. weekly, fortnightly or employment business) for a full twelve months prior to the monthly). This means that if the last payment notified to HMRC claim, employers can claim for the higher of either: by the RTI was before 6 April 2019 and no further payments were notified until after 19 March 2020, the CJRS will be – the same month’s earning from the previous year rejected. – average monthly earnings from the 2019-20 tax year up to the day before they were furloughed. – If the employee has been employed for less than a year, 18 Calculation of wages for furloughed employers can claim for an average of their monthly workers for claim periods to 30 June earnings since they started work up to the day before they were furloughed. 2020 – If the employee has been employed for less than a month, employers should use a pro-rata for their earnings so far to For salaried employees (whether full or part-time), the claim for 80% up to the day before they were furloughed. employee’s actual salary including regular contractual pay

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 10 20 Past overtime, fees, commission, 21 Benefits in kind and salary sacrifice bonuses and non-cash payments and schemes the definition of ‘non-discretionary’ The reference salary for claiming under the CJRS should payments not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. Similarly, Previous government guidance stated that fees, commission benefits provided through salary sacrifice schemes (including and bonuses were excluded from pay that could be claimed pension contributions) that reduce an employee’s taxable from HMRC. The government changed its guidance on 4 pay should also not be included in the reference salary (the April 2020 to state that employers can claim for any regular reference salary is the post salary-sacrifice amount as of payments that employers are obliged to pay their employees 19 March 2020). Where the employer provides benefits i.e. regular contractual payments. This includes wages, past to furloughed employees, this should be in addition to the overtime worked (prior to furlough), fees and compulsory wages that must be paid under the terms of the CJRS (to the commission payments. These amounts can be claimed for at extent these contractual payments are not validly varied as a 80% of their cost subject to the £2,500 cap. Where employers temporary variation of contract). are not topping these payments up to 100%, as this would The government guidance updated on 9 April 2020 states amount to a variation of contract, employees’ consent would be that all the grant received to cover an employee’s subsidised required to withhold the full payment. However, discretionary furlough pay must be paid to them in the form of money. No bonuses, tips (including tips paid through a tronc), commission part of the grant should be netted off to pay for the provision payments and non-cash payments should be excluded. of benefits or a salary sacrifice scheme. In other words, the The government further updated its guidance on 14 May lower, post salary sacrifice salary, should be used for the 2020 to state that non-discretionary payments for hours purposes of a claim under the CJRS and the employer must worked, including overtime, can be claimed under the CJRS. pay any ongoing benefits, including through a salary sacrifice The second Treasury Direction dated 22 May 2020 confirms scheme, itself, unless these benefits are contractually varied. that these include regular contractual payments made for Normally, an employee cannot switch freely out of a salary non-discretionary overtime, fees, commission or piece rate sacrifice scheme unless there is a 'life event’. HMRC agrees payments; or regular non-discretionary payments made that the coronavirus epidemic counts as a life event that in recognition of the employee undertaking additional could warrant changes to salary sacrifice arrangements, if the responsibilities (so, for example would include “acting up” relevant employment contract is updated accordingly i.e. where payments), or payments made due to the time the duties are the salary sacrifice scheme is varied as a temporary variation of undertaken (so, for example, would include shift payments). contract in accordance with the employee’s agreement. These are payments which employers have a contractual HMRC guidance on salary sacrifice schemes, which includes obligation to pay and to which the employee has an guidance on changing the terms of a salary sacrifice enforceable right. The guidance states that variable payments arrangement is available here: https://www.gov.uk/guidance/ specified in an employee's contract that are always paid should salary-sacrifice-and-the-effects-on-paye also be treated as non-discretionary and included in the CJRS claim. The guidance now usefully confirms that payments for 22 Returning to work from statutory leave overtime worked are non-discretionary when the employer is contractually obliged to pay the employee at a set and defined Employees returning form statutory parental leave may be rate for the overtime that they have worked. This means that placed on furlough under the CJRS for the first time after 10 overtime that is not guaranteed or which the employer is not June 2020 (please see the above section on Parental Leave obliged to offer will be non-discretionary and is to be included New Entrant Exemption on page 4). Government guidance in the CJRS claim where the employer is obliged to pay for the confirms that claims under the CJRS for employees returning overtime once it is worked at a specified rate, as is invariably from statutory leave, which includes maternity leave, paternity the case. leave, shared parental leave, adoption leave, sick leave and parental bereavement leave, should be calculated against their salary, before tax, not the pay they received whilst on statutory leave.

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 11 As set out previously, claims under the CJRS for those on the purposes of eligibility for the statutory payment and the variable pay, returning from statutory leave should be rate payable for statutory parental leave pay will be calculated calculated using the higher of the: based on the pay they would have received if they were not furloughed. – same month’s earning from the previous year; or – average monthly earnings for the 2019-2020 tax year. The Regulations apply in respect of the following parental leave payments: The government guidance is silent on how variable earnings should be calculated where an employee was on statutory – maternity allowance, leave, such as maternity leave, both in the same month in the – statutory paternity pay, previous year and during some or most of the 2019-2020 tax – statutory adoption pay, year and receiving a lower statutory rate of pay due to being – statutory shared parental pay; and on statutory leave than had they been working during those – statutory parental bereavement pay periods. In respect of statutory parental pay, under the Regulations, However, paragraph 7.3 of the Treasury Direction states that the earnings used to work out the employee’s average weekly in calculating the employee’s reference salary for the purpose earnings for the part of the 8-week reference period when the of the CJRS, no account is to be taken of anything which is employee was furloughed for determining their eligibility for not regular salary or wages. In applying this wording and to statutory parental leave pay and the rate payable for statutory avoid discriminating against employees who have recently parental leave pay will be the higher of either what they: taken parental leave and indirectly discriminating against – actually received from their employer, or employees on long-term sick leave who may be disabled, for – would have received from their employer had they not been both fixed salary employees and employees receiving variable on furlough pay, the calculation of the employee’s earnings must only take account of regular salary or wages, it must not take account of Whilst the normal weekly earnings of a salaried employee Statutory Sick Pay, Statutory Maternity Pay or other statutory will be the salary that applies when they are not on furlough parental leave pay. (assuming their pay is reduced whilst on furlough), it is not clear how ‘normal weekly earnings’ for those on variable pay Accordingly, where the average monthly earnings for the had they not been on furlough are to be calculated under the 2019-2020 tax year are higher than the same month’s Regulations and the government guidance is not conclusive on earnings for the previous year, the months where the employee this issue. was receiving a lower statutory rate of pay due to being on statutory leave, should be excluded when calculating the The government guidance to the Regulations states where it’s average monthly earnings for the 2019-2020 tax year. Only not clear what the employee would have received, a helpful those months where the employee was receiving their regular starting point is the reference salary used to determine how salary or wages (and not the lower rate of statutory leave pay) much the employer can claim through the CJRS using the should be included in the calculation period for calculating the government guidance for working out 80% of the employee’s average monthly earnings under the CJRS. wages through the CJRS scheme. In doing so, the employer should also consider payments 23 Statutory parental leave following the employee was due to receive in the relevant period for calculating their furloughed wages that would have been furlough classed as earnings. These earnings could include bonus payments and commission payments. Emergency legislation came into force on 25 April 2020, known as The Maternity Allowance, Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay, Statutory 24 Employees that are paid the National Shared Parental Pay and Statutory Parental Bereavement Pay Minimum Wage and training (Normal Weekly Earnings etc.) (Coronavirus) (Amendment) Regulations 2020. The HMRC guidance confirms that Individuals are only entitled These Regulations provide that when an employee is on to the National Living Wage (NLW)/National Minimum Wage furlough during part or all of the relevant period for calculating (NMW) for the hours they are working. statutory parental leave pay and their pay is reduced as a Therefore, furloughed workers, who are not working, must be result of being on furlough, their normal weekly earnings for paid the lower of 80% of their salary, or £2,500 even if, based

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 12 on their usual working hours, this would be below NLW/NMW. terms of employment”. Strictly speaking, unless an employer is In other words, employees whose pay is equal to the NLW/ required to consult collectively under the terms of a collective NMW rate would receive 80% of the NLW/NMW rate whilst on or workforce agreement when proposing to vary contractual furlough. terms, the requirement to consult collectively is only triggered where there is a “proposal to dismiss” at least 20 staff within However, if workers are required to for example, complete a period of 90 days, (in this case, should they fail to agree to online training courses whilst they are furloughed, then they the terms of the furlough proposed). Individual consultation must be paid at least the NLW/NMW for the time spent for redundancy should be followed where fewer than 20 training, even if this is more than the 80% of their wage that employees are placed at risk of redundancy within a period of can be claimed under the CJRS. The Treasury Direction dated 22 90 days (a shorter redundancy process may be followed, where May 2020 provides that employees may participate in training appropriate, where employees have less than 2 years’ service). during furlough where the purpose of the study or training is to improve an employee’s effectiveness in the employer’s business, or the performance of the employer’s business. 27 Terms and conditions of employment However, the training carried out must not directly provide a service to the employer or the business activities of the during furlough employer, or generate income or profit for the employer. Employers may wish to consider asking employees to be placed The Education Secretary has appealed to businesses to on furlough to agree to a claw back and deductions from encourage their furloughed employees to use The Skills Toolkit, wages clause. This is to apply in the event that the employer is which are free online courses, to improve their knowledge, unable to reclaim the reduced wages paid during furlough from build their confidence and support their mental health during HMRC, or where HMRC later asks for the furloughed wages the coronavirus outbreak. These courses focus on digital and to be repaid to HMRC following an audit and the employer numeracy skill development, as previous research indicates wishes to recover this from the employee, including from that these are the key skills that employers require. future wages. The employer may additionally or alternatively Please note the increase in the NMW rates from April 2020, require the employee to agree to a deferment of wages until although the NMW increase will not be reflected in the the furloughed wages have been paid to the employer by HMRC reference salary for the CJRS claim as the reference salary (although the employer is required to declare to HMRC when predates the April increase in the NMW for most claims. making a CJRS claim that the furloughed wages claimed for will be paid to the employee in the next payroll at the latest). Please see our template Letter to Employee Assigning them to 25 Volunteer work during furlough Furlough, for an example of this).

A furloughed employee can take part in volunteer work, if it does not provide services to or generate revenue for, or on 28 Notice pay where notice given during behalf of the employer or any organisation associated with furlough or linked to the employer. The employer can agree to find furloughed employees new work or volunteering opportunities Where notice is given to terminate the employment whilst the whilst on furlough if the work or volunteering opportunities are employee is on furlough, including where notice of redundancy in line with public health guidance. dismissal is given or the employee gives their employer notice of resignation, notice pay should usually be paid at the 26 Consultation for furlough employee’s normal salary or wages and not the reduced pay that applies during furlough or during statutory leave (such as parental leave or sick leave). This is because employment Where there is no existing contractual right to place employees legislation states that employees are entitled to minimum on lay off or short-time working, employers will require pay during the notice period which is the employee’s normal employees’ consent for them to be placed on furlough as salary or wages. However, where the amount of notice the this will amount to a variation of contract. Where they do not employer is required to give to end the contract is at least agree, employers may decide to consult with those staff for a week longer than the statutory minimum notice period an redundancy. employer is required to give to end the contract, the employee Government guidance states that, “if sufficient numbers of is not entitled to be paid their ‘normal salary or wages’ during staff are involved, it may be necessary to engage collective the statutory notice period and the notice pay will instead consultation processes to procure agreement to changes to be determined by the employment contract. It is not clear in

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 13 this circumstance, however, if the employer can pay reduced Whilst Statutory Sick Pay rates cannot be reduced, where furloughed wages for the notice period in accordance with employers offer contractual (enhanced) sick pay, it should be the temporary variation of contract, or whether the employee confirmed whether or not the enhanced element of sick pay would still be entitled to their ‘normal salary or wages’ (over and above Statutory Sick Pay) will be reduced by 20% during the notice period whilst on furlough. In the absence of during furlough. caselaw on this point, unless the employee is taking statutory leave during their notice period which reduces their pay to the statutory level (such as parental leave or sick leave), the 30 Annual leave during furlough employer should exercise caution and pay the employee’s ‘normal salary or wages’ during the employee’s notice period, Government guidance was updated on 17 April 2020 to make rather than their temporarily reduced salary or wages which clear that employees can take annual leave during furlough. otherwise apply during furlough. The updated government guidance states in respect of annual leave pay that “employers will be obliged to pay additional amounts over the grant” which clarifies that employers can 29 Sick leave during furlough claim for annual leave pay at 80% under the CJRS. It remains the case that an employer may refuse a worker's holiday The Treasury Direction dated 20 May 2020 states that request by serving a counter-notice. The employee must be employees cannot be placed on furlough and their wages given at least as many calendar days before the date on which claimed for through the CJRS at the time they are receiving the leave is due to start as the number of days which the Statutory Sick Pay (SSP) or the employee is due to be paid SSP. employer is refusing. Furlough can commence after the period of incapacity for work Furlough is subject to existing legislation and the existing has ended as agreed between the employer and employee. terms of the employee’s contract (to the extent they are not As the employer may now agree with the employee to end varied by the employee agreeing to any variation of contract the period of incapacity for work for the purpose of SSP and to apply during furlough leave). Accordingly, as employment place them on furlough instead, this a change to the Treasury legislation defines a ‘week’s pay’ for the purpose of certain Direction dated 15 April 2020 which stated that employers statutory entitlements including statutory annual leave cannot place employees on furlough and claim furloughed (a ‘week’s pay’ is essentially the employee’s ‘normal pay’), wages under the CJRS until their eligibility for SSP following statutory annual leave should be paid at the employee’s the first period of incapacity for work has ended. normal salary rather than at the reduced salary, whether or The government guidance which was updated on 9 April 2020 not taken whilst on furlough leave. Where employees’ wages states that where furloughed employees become unfit to work are at the National Minimum wage level, statutory holiday during furlough, employers can choose whether or not to move taken after the NMW/NLW increase on 1st April 2020 should these employees onto SSP or to keep them on furlough, at reflect this increase in the NMW/NLW. Where employees are their furloughed rate of pay. entitled to additional annual leave in excess of the 5.6 weeks’ statutory annual leave, the additional contractual annual leave Where a furloughed employee who becomes sick is moved may be paid at 80% of the employee’s salary subject to the onto SSP, employers can no longer claim for the furloughed employee agreeing this as a temporary variation of contract. salary while they are receiving SSP. Employers are required to The employer may also seek the employee’s agreement that pay SSP themselves, although may qualify for a rebate for up the additional contractual annual leave entitlement will not to 14 days of SSP where the employee is sick due to having accrue during furlough leave (statutory entitlements, including coronavirus symptoms, is self-isolating due to someone in statutory annual leave entitlements will continue to accrue their household having coronavirus symptoms, or shielding in during furlough regardless). accordance with a public health notification as an extremely vulnerable person and cannot otherwise work from home. Employers can agree with employees specified periods to be Where employers keep the sick furloughed employee on the taken as annual leave, including during furlough. Additionally, furloughed rate, they remain eligible to claim for these costs the contract of employment may specify certain periods of through the furloughed scheme. Where employees are sick and shutdown when the employee is required to take annual thus unfit to work whilst on furlough but their sickness is not leave, in which case these would also apply during furlough. related to furlough, as employers cannot reclaim SSP paid for Alternatively, including during furlough, employers can give non-coronavirus related incapacity, employers may choose to notice to take holiday i.e. without requiring employees’ ‘top up’ their SSP to their furloughed rate of pay and continue agreement (although employers should act reasonably) to reclaim the employee’s furloughed wages during the period by giving twice as much written notice as the amount of of sick leave whilst they remain on furlough. annual leave the employer requires the employee to take,

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 14 e.g. by giving 2 weeks’ notice to take a week’s annual leave. 31 Supporting staff during furlough Government guidance states that employers should exercise caution in serving notice on employees to take their 4-week Whilst employees are unable to carry out work for their statutory annual leave during furlough where any restrictions primary employer or an associated employer during furlough, the worker is under, such as the need to socially distance or employers should of course include employees on furlough in self-isolate, would prevent the worker from resting, relaxing any significant workplace communications and support them and enjoying leisure time, which is the fundamental purpose where possible in order to maintain trust and confidence. of holiday under the European Working Time Directive where Employers also have a duty of care under health and safety furloughed employees may be unable to benefit This issue has legislation to take reasonable steps to support employees’ not yet come before the courts for determination but could be mental health, as well as their physical health, during the subject to legal challenge in future. For this reason, employers coronavirus pandemic. Acas Guidance on supporting staff’s should bear in mind that requiring employees to take annual mental health during the pandemic reminds employers that leave whilst they are following more rigorous social distancing staying in contact with employees whilst they are furloughed measures in accordance with public health advice, such as can help them feel connected with their workplace and enable those that are clinically vulnerable and those that are shielding employers to check on their well-being. It suggests that to help due to being extremely clinically vulnerable, or who are sharing staff feel reassured (including when employees are no furlough a household with someone who is and following more rigorous and not attending the workplace), employers should: social distancing for this reason, should not have annual leave – communicate openly and share information in a highly enforced where they do not wish to take annual leave for this visible location, for example on the intranet or by emailing reason, due to the legal risk (in the absence of any caselaw) all staff; that enforcing holiday in this circumstance may be contrary to – consult’ with staff (ask for and consider their views) so the Working Time Directive. they can give feedback and share concerns; and Please note that, although furloughed workers are not – provide timely information so staff are regularly updated expected to build up significant periods of accrued but untaken – Further guidance is available here: (https://www.acas. annual leave due to the fact that the CJRS permits employees org.uk/coronavirus-mental-health/managing-workplace- to take annual leave without breaking their furlough, The mental-health) Working Time (Coronavirus) Amendment Regulations amend the Working Time Regulations 1998 (WTR 1998) by permitting the carry-over of any untaken statutory annual leave in respect 32 Employees who may be placed on of the 4-week annual leave entitlement only. This applies furlough under the CJRS where it was not reasonably practicable for the individual to take it in the leave year "as a result of the effects of the Please refer to the following guidance, which includes coronavirus (including on the worker, the employer or the wider details of the CJRS changes that apply from 1 July 2020: economy or society)". Carried-over leave may be taken in the https://www.gov.uk/guidance/check-which-employees-you- two leave years immediately following the leave year in respect can-put-on-furlough-to-use-the-coronavirus-job-retention- of which it was due. Employers will only be able to require scheme a worker not to take carried-over leave on particular days where they have a "good reason" to do so (this is undefined). Regulation 14 of the WTR 1998 is also amended to ensure a 33 Where employees have been given worker will be paid in lieu of any untaken carried-over holiday where their employment is terminated before they have had a notice of redundancy or stopped chance to take it. working for their employer on or after The additional 1.6 weeks’ statutory annual leave entitlement 28 February 2020 (i.e. over and above the 4 weeks’ basic annual leave entitlement) may only be carried over where the contract of HMRC guidance has confirmed that the CJRS also covers employment or other ‘relevant agreement’ permits this. employees who were made redundant after 28 February 2020, if they are rehired by their employer (although there is no obligation for employers to offer re-employment in this circumstance). This is provided that the employee was on the employer’s payroll as at 28 February and had been notified to

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 15 HMRC on an RTI submission on or before 28 February 2020. the existing provisions of their contract of employment, or This means an RTI submission notifying payment in respect of under new terms and conditions to be agreed between the that employee to HMRC must have been made on or before 28 employer and employee; or may keep them on furlough and February 2020. agree with the employee for them to carry out some work under the Flexible Furlough scheme from 1 July 2020. Where Employers may have contacted employees they dismissed or the employee is at risk of redundancy and the employer decides made redundant due to business circumstances brought about not to keep them on furlough but dismiss for redundancy, the by the Coronavirus epidemic to offer re- instatement on the employer will need to follow a redundancy dismissal process. same terms and conditions, or re-engagement on alternative In most cases the employee will have less than 2 years’ service terms and conditions of employment. This would have been where the employer has re-engaged them with a break in offered on the basis that they will be assigned to a period statutory service, rather than re-instated them and so would of furloughed leave. There is no legal obligation to do so, not be able to claim ordinary unfair dismissal, but the employer however. should be mindful of any potential “short-serving” claims As the previous dismissal decision would still stand in this should they decide to dismiss or make the employee redundant circumstance (unlike in the case of a successful appeal by the (please see our factsheet on “Dismissing Short-Serving employee against a redundancy dismissal decision), this would Employees”). break continuity of service for statutory purposes. However, the employer may have agree to re-instate on existing terms and conditions and agreed to recognize continuity of service 34 Shielding employees for contractual purposes (e.g. in respect of any contractual benefits, over and above statutory benefits, that require The updated government guidance dated 4 April 2020 stated a minimum length of service). Alternatively, the employer that employers can claim for furloughed employees who are may have offered re-engagement on alternative terms and shielding in line with public health guidance (or need to stay conditions. home with someone who is shielding) if they are unable to work from home and they would otherwise be at risk of redundancy. The government updated their guidance on 4 April 2020 This refers to individuals who are following more stringent to include in the category of former employees who can be social distancing measures due to being very vulnerable. The furloughed and their wages claimed for through the CJRS, not government guidance was updated again on 9 April 2020 to only employees who were dismissed due to redundancy on remove the requirement that those employees otherwise be at or after 28 February 2020, but also employees who ‘stopped risk of redundancy if they are not furloughed due to the wider working’ for their employer. They can be re-employed and stated purpose of the CJRS. placed on furlough even if they are not re-employed until after 19 March 2020. The government guidance update on 23 April The Sick Pay (General) (Coronavirus Amendment) (No.3) 2020 states that employees who were on fixed term contracts Regulations 2020 came into force on 16 April 2020. These can also be re-employed, furloughed and claimed for if either: provide that extremely vulnerable individuals who have been notified to shield in line with public health guidance – their contract expired after 28 February 2020 and an RTI are entitled to SSP subject to meeting the other eligibility payment submission for the employee was notified to requirements for SSP. The employer may continue to pay SSP HMRC on or before 28 February 2020; or to employees who are shielding and entitled to SSP or to end – their contract expired after 19 March 2020 and an RTI the SSP period with their agreement and to furlough them and payment submission for the employee was notified to pay furloughed wages. This is in line with the Treasury Direction HMRC on or before 19 March 2020 dated 20 May 2020 which states that furlough can commence Where the employee’s fixed term contract has not already after the SSP period of incapacity for work has ended as agreed expired, it can be extended, or renewed. You can claim for them between the employer and employee. if an RTI payment submission for the employee was notified to HMRC on or before 19 March 2020. 35 Employees with caring responsibilities Employees that started and ended the same contract between 28 February 2020 and 19 March 2020 will not qualify for the Employees who are unable to work because they have caring CJRS regardless of their contract type. Re-employment and responsibilities resulting from coronavirus (e.g. because they placing on furlough is subject to the employer’s agreement. need to look after children due to school closures) can be Where employees now have work for those employees, they furloughed. can unfurlough them and ask them to return to work under

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 16 36 Apprentices to accompany their colleague during a disciplinary, grievance or redundancy consultation meeting on an individual basis; or act Apprentices can be furloughed in the same way as other as an employee or trade union representative, including during employees and they can continue to train whilst furloughed. a TUPE consultation or a collective redundancy consultation This is provided that the apprentice does not provide services meeting. Whilst the government guidance does not address to or generate revenue for their employer whilst furloughed. this point, it would not be a breach of furlough for an employee Furloughed apprentices can continue to undertake training to participate in a disciplinary, grievance, redundancy or with their training providers whilst furloughed. Apprentices TUPE consultation process whilst they are on furlough as it is can engage in digital or distance learning from home at a extremely unlikely that, in doing so, the employee would be convenient time within their agreed working hours. provided services to or generating revenue for, or on behalf of the employer or an organization linked to the employer. Apprentices must be paid at least the Apprenticeship Minimum Employers may, for example, need to commence a redundancy Wage, National Living Wage or National Minimum Wage as consultation process or serve notice of redundancy with appropriate for all the time they spend training (rather than employees who are on furlough and the CJRS rules do not the reduced 80% of wages). This means the employer must currently prohibit this. Employees may continue to be paid cover any shortfall between the amount they can claim for their furloughed wages (subject to payment of the minimum their wages through this scheme and their statutory minimum NMW/NLW) during consultation periods. However, ACAS has wage. Every effort should be made to ensure that apprentices published guidance on disciplinary and grievance procedures can continue with their apprenticeship, and be assessed in during the coronavirus pandemic that states that employees accordance with the current End-Point Assessment plan should only take part in a disciplinary or grievance investigation and External Quality Assurance requirements if possible during furlough where they do so voluntarily (i.e. choose to do and where remote assessment is permitted. Where this is so) (please see section below). not possible, apprenticeship providers should first consider whether it is appropriate to extend the apprenticeship in order to reschedule the End-Point Assessment. Formal breaks in 38 Redundancy consultation during learning lasting more than four weeks should be reported to the ESFA. In Wales, training providers are empowered, where furlough there is no reasonable alternative, to place apprentices on authorised absence ‘for as long as required’. Employers of Employers may need to start planning for redundancies where apprentices should check with the apprenticeship provider certain roles are at risk or where the extension of the CJRS how the apprenticeship is impacted. Guidance is available for to the end of October 2020 will not prevent redundancies. apprenticeships which are affected by the coronavirus epidemic Employers who are proposing to make at least 20 employees in the following link: https://www.instituteforapprenticeships. redundant within a 90 day period or less (including where they org/response-to-covid-19/. propose to dismiss at least these numbers of employees where proposed contractual variations are not agreed) will need to Further government guidance, including for employers, is commence redundancy consultations in good time and follow a available here: https://www.gov.uk/government/publications/ minimum 30-day consultation period before the first dismissal coronavirus-covid-19-apprenticeship-programme-response/ takes effect (that is, when the contract of employment is coronavirus-covid-19-guidance-for-apprentices-employers- terminated, so will need to factor in any notice periods where training-providers-end-point-assessment-organisations-and- notice is given rather than where a Payment in Lieu of Notice is external-quality-assurance-pro made). Where 100 or more redundancies are proposed within a 90-day period, the consultation must begin at least 45 37 Furloughed employees working as union days before the first dismissal takes effect. It is very unlikely employers could rely on the ‘special circumstances’ defence in or employee representatives curtailing the minimum collective consultation period as the legislation and caselaw currently stands. It is unlikely that the Government guidance updated on 30 April 2020 confirms that legislation that sets out the minimum periods for collective whilst on furlough, employees who are union or non-unions consultation will be modified to provide employers with greater (employee) representatives may undertake duties and activities flexibility on minimum timescales for collective redundancy for the purpose of individual or collective representation of consultations during the epidemic. Employers may need to employees or other workers. However in doing this, they must consult with employees remotely during furlough and generally not provide services to or generate revenue for, or on behalf of during the epidemic and this should be done in accordance with your organisation or a linked or associated organisation. This a fair redundancy procedure (please refer to our factsheet on means that it will not be a breach of furlough for a colleague Redundancy).

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 17 39 Disciplinary and grievance procedures 40 Do employers have to make up the 20% during furlough short-fall in pay for those workers on furloughed leave? The Acas Code of Practice on disciplinary and grievance procedures still apply during the coronavirus pandemic. This Where employers are able to rely on existing lay off clauses, includes while social distancing and lockdown measures are in there is no legal requirement to obtain consent to a reduction place. Please refer to our factsheets on Disciplinary Hearings in salary during the leave period (as employees in this and Appeals – Fair Procedure and Grievance Hearings and circumstance do not have any contractual right to pay when Appeals – Fair Procedure which set out what a fair procedure on furloughed leave, which is essentially a period of lay off). should include. They would receive pay at 80% of their current contractual ACAS has published guidance on disciplinary and grievance salary whilst they are on leave in accordance with the CJRS. procedures during the coronavirus pandemic which states There is no contractual obligation to top up the 80% pay to that the employer needs to decide if it would still be fair and the employee’s contractual pay rate that would otherwise reasonable to carry on with or start a disciplinary or grievance apply if they were not on leave. However, where there is no procedure while: contractual right for the employer to place employees on lay off, employers will need their employees’ consent to place – people are on temporary leave because of coronavirus (on them on furloughed leave and to reduce their salary by 20%. ‘furlough’) Under the terms of the CJRS, the agreement to furlough and – following social distancing and other public health the terms and conditions to apply during furlough must be guidelines, if they’re in the workplace confirmed in writing. – people are working from home, and it would have to be carried out remotely The guidance is available here: https://www.acas.org.uk/ 41 Do employees have the right to be disciplinary-grievance-procedures-during-coronavirus placed on furloughed leave? Where employees are on furlough, the guidance states that they can take part in a disciplinary or grievance investigation Employers must designate employees as ‘furloughed or hearing only if they're doing it out of their own choice workers’ by telling HMRC. As in the case of lay off, there is ('voluntarily') and it takes place in line with current public no entitlement for employees to insist that they be placed on health guidance. This guidance essentially prevents employers this leave if the employer decides there is work for them to from, for example, carrying out a disciplinary investigation do. In other words, employers are not required to place their or disciplinary meeting with an employee, or as a witness to employees on furlough. However, employees that are placed a disciplinary or grievance investigation whilst they are on on furlough cannot undertake any work for their employer furlough, unless the employee genuinely consents to this during the minimum 3-week furlough leave, even on a reduced e.g. where the employee would prefer for the matter to be hours basis, or intermittent basis. Each period of furlough can resolved sooner and assuming that any identified witnesses be extended by any amount of time whilst the employee is on are also agreeable to participating in the process, rather than furlough (it does not need to be extended by a minimum period waiting until their furlough has ended. Where the employer of 3 weeks, provided that the employee remains on furlough does not wish to wait until the period of furlough has ended for a minimum of 3 weeks at any time). to commence the procedure, the employee (and any relevant witnesses who do not wish to participate in the process whilst on furlough) would need to be taken off furlough. However, 42 Can the employer ‘rotate’ employees on the employer would need to show that any decision to take the furlough leave and employees who are employee off furlough is in accordance with mutual trust and confidence, to reduce the risk of employees claiming that the working where there is reduced work? decision to do so in order to commence the relevant procedure is a breach of trust and confidence and potentially claiming Designating some staff as furloughed workers but not others constructive unfair dismiss where they have sufficient service may lead to resentment between staff who are perceived to to do so. Where employees are taken off furlough, including be sat at home “doing nothing” whilst receiving 80% of their where they are placed on disciplinary suspension, they would salary while some staff are required to continue working. For be entitled to receive their normal wages and the employer this reason, employers may decide to draw up a set of fair would not be able to claim those wages under the CJRS. and non-discriminatory criteria according to business needs to decide who will be selected for furlough leave, to ensure

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 18 this is in accordance with the implied term of mutual trust and placed them on furlough if they decide to stop furloughing confidence (although there is no legal requirement to do so). the employee, and the employee must be able to undertake Alternatively, employers may need certain employees to carry any training the employer requires them to undertake while out work between periods of furlough leave, such as employees on furlough. The new employer should ensure they complete who are on call out. For this reason, employers may decide the starter checklist form for PAYE with their new employee to operate a staff rota system between periods of furlough and the employee should complete ‘Statement C’ of the form leave and periods of work. Government guidance confirms that (https://www.gov.uk/government/publications/paye-starter- employees must be placed on furlough leave for a minimum checklist). Any activities undertaken while on furlough must period of 3 weeks at a time. Further government guidance be in line with the latest Public Health guidance during the has confirmed that employees may be placed on furlough coronavirus outbreak. leave under the CJRS more than once, subject to spending a minimum 3-week period on furlough leave in each leave period. This means that the CJRS will allow for employers to, 44 What about employees that employers say, alternate groups of working and furloughed employees to have inherited following a TUPE vary groups of workers or individual employees on furloughed leave or attending work at any time. Alternatively, one period transfer? of furlough leave can follow straight after an existing furlough period. The government guidance, which was updated on 9 April 2020, closes a previous loophole by confirming that a new employer As HMRC guidance has confirmed that employees must remain is eligible to claim under the CJRS in respect of the employees on furlough leave for a minimum period of 3 weeks, this means of a previous business who transferred to their employment that employers cannot cut short the furlough leave to shorter after 28 February 2020 if either a business has changed than 3 weeks, even if business circumstances subsequently ownership after that date and its employees are protected change whilst the employee is on furlough and the employer under the Transfer of Undertakings (Protection of Employment) now requires the furloughed worker to return to work before the Regulations 2006 (TUPE) or where 2 or more PAYE schemes end of the 3-week period. For this reason, employers may need have been brought together for the same legal entity after to consider carefully which employees they assign as furloughed that date (PAYE business succession). There is no requirement workers if there is a possibility they may need them to return for the new employer to have submitted an RTI submission to to work during the first 3-week period of furlough leave. From HMRC by 19 March 2020 in order to claim furloughed wages 1 July 2020 when working is to be permitted during furlough under the CJRS for employees who have transferred to their under the modified terms of the CJRS, (provided the worked employment via a TUPE transfer after 28 February 2020. This period is at least 1 week in length), employers will need to is provided the employee was employed by their old employer agree with their employees any new working patterns to apply on 28 February 2020. As set out above, employers that during furlough and any rotational patterns between unworked inherited employees following a TUPE transfer after 10 June and worked periods of furlough. 2020 may place them on furlough under the CJRS, provided Employees on statutory leave, such as maternity leave, their previous employer submitted a CJRS claim for them for will continue on statutory leave (they would have no right a furlough period of at least 3 consecutive weeks, any time to remuneration, except for maternity etc. pay in those between 1 March 2020 and 30 June 2020. circumstances). The government has introduced a similar scheme for the self- employed who are similarly impacted by loss of earnings due 43 Can employees work for another to the coronavirus epidemic. This scheme opened for claims on 13 May 2020: https://www.gov.uk/guidance/claim-a-grant- employer when furloughed, including a through-the-coronavirus-covid-19-self-employment-income- new employer? support-scheme The following link sets out the current government financial Yes. The updated government guidance dated 4 April 2020 support available for employees and employers during the states that, where the employee’s contract of employment Coronavirus epidemic: https://www.gov.uk/government/ permits, the employee may undertake other employment (with publications/guidance-to-employers-and-businesses-about- a different or new employer) while their current employer has covid-19 placed them on furlough. This will not affect the grant that the employer can claim under the CJRS. The employee will need to be able to return to work for the employer that has

Furlough and the Coronavirus Job Retention Scheme | Updated 15 June 2020 | 19 Updated 15 June 2020 For the latest guidance, please visit https://uk.markel.com/insurance//getmedia/42d7a9b7-8215-431f- 9f14-b8e932e2c435/Furlough-and-the-Coronavirus-job-retention-scheme

NOTE: This guidance is subject to change in accordance with updated government guidance. This factsheet was last updated on 15.06.20. It incorporates the government updates to the employer guidance on claiming for employees' wages through the CJRS: (https://www.gov.uk/guidance/claim-for- wage-costs-through-the-coronavirus-job-retention-scheme) and The Coronavirus Act 2020 Functions of HMRC (Coronavirus Job Retention Scheme) Direction dated 20.5.20 (which updates the original Direction dated 15.04.20 and sets out the legal framework for the Scheme): https://assets.publishing. service.gov.uk/government/uploads/system/uploads/attachment_data/file/886959/CJRS_DIRECTION_ No2___20_05_2020.pdf Markel Law LLP owns the copyright in this document. You must not use this document in any way that infringes the intellectual property rights in it. You may download and print this document which you may then use, copy or reproduce for your own internal non-profit making purposes. However, under no circumstances are you permitted to use, copy or reproduce this document with a view to profit or gain. In addition, you must not sell or distribute this document to third parties who are not members of your organisation, whether for monetary payment or otherwise.

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