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Last Friday the UK Government announced the introduction of the Coronavirus Job Retention Scheme. There has been very little guidance since the announcement however, further guidance was published last night which can be summarised as follows.
Who is eligible to claim?
Any UK organisation with employees paid through the pay-as-you-earn system (“PAYE”) can apply including businesses, charities, recruitment agencies (ie agency workers who are paid through PAYE) and public authorities. The organisation must have been using the PAYE payroll on or prior to 28 February 2020 and have a UK bank account. The organisations can furlough employees who were on the PAYE payroll system on the 28 February 2020 and includes those on full or part time contracts, employees on agency contracts and employees on flexible or zero-hour contracts so long as they do not continue to carry out any work after being furloughed. Furlough will not apply to new employees that were hired after 28 February 2020. Unfortunately, other arrangements will have to be made for such new starts, such as lay off, agreed variation to working hours/pay, or redundancy. It looks like furlough can in theory be rotated, but note that the minimum duration of a furlough is 3 weeks.
How do employers become eligible for this?
In the absence of a furlough clause in the employment contract, employers must discuss the change to the employees’ status and pay arrangements with employees and come to an agreement. The Government suggests that employers should also write to employees confirming that they have been furloughed and keep a record of this communication after agreement has been made. The guidance also suggests that where sufficient numbers of employees are involved, it may be necessary to engage in collective consultation to obtain agreement from employees. However, it is thought that this will only be required where employers wish to dismiss and re-hire employees in order to change the terms of the contract rather than to simply agree to put employees on furlough leave.
How much can employers claim?
Employers can apply for a grant to cover 80% of an employee’s regular wage up to a maximum of £2,500 per month. In addition, the grant will cover the employer’s National Insurance contributions and their minimum automatic enrolment pension contributions based on the subsidised wage. Fees, commission payments and bonuses will not be included. An employer can choose to top up the pay to 100% is they wish to do so. Claims can only be made every three weeks (or at longer intervals presumably).
How is the 80% calculated?
For salaried employees, their salary as at 28 February 2020 will be used to calculate how much the 80% grant will cover. For employees whose pay varies, if they have been employed for the previous 12 months prior to the claim then employers can claim for the higher of either the same month’s wage from the previous year (e.g. March 2019, April 2019 and so on) or the average monthly earnings from the 2019/20 financial year. Where an employee has been employed for less than a year, employers should work out employees’ average monthly earnings since they commenced employment and they will be able to claim 80% based on this.
How should employees be paid if they are off sick?
If employees are currently off sick or self-isolating then they should continue to receive Statutory Sick Pay (“SSP”) but they can be placed on furlough leave on their return from sick leave. If an employee becomes sick whilst on furlough leave then they should make the employer aware of this and be taken off of furlough leave and placed on sick leave. They can be placed back on furlough leave once they are better. Similarly, employees who are currently on maternity leave or are due to go onto maternity leave will continue remain eligible for Statutory Maternity Pay or Maternity Allowance. If the employer and employee agree, or if the employee provides sufficient notice, an employee can return to work from maternity leave and be placed on furlough leave. However this is perhaps unlikely as if the furlough lasts for a shorter term, the employee would essentially be cutting short their maternity leave.
National Minimum Wage (“NMW”)
Employees placed on furlough must be paid 80% of their salary subject to the cap of £2,500 even if this will reduce their pay to below NMW. This is justifiable as, legally, individuals are only entitled to receive NMW for the hours that they work and employees will not be working whilst on furlough leave. However, the guidance permits employees to complete online training if required and, if employees have to do this, they must be paid NMW for the time that they spend training.
Fiona Knox, Trainee Solicitor
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