Coronavirus Job Retention Scheme FAQs for furloughing employees (updated 11 June 2020)
Below is a list of frequently asked questions about the Coronavirus Job Retention Scheme and furloughing employees.
I’ve heard of the Coronavirus Job Retention Scheme (CJRS). What is it?
The Government has reacted to the very real possibility that businesses will not be able to continue in the wake of the Covid-19 pandemic and the likelihood that if nothing is done, wide scale redundancies will be made, damaging the economy further.
Its answer is the CJRS, which is a new system. It requires the employer to make a decision to lay off or ‘furlough’ staff, i.e. ask them to temporarily not come to work. Until 31 October 2020 there will be a scheme to reimburse some of the costs of employing people who agree not to come to work.
What is the purpose of the scheme?
The aim of the scheme is to keep workers and employees on the payroll so that when Covid-19 restrictions are lifted, the economy can bounce back quickly and efficiently. If staff are made redundant, not only is there an immediate cost to businesses but there will be no workforce to mobilise when the time comes. Scary stuff!
How do employees access the scheme?
Employees cannot access the scheme directly. It requires the employer to designate the individual as ‘furloughed’. The employer will pay the employee and reclaim the money from the Government.
How long will the scheme go on for?
It is currently set to run from 1 March 2020 until the end of October 2020 although the rules are constantly changing.
Employees cannot be furloughed for the first time after 10 June 2020.
Which employees are eligible under the scheme?
The scheme is applicable to anyone who is:
- paid through the PAYE system and was on your payroll as of 19 March (and had been notified to HMRC under RTI on or before that date). (Originally the HMRC guidance stated that the payroll cut off was 28 February, but this guidance was changed on 15 April).The 19 March qualifying date is important, as it serves to prevent some businesses cynically putting people onto the payroll to get the payments; and
- has been or was furloughed for a minimum of three weeks by 30 June 2020.
For the avoidance of doubt, this includes employees on zero hour contracts and agency workers. Whilst the scheme is, in theory, open to the public sector, the majority of such workers will be providing front line services so it is unlikely to be needed.
What is actually covered by the grant?
Until 1 August 2020, employment costs to 80% of salary capped at £2500/month are covered. In addition, the scheme will also cover the associated NI and will cover employer pension contributions to the minimum level required by auto-enrolment.
From 1 August 2020, the government’s contribution will start to reduce. See further below.
Do I have to top-up from 80% to 100%?
No but if you are not going to do so, there will need to be the buy-in/agreement of staff as it will, in most cases, amount to a deduction in wages or breach of contract for which claims could ensue.
80% of what?
If we are taking about salaried staff, it's straightforward as the income will be constant. It will literally be 80% of their normal monthly salary.
If income varies, the employer can claim for the higher of (i) the same month's earning from the previous year; or (ii) average monthly earnings in the 2019-20 tax year.
If employees are entitled to bonuses or other contingent payments, you should take specific advice as the rules aren’t necessarily straightforward.
Does it matter if the furlough payment takes pay beneath National Minimum Wage (NMW)/National Living Wage (NLW)?
NMW/NLW applies to pay for work done. As a furloughed worker is not working, it does not matter if any reduction to 80% puts income down to beneath NMW/NLW thresholds. If the individual is not working but training, however, NMW/NLW still applies.
When part-time furlough becomes reality, employees will need to be paid NMW/NLW for the hours they work.
Do staff need to be consulted before being designated as ‘furloughed workers’?
The duty to consult arises where there is a proposed change to terms and conditions of employment. It therefore depends whether the employer has the right to lay off staff in the contract of employment and whether there is a right to reduce pay accordingly.
- If there is a right then no consultation is needed.
- If there isn’t such a right, some form of consultation may be needed.
Given that the alternative is likely to be redundancy, employees would be wise to agree to the temporary change on the whole.
It is a case of winning hearts and minds and our experience thus far suggests that most staff are prepared to be furloughed, even on 80% pay, to protect their employment longer term. The message is altogether easier to make given that employers are paying staff significant sums of money via the scheme not to work at all.
It’s also worth noting that the Government advice refers to employees needing to agree to be furloughed. Clearly to obtain agreement the issue must be discussed in the first place, even if that does not amount to formal consultation. The terms which have been agreed should be recorded in writing, even if by way of confirmatory email – see further below.
Do I have to operate a fair procedure, as I might with redundancy, when selecting for furlough?
It seems not. However, the decision should be made on the basis of business need and it is clear, unsurprisingly, that using the scheme in a discriminatory fashion would be unlawful.
How do I make a claim?
Via the online portal accessible via this link: www.gov.uk/guidance/claim-for-wages-through-the-coronavirus-job-retention-scheme.
What do I need to document?
The Government initially said that to be eligible for the grant, employers must confirm in writing to their employee that they have been furloughed and a record of this communication must be kept for five years (until mid 2025).
However, the first Direction to HMRC stated that employers must have a written agreement with the employee, which may be by email. A lot of employers have simply notified employees and not required a response. The Government has since amended the Direction again to remove the requirement for a written agreement.
To be as safe as possible, employers are advised to seek confirmation in writing from employees that they agree with being furloughed and the new terms now in place. Otherwise, rely on a written notification to the employee setting out the terms and conditions which have been implemented.
If I have a lay-off provision in my employment contract, do I have to participate in the furlough scheme?
Theoretically, no. If you have a lay-off provision, there is a benefit to using it as an alternative to furlough as it means you do not have to pay staff laid off anything other than guarantee pay, which is a very small sum indeed.
It should be noted that normal lay-off rules mean that an employee can apply for redundancy if the lay-off lasts four consecutive weeks or six weeks in any 13 week period. The Coronavirus Job Retention Scheme, however, makes things more complicated as an employee laid off could arguably accuse you of breaching trust and confidence by laying off without giving them access to the scheme. Your rationale for doing so will therefore need to be carefully thought out.
Does furlough have any bearing on redundancy?
Furlough is distinct from redundancy as the assumption is that it will be temporary. However, if you do not see an employee returning, redundancy may be the route to go, particularly if the individual has less than two years’ service so has no entitlement to statutory redundancy pay. They will, though, still be entitled to notice at full rate.
Care should be taken if taking any employee down the redundancy route so we would suggest you take advice specific to your circumstances. Employees may, of course, argue that the process of making them redundant whilst they are ‘cost neutral’ is unfair so it’s important to ensure fair and proper consultation takes place.
Do I have to lay staff off for the whole period of the scheme?
No. The Government has issued guidance saying that the minimum period of furlough is three weeks at any one time. So, you could bring an employee off furlough and then reinstate furlough once more, but to get the benefit of the grant each single period of furlough must be three weeks or more.
Remember as well that:
- an employee has to agree to be furloughed. Just because they agreed once, it doesn’t mean they’ll agree again;
- employees cannot be furloughed for the first time on or after 10 June 2020 time given the need to have been furloughed for three weeks by 30 June 2020 to claim under the scheme;
- employees who have been on maternity, paternity, adoption leave or shared parental leave can be furloughed for the first time after 10 June 2020 but there are conditions (including that the employer must have used the furlough scheme for other employees already).
Can I backdate furlough in that I have staff who I would have put on furlough if I knew it was available at the time?
As stated above, furlough is only available to those on your payroll as of 19 March. The scheme applies from 1 March but be careful. This does not allow you to retrospectively class staff who have worked since as furloughed. Rather, if you have laid staff off you might now wish to contact them to say that they are to be treated as furloughed.
In other words, it only applies to staff who are or have been genuinely laid off.
Can’t I ask a furloughed worker to do any work for me?
Until 1 July 2020, no. If you do, then this will invalidate your entitlement to funds for that individual under the scheme. Moreover, you need to make clear to staff that they must not do anything which could be viewed as work, even if answering an email or promoting your business via social media, for instance. Staff should not do any work for the business in which they work or any business associated with it, for example group companies.
Part-time working is due to be permitted from 1 July 2020 but the exact details are awaited. Employees must be paid as normal for the hours they work. Furlough payments can then be claimed for the hours not worked, subject to the limits set out.
If we put employees on shorter hours, can we claim anything?
Until 1 July 2020, no. Employees must be not working at all if the scheme is going to be used. This might mean choosing to furlough some employees and not others. To avoid claims of discrimination, clear reasons for the choice should be documented.
As above, keep tuned for changes to this as part-time furlough is to be introduced from 1 July 2020.
How does holiday work?
There are three points here:
- It appears as if holiday will continue to accrue as normal during furlough which is raising eyebrows as the purpose of holiday is to provide rest, and it can be assumed that a furloughed staff member will be fully rested having not been required to undertake work.
- A furloughed member of staff may, it seems, take holiday without breaking the period of furlough – in effect just receiving full pay for the period in question (but the employer can still reclaim the Government’s contribution at the relevant rate). This has now been confirmed by HMRC.
- As you might be worried about the need for there to be all hands to the pump following the immediate crisis, you can request staff take holiday during furlough. Note that statutory rules apply here – you have to give double the amount of notice for the time you want them to take off. So, if you want them to take a week, you need to give two weeks’ notice.
Can an employee insist on taking their holiday instead?
Employers usually reserve their right to refuse an employee’s request for holiday within the contract period. However, where possible you should be open to negotiation, particularly as it may service the business well.
How does furlough sit with sick pay and self-isolation?
Employees on sick pay or self-isolating cannot be furloughed until afterwards. This raises interesting questions over the employee who becomes sick during furlough. It’s unclear how this might work, though one school of thought is that because furlough came first, they remain on the scheme. Logically this would seem to be right.
What is clear is that you cannot just transfer staff who are not at work because they are sick or self-isolating to the scheme. Employees who are shielding (i.e. are in that very high risk category requiring them to self-isolate) can be placed on furlough, however.
What about staff who have opted to take unpaid leave to care for children? Can we furlough them so they get some pay?
The latest guidance suggests this is possible.
Can employees request to be furloughed?
Yes, they can, but an employer does not have to agree or do so if it is not right for the business.
What about staff on maternity leave, etc?
Employees on maternity, shared parental leave or similar can continue to draw SMP or equivalent payments. Theoretically, those employees can return early from statutory leave and be furloughed or alter parental leave and then be furloughed.
The Government has confirmed that employees who have been on maternity, paternity, adoption leave or shared parental leave can be furloughed for the first time after 10 June 2020 but there are conditions (including that the employer must have used the furlough scheme for other employees already).
Can I tell my staff they won’t be paid unless the monies from the scheme come through?
Sadly it does not work that way. The scheme requires the payments not to be conditional.
I have someone who started after 19 March but as they cannot be placed on furlough, what are my options?
As the scheme only provides funding for staff on the payroll as of 19 March (provided they’ve been notified to HMRC too), issues are emerging in respect of staff commencing their employment after that date. In reality, the options open to an employer in this scenario are these:
- Terminate the employment immediately but bear in mind that notice will have to be paid either in accordance with any contract of employment entered into or statutory minimum, whichever is the greater;
- If the employment has not yet commenced, attempt to defer the date of commencement through discussion with the employee;
- Agree to place the employee on unpaid leave, perhaps even giving access to some paid leave so that, when things finally return to normal, the booking of holiday will be less of an issue;
- If possible, require the employee to work or alternatively pay the employee as if on furlough, bearing in mind that the business will need to foot the entire wage bill for that person as no government help is available in these circumstances.
It is likely that owing to the cost, employers will only want to take option four if the employee in question is considered a real find and will be difficult to replace.
I have a member of staff who works mostly for another employer. She has been placed on furlough and so now has more time to work for me. I need more staff so any help she can offer would be welcome. Can I take her on?
It seems that this is acceptable under the scheme. However, it should also be noted that the employee’s contract of employment with their principal employer may prohibit working elsewhere. The employee, therefore, needs to be careful that they do not act in breach and the employer should be careful not to facilitate this.
What contact can I have with staff on furlough?
The Government guidance is clear that staff on furlough cannot work and should not be seen to work in any shape or form, so even the checking of work emails is out. The only exception is legitimate training for which they will need to be paid at least NMW.
However, those on furlough could be anxious and will potentially be feeling isolated. As you still owe your staff a duty of care, we would suggest that regular contact is a good thing, just to keep in touch. This should be done in such a way as not to allow discussion of work matters and should only be done using private contact numbers, emails, etc.
If I need to make redundancies, can I do this whilst employees are furloughed or do I need to un-furlough them? Can I consult with them?
The guidance seems to suggest that you can make redundancies whilst employees are furloughed. Our view is that if the employee is not undertaking work for you then they should be able to engage in consultations, whether individually or collectively. Practically though, it might be difficult to achieve – see further below.
Can I furlough staff who joined our payroll after 19 March because of a TUPE transfer?
Yes, the HMRC Guidance has now been updated to allow this.
How do we consult with staff over redundancies if they are furloughed?
It might be tricky! You will need to think about changing your normal processes to incorporate video and conference call technology and ensure you have personal contact details for staff. Face to face meetings will need to adhere to social distancing.
Don’t forget that normal employment law rules still apply:
- Remember collective consultation in the event that redundancies will be over the prescribed limits.
- Be prepared to allow staff to be ‘accompanied’ to virtual meetings by non-work colleagues or non-trade union representatives.
I’ve heard that I can re-hire ex-employees whose new jobs have fallen through and then furlough them. Do I have to and should I?
No, you do not have to and whether you do is a decision for your business, largely based on your cashflow and the relationship you had with the departed employee. Be mindful of inconsistent treatment between departed employees in case you are accused of discriminatory or detrimental treatment, especially if an employee left you in bad circumstances. If you are going to re-hire staff and furlough them and there is a problem with the reimbursement, you might find yourself financially worse off so do be aware of the furlough conditions.
I’ve furloughed staff for a specified period but need to extend it further. What should I do?
You should ensure you have the employee’s agreement to do so and then confirm this again in writing, asking for a response in writing too (email is fine). You are best advised to ensure that the period of extended furlough is agreed before the current one expires.
I’ve heard that employers are going to have to pay towards furlough from August. What will I have to pay?
From 1 August 2020
The Government is reducing its contribution towards the furlough scheme. Employees can remain on furlough but from 1 August 2020, the Government will no longer reimburse pension contributions and NI.
From 1 September 2020
The Government’s contribution to the wage bill will drop to 70% of salary or, if lower, £2,187.50. This means employers will have to pay the additional 10% or £312.50 as appropriate.
From 1 October 2020
The Government’s contribution to the wage bill will drop again to 60% of salary or, if lower, £1,875. This means employers will have to pay the additional 20% or £625 as appropriate.
If any employee has returned part-time, the amounts which can be claimed will be proportional to the hours not worked.
Further detailed guidance is awaited but for now the Government's Coronavirus Job Retention Scheme Factsheet (pdf) might be useful.
Can I bring employees back part-time from 1 July 2020 on a rotation basis?
At the moment, it seems that this will be allowed provided that the employees in question were all furloughed for at least three weeks by 30 June 2020. Further guidance is awaited though so decisions might be best left for when this is available.
I want to unfurlough employees, what do I need to consider?
See our blog for frequently asked questions about unfurloughing employees.
We are here to help
If you would like any advice on this or any other employment issue, please contact a member of the Employment Law Team.
This information is given to the best of our knowledge and does not constitute individual legal advice upon which you can rely. The situation relating to Covid-19 and the Government’s proposals are constantly evolving and may have changed since this document was produced. For up to date advice on your own situation and whether there are any other considerations relevant to your business, please contact us before taking any action.
Last updated 11 June 2020