The Coronavirus Job Retention Scheme – Updated guidance for employers

Harrison Drury’s employment law team, looks at the new Coronavirus Job Retention Scheme and offers business owners, directors, senior managers, and HR professionals some guidance on how to use it.

Article last updated April 17, 2020

What is the Coronavirus Job Retention Scheme?

The Coronavirus Job Retention Scheme (also referred to as the CJRS, or ‘Furlough Scheme’) is an unprecedented and unique temporary government measure. It is open to all UK employers to help them retain their workforces and continue to operate during the coronavirus pandemic.

The concept behind the scheme is to financially support employers whose business operations are being drastically affected by the pandemic, meaning employees don’t have to be made redundant.

It is envisaged that the scheme will run for at least three months starting from March 1, 2020. It is open to all UK employers who have had a PAYE payroll system in place before March 19, 2020, and who have a UK bank account from which PAYE employees are paid.

Although payments will only be processed under the scheme from April 2020, furlough leave applies to any employee on the payroll as at March 19, 2020. Employers do not have to wait until the scheme is live before employees can be furloughed.

What is the qualifying date for the scheme?

The qualifying date in respect of when the employee had to be on their employer’s payroll, has recently changed from 28 February 2020 to 19 March 2020.

This may have a significant impact for employers, who terminated contracts with employees where they were not on payroll prior to 28 February 2020. There may now be instances where an employer could look to re-employ those who were let go, with a view to furloughing them under the updated guidance.

How does it work?

Employers will obtain access to an HMRC portal where they will record an employee’s status as ‘furloughed’.  Once this is done, employers will be able to claim a maximum of 80% of furloughed employees’ usual monthly earnings or £2,500, whichever is the less, plus Employer National Insurance contributions.

Eligible employees will also continue to receive the minimum employer pension contributions in addition to 80 per cent of their usual wage.

If an employer wishes to do so, they can top up employees’ wages to their usual monthly amounts – however, employers are not obliged to do this and, given that the duration is unknown, careful consideration should be given to the setting of any precedents.

Its important employers have all the necessary earnings information for their employees ready to relay to HMRC and it is likely that tight documentation will be required to meet any audit requirements which may come into play.

My colleague Lucy Beachell has written a handy guide on what information employers should have to hand when making a claim under the CJRS.

Who exactly can we claim for?

Furlough leave is a temporary leave of absence for economic reasons only, in this case due to the coronavirus pandemic, and is designed to retain the employees who would otherwise have been laid off or made redundant. Put simply, it’s the continued payment of wages in the absence of work so employees cannot be undertaking work for the employer at all.

Employers can claim furlough for eligible employees on the following types of employment contracts:

• Full-time employees
• Part-time employees
• Employees on agency contracts – and are paid via PAYE but are not working.
• Employees on flexible or zero-hour contracts.

The scheme also extends to cover any employees who, since March 19, 2020 have been made redundant but subsequently rehired by their employer – a very unique provision in the world of employment law.

Furlough applies to the removal of a ‘whole job’, thus if an employee is working but on terms different to their usual contractual arrangements (i.e., reduced pay, reduced hours), they will not be eligible for furlough and the employer will be duty bound to pay the employee accordingly.

It may not be necessary for all employees to be furloughed and, in any event, appropriate consultations should take place with employees in the first instance with outcomes and agreements recorded and documented.

Employees must remain furloughed for a minimum of three weeks, at which point they can be asked to return to work. Guidance suggests that employees can be furloughed more than once, enabling employers to recall furloughed staff temporarily to cover further sickness absence.

When making decisions about which members of a workforce maybe furloughed, employers must consider and adhere to equality and discrimination laws which remain unaffected by the scheme.

Employees taken on after March 19, 2020 cannot be furloughed and so other options may need to be considered. Statutory redundancy also won’t be an option since they won’t have accrued the necessary service to qualify for that.

My colleague David Edwards has written a post about what action will be taken against those makeing fradulent claims under the scheme, and all employers should be aware of this.

Do directors qualify to be furloughed workers?

Although no specific guidance has been provided on directors, provided they fall within the above criteria (i.e. they are paid via payroll; and have been since at least February 28, 2020), then it would suggest these directors can be furloughed, although additional income, such as dividends, would not be covered under the CJRS.

Directors will also need to consider their ongoing fiduciary duties, and whether they can reasonably remain off work without carrying out any revenue-generating work for the business.

What about employees who are on sick leave?

The guidance for the CJRS was updated on 9 April 2020 to providee clarification in respect of employees on sick leave or currently on statutory sick pay.

Short-Term Absence

The guidance makes it clear that the CJRS is not intended for those employees on short-term absence from work due to sickness and should not be a consideration whether to furlough an employee. It remains possible to furlough an employee who is off sick (short-term or otherwise), for business reasons in line with the previous guidance on the CJRS. In cases such as this, the employee should no longer receive sick pay and should be classified as a furloughed employee.

Long-Term Absence

Employers are entitled to furlough employees who are off on long-term sick and it is for the employer to decide whether to furlough the employee. It is possible for an employer to claim back on the CJRS and Statutory Sick Pay for the same employee, but this cannot be for the same period of time.

We’ve also provided some guidance about what impact furloughing a worker will have on annual leave entitlement.

Can I furlough workers who joined under TUPE regulations?

The updated government guidance has provided clarity on the issue of furloughing employees that have been transferred to a new employer, under the TUPE regulations, after the 28 February 2020.

Under previous guidance, it was unclear how employees who had transferred to a new employer by TUPE, after 28 February 2020, would be eligible to be furloughed. Despite continuity of service being protected, the employees would not have been on the new employer’s payroll before the relevant cut-off date. However, the new guidance has now confirmed that a new employer is eligible to claim under the CJRS for employees of a previous business that have transferred after 28 February 2020, if either the TUPE or PAYE business succession rules apply to the change of ownership.

Of course, if you have recently acquired a business through a TUPE transfer there are many other issues that can arise from it in this challenging time. This may range from cashflow to HR matters. Our team can provide complete support in relation to business issues arising from the purchase of a business and/or its assets.

I’m worried about supporting my employees, what should I do?

Don’t panic! In addition to this government support, we are here to help you, whether that’s to guide you through this scheme, carry out any audits or advise on employment matters generally. We are all in this together and we’ll do our best to help you.

For further advice regarding the furloughed workers scheme, contact our Employment Law team on 01772 258321.