Coronavirus FAQs For Business Owners & Directors

This is a new term the Government have brought in to support UK Employers solely for dealing with the Coronavirus pandemic. In short, the term means a temporary absence of work.

The Job Retention Scheme is in operation for UK Employers of any size. The Scheme is intended to cover 80% of the basic salaries of those employees that no longer have any work and where the employer cannot afford to pay them. The Scheme is intended to avoid redundancies due to the Coronavirus outbreak and is intended for employees to be reinstated and to return to work once the outbreak has ceased.

Any employer with a UK payroll and a UK bank account will be able to claim, but employees must have been on a Company’s PAYE payroll on or before the 19th March 2020 AND notified to HMRC on an RTI submission on or before 19th March 2020.

The Scheme was scheduled to last up until 30th June 2020. On the 12th May 2020, Rishy Sunak, Chancellor, announced that the scheme would now be extended until 31st October as per the timetable below:

1) Scheme will run with no changes now until 31st July 2020

2) From 1st August and until 31st October 2020, the scheme will provide greater flexibility to aid employees returning to work and support part-time working

3) The scheme is now scheduled to end on 31st October 2020.

Mr Sunak announced that if employees return to work part-time after 31st July 2020, they will not be any worse off than they would have been under the current furlough scheme rules i.e. 80% of salary to a cap of £2,500 per month.

Full details are to be published by the Government by the end of May 2020.

No. The furlough period must begin on the date that you actually furlough an employee i.e. the date they had no work.

To be eligible to be furloughed, an employee must have no work to do AND must not work at all for the Company, or any associated Companies, or organisations associated with the Company, during the furlough period. HMRC are setting up an online portal for employees to report any employer that is falling foul of the furlough rules.

Furloughed employees must not undertake any work whilst they are absent. The rules include, and clearly state, no business generation activity to be undertaken. A furloughed employee may undertake separate volunteering duties (that do not benefit the employer) or continue working for a secondary employer or employers. The furlough cap applies to each separate employment.

Employees are allowed to complete Company training whilst furloughed, but they must be paid at least the National Minimum Wage whilst carrying out this activity, even if this is above the 80% of Salary.

If employees have had their hours reduced due to a reduced workload, then these employees cannot be furloughed and must continue to be paid at least a pro-rata of their contractual pay.

The Government have now confirmed that it is allowing a furloughed employee to be able to gain additional employment during their normal contracted working hours, but this is subject to contractual terms with the employer.

The Employer will have to give agreement to the new employment and the agreement placed in writing between the employee and the employer. The Employer must give their express consent for the employee to start work for another Company and the period. The Employer may refuse to allow the new employment if it involves working for a competitor or in direct competition with the employer, although this is subject to the contractual terms in the employee’s contract of employment.

Any employee starting additional employment will be required to complete a New Starter Checklist with the new employer and the employee needs to tick statement C to confirm it is not their main or only job.

If you are unsure about any additional working request, please contact HR Smart before taking any action.

HMRC have reserved the right to complete retrospective audits on companies. HMRC are likely to enforce repayment, and possibly charge interest, if they find that the rules have not been applied in line with the instructions. This could put all payments in jeopardy for all employees and possibly lead to prosecution for fraud if the rules are found to have been flouted on purpose. All records of “furloughed” employees must be retained for 5 years and given to the HMRC if requested to do so.

HMRC are setting up an online portal for Employees to report any Employer that is falling foul of the furlough rules.

By “furloughing” an employee, the employer is changing the employee’s employment status and any changes in employment status are legally protected. Unless there is a specific contractual clause or agreement in the employee’s contract of employment, this change in status has to be mutually agreed between the employer and employee via consultation in advance of the “furlough” period commencing, and then confirmed in writing by the employer. Please contact HR Smart if you need a letter template to furlough staff.

An employee cannot request or insist on being “furloughed”. If there is still work that can be carried out under the Governments safe distancing guidelines, then the employee must still attend work or work from home.

If the employer has no work and/or the place of work is closed and agreement cannot be reached with employees, this may result in a termination of employment on the grounds of redundancy. Consultation and statutory redundancy pay continue to apply.

The Employer continues to pay the employees on their contractual pay date, even if they are “furloughed”. Payment must be no less than 80% of the employees’ basic salary up to a maximum of £2,500 per month. The Employer can choose to supplement the 20% shortfall but is not legally required to do so.

For clarity, the Employer must continue to pay the salary due and must not wait until the HMRC grant has been received. Failure to pay salaries or wages on time could result in an unlawful deduction claim.

Companies should be prepared for delays in receiving the Government payment and make alternative short-term funding decisions, such as applying for the Government backed loan scheme (CBILS) through their bank.

The employee retains all of their statutory rights including Statutory Sick Pay, Maternity and Paternity rights, Other Parental Rights and Pensions. Employees will also continue to be protected against Unfair Dismissal and for Redundancy.

If your employee has been on unpaid sabbatical or unpaid leave, you should use the salary amount they would have been paid if they were on paid leave when calculating 80% of their wages.

For employees on fixed pay, claims for full or part time employees furloughed on return to work after time off sick should be calculated against their salary, before tax, not the pay they received whilst off sick.

Claims for those on variable pay, returning to work after time off sick should be calculated using the highest of either:

80% of the same month’s wages from the previous year (up to a maximum of £2,500 a month)
80% of the average monthly wages for the 2019 to 2020 tax year (up to a maximum of £2,500 a month)

Family-related statutory leave includes maternity leave, paternity leave, shared parental leave, adoption leave, parental bereavement leave and unpaid parental leave.

For employees on fixed pay, claims for full or part time employees furloughed on return from family-related statutory leave should be calculated against their salary, before tax, not the pay they received whilst on family-related statutory leave. The same principles apply where the employee is returning from a period of unpaid statutory family-related leave.

Claims for those on variable pay, returning from statutory leave should be calculated using the highest of either:

80% of the same month’s wages from the previous year (up to a maximum of £2,500 a month)
80% of the average monthly wages for the 2019 to 2020 tax year (up to a maximum of £2,500 a month)

This has recently been clarified by the Government, who have advised that the Employer can claim for any regular payments the Employer is obliged to pay its employees under the contract of employment terms.

This includes wages, contractual overtime, fees and compulsory commission payments. However, discretionary bonuses (including tips), commission and non-cash payments are excluded.

Employers and employees are still required to pay their monthly amounts into the employee pension plans as normal, unless they have previously opted out of the pension scheme.

Yes. You must use the same calculation as you would have used under normal circumstances. This means an average of the last 52 week’s total pay (12 weeks average prior to 6th April). This will be more expensive than furloughing, but it does mean that holiday entitlement will not build up creating a greater problem later in the year.

An employee’s holiday entitlement continues to accrue whilst they are furloughed. The Government has stipulated that employees who are unable to take their annual leave due to the Coronavirus outbreak will be able to carry forward up to four weeks accrued holiday over a two-year period. The remaining 1.6 weeks can be carried over by one year if the employer agrees. We believe this will be enacted via a legal change to the Working Time Regulations.

The easiest way to deal with furloughed employee holiday requests is to take them off furlough during their holiday period and pay them as normal i.e. 100% of salary or wages. We would then advise putting the employees back on furlough after their holiday period if there is still no work available and the Government scheme is still in operation. The Government advice here is still unclear and we think this is the best way to approach this at the moment.

Bank holidays will cause an issue as most employees have these days as part of their contractual holiday entitlement, which will need to be paid at 100% of their salary or wage. We would suggest you consider deferring the bank holidays to be taken at a later time.

Holiday arrangements under furlough is complex and partly unknown, so please call us if you need further advice.

If an employee falls sick during a period of furlough, then the employee should be removed from their period of furlough and paid in line with the employee’s contractual arrangements i.e. SSP or Company Sick Pay.

This applies whether the illness is Coronavirus related or not, however, the Company can recover the SSP element for any sickness that is related to Coronavirus from day 1 of the sickness period.

If an employee is “shielding” under current Government public health guidelines, then they can also be furloughed.

If an employee is currently off sick or self-isolating, then they cannot be furloughed and should be paid SSP or their contractual Company Sick Pay. They can be furloughed immediately after the sickness period has ended.

The employees’ contract of employment terms and conditions remain in place.

If an employee is monthly salaried, they will be paid the lower of 80% of their basic monthly salary OR a capped sum of £2,500 per month. This salary figure should be based on the employees last pay period prior to the 19th March 2020. If you have used a different pay period, you can continue to use this for your first claim.

Employee pay with variable earnings such as variable hourly pay or zero-hours contracts of employment, will be determined by one of the following mechanisms:

The greater of:

1) The same month’s earnings from the previous year (2018/19)

2) Average monthly earnings from the current tax year (2019/20)

OR if less than 12 months’ service

3) Average pay since starting work for the current employer

Tax, National Insurance and Auto-enrolled pension contributions will be deducted as normal before making payment to the employee. National Insurance Contributions will also need to be paid by the Employer.

Employers will be able to claim the statutory Employers’ pension percentage and National Insurance contributions back under the Job Retention Scheme application up to the 80% salary cap. If an Employer decides to top up the employee salaries to 100%, the Employer NI and Pension on top up pay cannot be claimed as part of the Job Retention Scheme.

If an employee is furloughed, then this period must be for a minimum of three weeks. An employee can move in and out of paid and furloughed periods, but the three-week minimum must apply each time they enter a furlough period.

No. The monies received to cover furloughed employee salaries under the Job Retention Scheme are grants and therefore will not have to be paid back to the Government. However the HMRC reserves the right to audit any claims. Any claims not considered to be genuine or that are deemed to fall foul of the system may be required to be paid back.

Furloughed employees continue to accrue leave as per their employment contract.

The employer and employee can agree to vary holiday entitlement as part of the furlough agreement, however almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.

Employees can take holiday whilst on furlough. Working Time Regulations require holiday pay to be paid at the employee’s normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the previous 52 working weeks. Therefore, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations.

If an employee usually works bank holidays, then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave, then the employer would either have to top up their usual holiday pay or give the employee a day of holiday in lieu at some point in the future.

Employers will be obliged to pay additional amounts over the grant, though will have the flexibility to restrict when leave can be taken if there is a business need. This applies for both the furlough period and the recovery period.

Yes. Employers can request that employees take holiday by giving employees twice the amount of notice as their holiday entitlement i.e. 1 week’s holiday period = 2 weeks’ notice from the employer.

The Government has stipulated that an employee can be furloughed from 1st March 2020, subject to no work being available. The Scheme is available for four months, (end of June 2020), at which time we understand the Government will review the situation.

All benefits under the employees’ contract of employment remain in place.

If employees have elected for Salary Sacrifice schemes, then they can opt out of this arrangement on the basis that HMRC have declared the Coronavirus pandemic a “Life event”. This will amount to a contract variation and should be confirmed in writing to the employees.

If employees are receiving other benefits such as company cars or life assurance, then these must not be added to the salary to work out the furlough payment. These benefits should, however, continue to be paid by the employer separately to the furlough payment.

Yes. If you have dismissed employees as a result of a downturn in work due to Coronavirus, who were on PAYE on 28th February 2020 AND you had submitted an RTI return on or by the 28th February 2020, then you can reinstate the employees to claim the furlough payments, even if they are reinstated after the 19th March 2020.

Redundancy payments, holiday pay and any other payments made may need to be reversed and repaid in order to achieve the reinstatement. We would recommend contacting HR Smart in advance if you are thinking about taking this action.

As per previous Government guidance, employees dismissed prior to 28th February 2020 will not qualify for reinstatement and furlough.

Any employee who has been employed since the 19th March 2020 and has been dismissed will also not qualify for the reinstatement and furlough arrangements.

This depends on the reasons for redundancy. If the redundancy is non-Coronavirus related then the Job Retention Scheme will not apply and the redundancy can continue, subject to following a formal consultation process.

If the redundancy is linked to the Coronavirus, bear in mind that the Job Retention Scheme was designed to avoid redundancies happening during the outbreak. We would advise companies to think hard and seek advice before completing a redundancy process during this period.

Employees that have been furloughed may still be subject to redundancy if the employer cannot afford the employment. There is a risk of unfair dismissal claims, whilst the Government’s Job Retention Scheme is available, as this scheme could be considered a reasonable alternative to redundancy at this point.

If you feel you still need to make redundancies, we recommend that you contact HR Smart before finalising any actions. The normal rules around consultation, time frames and redundancy still apply.