Coronavirus: Furloughing and Job Retention Scheme – Frequently Asked Questions…
How long will the scheme run for?
The intention is for the scheme to run for at least three months from 1 March 2020 but it will extended if necessary.
How do I choose which staff are going on furlough?
There must be no work for the staff member due to Covid-19. Normal equality and discrimination legislation will apply.
Can I just put staff on Furlough?
No, legislation states that all staff being put on furlough should be consulted. If an employee does not consent then this is a complicated legal situation and you should seek employment law advice. Even if employees consent you should ensure records are held in writing. You should include at a minimum the date the staff member went onto furlough, the length of time until first review of furlough period, the % salary to be paid, and how you will contact the staff member during the furlough period. We suggest employees sign this record and you may wish to include comments on the employee seeking work elsewhere during the furlough period. However, please note, we are not suggesting this will be legally binding and employment law advice should be sought if you are unsure.
Can staff members be taken in and out of the furlough scheme?
The minimum furloughed period is three weeks. They can then come off furlough. This appears to mean that employers cannot rotate staff weekly between furlough and non-furlough.
What if a staff member is sick or self-isolating?
Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this. Employees who are shielding in line with public health guidance can be placed on furlough.
I already made staff redundant due to Covid-19 before this, can I reinstate them?
The scheme will be backdated to 1 March 2020 and redundant employees can be re-engaged.
You can also commence the redundancy process whilst staff are on furlough leave.
Can directors be placed on furlough?
ICAEW have released guidance suggesting that company directors that receive salaries through PAYE can be furloughed and apply for a grant of 80% of their salary during the coronavirus pandemic. Comments are included below:
‘We are awaiting full details of how the scheme will operate from HMRC, including for directors paid via PAYE but not receiving a consistent, regular monthly salary. We understand the intention of the scheme is to include those on irregular earnings, but full details on how the amount of the grant will be calculated for these individuals have yet to be released.
As with other businesses, such directors would need to have been on the payroll on 28 February 2020 and they cannot work while they are on furlough leave. We do not yet know the extent to which minor directorial duties would be disregarded, or whether the requirement that a furloughed employee should do ‘no work’ would prohibit this.’
Do the government pay 80% of the gross or net wage? What about employers NI and pension contributions?
The grant will cover the lower of 80% of an employee’s regular gross wage or £2,500 per month, plus the associated Employer NICs and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses are not included.
If I will not be topping up employees’ wages to 100% how do I calculate the 80%?
For full-time and part-time salaried employees, the employee’s actual salary before tax (gross pay), as of 28 February, should be used to calculate the 80%.
If the employee has been employed for a full twelve months prior to the claim, you can claim for the higher of either:
- the same month’s earning from the previous year
- average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
If the employee only started in February 2020, use a pro-rata for their earnings-so-far to claim
What if I am topping up an employees’ wages to 100%?
If topping up to 100%, process employees’ pay as normal (current salary not as at 28th Feb).
What about employees on Furlough where their pay varies each week/month?
Calculate the higher of either:
- The employees pay in the same pay period in the last tax year
- The pay period average for the entire 2019/20 tax year.
Process payroll at 80% gross, up to a maximum of £2500 per month.
If topping up to 100% process pay at the full amount as described above.
Are there any legal implications to not paying staff 100%?
Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.
What if I am only paying 80% and this drops the pay below minimum / living wage levels?
It is ok in this situation that the 80% figure may fall below the national minimum wage and national living wage.
How do I make sure my employees are not working elsewhere whilst furloughed?
The temptations for staff will be large, we do not yet know what penalties will exist or how this will be policed. The first step must be to speak to your staff.
Can I pay dividends whilst claiming under the furlough scheme?
Nothing has been published in relation to this, there could be restrictions put in place or the risk of claw-backs going forward.
What will I need to make the claim when the scheme is open?
- your ePAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 weeks)
- your bank account number and sort code
- your contact name
- your phone number
Will HMRC challenge my claim?
You will calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.