Further to updated advice from HMRC, Thompsons now provides additional information in the form of a Q and A about how the coronavirus job retention scheme (see LELRs 664 and 666 for more details), introduced by the government in March 2020, is likely to work in practice.
The latest government guidance states that the scheme is open to any employer who cannot maintain their current workforce because their operations have been severely affected by coronavirus (COVID-19).
Employers can only make a claim through the scheme on behalf of a worker who was on the payroll as at 28 February. This therefore allows them to re-engage workers who have left since 28 February, furlough them and make a claim for 80 per cent of their usual monthly wage costs up to a maximum of £2,500 a month. There is no protection for any worker who left employment before 28 February 2020.
There will be financial consequences in taking this step given that organisations are not yet able to access the portal to make a claim for the reimbursement of wages and if financial reserves are limited they will undoubtedly want to concentrate on those individuals who remain within their employment. Employers will also have to consider the practical consequences of re-engaging an employee whose contract they had previously terminated.
The usual monthly wage costs consist of the “regular payments” that the employer makes to their employee, plus their National Insurance Contribution and auto enrolment pension contributions. These payments therefore include wages, contractual overtime payments and any relevant fees and commission.
Certain payments are not included, however, such as discretionary bonus payments (including tips), discretionary commission payments, discretionary non-cash payments, the cost of non-cash benefits and benefits provided through salary sacrifice schemes which reduce an employee’s taxable pay.
In terms of employees whose pay is variable, the employer can claim the highest of either the same month’s earnings from the previous year or average monthly earnings for the 2019-2020 tax year.
Individuals who work through a personal service company (PSC) can be furloughed provided they are not in business on their own account and are paid via PAYE. It follows that those who submit an invoice via their PSC cannot be furloughed and would have to claim a grant through the government’s self-employment income support scheme (LELR 664).
Although the government does not expect public sector organisations to furlough workers, the cabinet office has issued guidance on “contingent workers” (such as contract workers operating through a PSC) who can be furloughed, subject to certain conditions (see the article in this LELR for details).
Fixed term workers are also eligible to be furloughed if they were on the employer’s PAYE system on or before 28 February but only up until the end of the fixed term period. The government has confirmed, however, that a fixed term contract that was due to come to an end during the period of furlough leave can be extended or renewed.
Likewise, agency workers who are paid through PAYE can be furloughed. If they are employed through an umbrella company, it is that company which has responsibility for putting them on furlough leave. An agency worker who is employed by an agency cannot work for or on behalf of the agency while they are on furlough leave, although they can work for another agency.
Finally, it has been confirmed (although not expressly in the guidance) that those TUPE transferred on or after 28 February 2020 can be furloughed under the scheme.
The new guidance is obviously welcome but many questions remain unanswered, not least around the interplay between furlough and annual leave entitlement. There are also workers who the scheme does not assist such as those who left their roles before 28 February 2020 and who have not started their new jobs as a result of the pandemic. The scheme also relies on employers to access it whereas some may consider there is still a greater financial incentive to cut casualised labour rather than take this step.
Articles shared by Thompsons relating to coronavirus (COVID-19) are correct at the time of publication. You should check the government's guidelines for the latest information and advice at https://www.gov.uk/coronavirus.