What Is It?
On Friday 20th March the government announced the introduction of the job retention scheme.
Under the scheme the government will contribute 80% of employees’ wages for those workers who have been ‘furloughed’ in order to encourage employers to keep staff in employment during these unprecedented times.
Any employee who is on PAYE could be eligible if they were in employment on 28th February 2020. It appears this would include temporary workers although we await further guidance to confirm this.
In order to gain funding, employers must have put said employees on ‘furlough’. Furlough is to essentially to be kept on the payroll but not doing any work.
Normally this would be without pay, but the government has advised it will fund 80% of normally wages up to the value of £2500 per month. We are currently unclear on whether the grant can cover wages costs such as Employer Pension and Employer National Insurance Contributions or if this is just to cover gross wages. The funding will be available for at least 3 months but may be extended in the future. It can be backdated to cover furlough back to 1st March 2020.
How To Invoke Furlough?
It’s important to remember that normal employment law is still in place. By using furlough you are changing the status of your workers.
Remember to follow your usual HR policies and procedures. Depending on your contracts you may require agreement from your workers to invoke Furlough.
How Much Do Employees Get Paid?
The payment will be processed via payroll under the normal payment frequency.
At present it is unclear whether you should pay employees 80% of their wage costs which will be covered by the government or, if you want to, uplift this to meet their normal salary requirement. There is the concern that by topping this up the employee is not in fact on ‘furlough’ so would void the employer reclaiming this back. We await further guidance.
How to calculate 80% of wages costs is also currently unclear. We await further guidance on whether this should be based on contracted pay elements (for example exclude overtime and process 80% of basic salary only) or be based on average weekly earnings over a set earnings period.
What Happens to Holiday Pay?
Both annual leave (and continuity of service) will continue to accrue while on furlough.
What About Pension Contributions?
For schemes using qualifying earnings contributions (used by most SME’s) will be calculated based on earnings within each payroll cycle.
For schemes using self-certification each employer will need to check the individual pension scheme rules but having dealt with a number of pension providers already the pension contributions would remain to be calculated on their contracted salary.
What Happens If you Have Already Started Redundancy Procedures?
Seek advice – there may be time to halt the process and use furlough as an alternative option. This may be important to avoid future discrimination cases if it was viewed that the redundancy could have been avoided.
Can Workers on Furlough Take Employment Elsewhere?
At present there is no guidance from the government about this. We recommend you follow your usual policy and procedures until advised otherwise.
How Do Employers Claim the Grant?
This is currently unclear. The government has announced that this cannot be done from existing systems and that they will provide advice soon on how to claim access to this funding. In the meantime, employers are advised to take advantage of ‘Time to Pay’ scheme in place to push back payment of PAYE and VAT to assist with cash flow.
Employers needing extra assistance can apply for a government backed loan from bank. We suggest employers plan ahead as we are unsure on time frames around funding for the Job Retention Scheme.
We’ll keep clients updated within the ever changing environment. For other employers we are introducing a free support meeting (online or telephone of course). We have 4 slots available each Wednesday afternoon for 30 minutes each. Book your place now;