We’re seeing unprecedented changes with new guidance announced daily by the government. A few weeks ago, none of us had heard about furlough yet many employers are now calculating large numbers of payments based on new and changing legislation. In fact, further guidance was released at the weekend with some changes to original details provided by the government.
We’ve simplified the rules to help make things as easy as possible for employers. If you have any specific questions book onto one of our free private Q&A sessions available for any employer each Wednesday afternoon.
What You Can Claim For?
Under the job retention scheme UK employers can claim a grant of up to £2500 per worker per month to cover 80% of their normal wage costs. In addition to the £2500 employers will also be reimbursed for employer national insurance contributions and minimum employer autoenrollment pension contributions. Employers will not be reimbursed for apprenticeship levy.
Claims will be made via a new portal which is expected to be available at the end of April 2020.
Furlough payment should be calculated on their normal contractual salary. This should include any guaranteed overtime or guaranteed commission.
Non-monetary benefits in kind (such as private medical insurance) should be excluded when calculating the reference salary. Similarly, so should salary sacrifice pay elements (such as pension’s processed via salary exchange or pre-existing childcare vouchers).
For employees wanting to change salary sacrifice arrangements HMRC have confirmed that COVID-19 is classed as a life event and will be able to do so (in line with normal employment law rules).
You do not need to consider NMW for furloughed workers as they are not working so fall outside of NMW rules. Be aware that employees completing training while on furlough will need to be paid at least NMW for any training they carry out.
Workers with Varied Pay – Zero Hour Workers / Seasonal Workers / Agency Workers Paid PAYE (including those paid via an Umbrella Company)
Furlough payment should be calculated on the higher of;
- Average monthly earning from 2019-20 tax year (a pro rata calculation should be made if workers started part way through the tax year), or
- Pay from the same pay period from last tax year.
This calculation will need to be run each pay period to ensure the correct payment is made to your workers.
You can include overtime when calculating furlough payments as well as any guaranteed commission (check your employment contracts). You should exclude any discretionary commission, bonus payments or tips.
If the worker was still on the payroll on 28th February (not on unpaid leave) they can be furloughed. As their pay varied their reference earnings should be calculated in the same way as workers with varied pay.
Shielding Employees and Those Unable to Work due to Childcare Restrictions
Employees shielding due to underlying medical reasons / pregnancy / over the age of 70 can be furloughed. Similarly, employees who are unable to work due to childcare restrictions can be furloughed and the employer reclaim 80% of normal wages via the job retention scheme.
Apprentices can also be furloughed. They can continue with their apprenticeship training although NMW checks will need to be in place to ensure they are paid at least NMW is paid for training hours.
Workers on Unpaid Leave on 28th February 2020 or Hired After 28th February 2020
Unfortunately, these workers cannot be furloughed. You may need to agree short time working/lay off following usual employment law processes.
Taking Employees on and Off Furlough
You can take employees off and on furlough multiple times and still claim for the job retention scheme. Each furlough period must last for at least 3 weeks in order to qualify.
Workers will continue to accrue holiday while on furlough in line with their employment contract. ACAS have confirmed that employees can take holidays while on furlough. This means that potentially employees can take the Easter Bank holidays as paid holidays. There is currently no guidance on how this should be paid. We are recommending employers currently paying 80% of average pay uplift this to normal pay for holiday days.