Jarred Consulting

Many clients and friends are either asking us the same question or searching the internet trying to find answers about ‘Furloughing employees’ so we thought it appropriate to ask one of our team, Charlotte Spooner, an HR expert, to give us her view on the scheme as it applies to UK based businesses in this current crisis. If you feel you would like more information please feel free to get in touch as we know how difficult it can be at this time. Summary of the scheme ▪ The scheme applies to all PAYE employees, including apprentices, who were on the payroll on 28 February 2020. It also applies to employees who were made redundant on or after 28 February 2020, who can be re-employed and then furloughed. Employers can furlough employees whose roles are not entirely redundant but who have less work to do than they usually would, so long as they do not do any work during the furlough period. Employers can also agree to re-employee employees who resigned and have asked to return to their employer but care should be exercised in this scenario. ▪ Employers can make a claim to HMRC to reimburse 80% of usual wage costs, up to a cap of £2,500 (gross) per worker per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer contributions on that wage. There is no obligation to top up to full salary, although employers can elect to do so. There is also no obligation to top up to national minimum wage if the 80% takes an employee below the minimum (unless the employee is doing training). Compulsory commission payments and fees may also be included. ▪ For employees on variable pay arrangements, pay can be calculated as the higher of either, (a) their pay in the same month of the preceding year (e.g. April 2020 based on April 2019 pay); or (b) their average earnings in the 20219/20 tax year. ▪ Furlough claims can be made from the date an employee ceases work and commences furlough leave, not the date that furlough leave was agreed which is likely to happen in advance. ▪ During furlough, employees cannot do any work for their employer, although the scheme does allow employees to undertake work for another employer (should this arise employers should check whether the employment contract allows this). They can do volunteer work (employers can support their employees in finding volunteering opportunities), or training if this does not provide services to or for the employer, or generate revenue for the employer. ▪ An employee must be furloughed for a minimum period of 3 weeks. A furloughed employee can then return to work and put on furlough again later if needed, therefore allowing employers to effectively rotate furloughed employees. ▪ Employees who are on sick leave are not eligible to be furloughed, however when their period of sickness ends they can be furloughed. Are we eligible to furlough our employees? Companies can find out whether they are eligible to claim furlough for their employees in relatively simple steps. 1. Prove that it’s employees cannot do their jobs due to the coronavirus measures put in place by the government. 2. Notify employees of their new ‘furloughed’ status. 3. Finally, submit information to HMRC about furloughed employees to set up a system for reimbursement. The link below will take you to the government guidelines and advice on how to claim the grant. https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retentionscheme https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronavirus-job-retentionscheme https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retentionscheme Who do I furlough? Look at all your employees and the work that needs doing. Ask yourself whether the work is business critical and whether there is actually enough work to be done. Many businesses will be experiencing a downturn and it will be obvious which roles are a necessity now and which roles will be required in the future when the situation returns to normal, but aren’t required at the moment; they may not be business critical or the work load may simply not be there. Furlough rather than lay off, redundancies may come out of this situation further down the line, but that bridge can be crossed then. You as employers are the gate keepers to this scheme and the decision becomes not only a financial one but also a moral one. Important to note, the process needs to be fair and reasonable, not least to ensure that employees do not have cause to suggest that they were treated unfairly due to a protected characteristic. Short answer – if there isn’t any work for an employee to do or they can’t work - furlough How do we put an employee on furlough? The employee needs to agree to being furloughed and you must obtain written evidence of this for each employee. This record must then be retained for a period of five years. Consult with the employees and explain why you wish to do this and how it will benefit them, explain that it is almost like being on garden leave, they are getting paid but not expected to work and you are doing this to avoid having to make them redundant at this time. If you can and wish to, top up the 80% and inform them of this and if you can’t then explain why. Important to note that you should treat all employees the same way, it would be potentially discriminatory to pay one employee the top up and not another. Can we ask employees to do training while furloughed? Yes. A furloughed employee can do training if this does not involve providing services or generating revenue. The guidance points are that if workers are required to, for example, complete online training courses while they are furloughed, they must be paid at least the National Living Wage/National Minimum Wage for the time spent training, even if this is more than the subsidy. My business can’t wait until the end of April for the payments to arrive, what are my options? There are several options available to businesses unable to wait for the first payments from the scheme (and you should note there is no guarantee when payments from HMRC will actually commence), including a number of coronavirus grants and loans for businesses to facilitate cash flow. Failing that, bosses and HR will need to have conversations with staff about the possibility of changing working arrangements. Consult with your employees and endeavour to come up with a solution that works for everyone. What happens at the end of furlough? The idea is that employees will be able to come back to work. The scheme is designed so that employers don’t need to make redundancies and then recruit a new workforce once the crisis is over - their existing workforce will be ready and waiting in the wings to resume work. However, if trading conditions have not improved sufficiently for you to take all the furloughed employees back when the scheme ends then you will be able to make them redundant, subject to the usual rules on redundancy. There are currently no restrictions on employers making redundancies post a furlough situation. Written by Charlotte Spooner and Euan Graham https://www.linkedin.com/in/charlotte-spooner-90161a5a/ https://www.linkedin.com/in/euan-graham/ There are still areas of uncertainty relating to furlough leave, for example, can an employee be on furlough leave and holiday at the same time? We will keep this document under review and update it as appropriate. Please keep an eye on our website: www.jarredconsulting.com for further updates.