The Job Retention Scheme & Furlough Leave
On the 20th March 2019, the Chancellor of the Exchequer, Rishi Sunak, set out a comprehensive list of measures to support the UK economy through one of the most disruptive times in modern British history. The main package of support for British businesses announced by the Chancellor is the Job Retention Scheme. Since the Job Retention Scheme was announced the term ‘furlough leave’ has been at the forefront of many employer’s minds. We are in an unprecedented situation which has led to many unknowns. We’ve pulled together 20 of the most common questions employers have about the scheme and furlough, to give you the answers you need.
The Basics of the Scheme
1. What is the Job Retention Scheme?
A: The Job Retention Scheme aims to encourage British businesses to put employees on furlough leave instead of dismissing them or making them redundant. Simply put, furlough means putting employees on a period of paid leave. More commonly used in the US, this is the first use of the term ‘furlough’ in English employment law.
2. Is my business eligible to apply for the Government Job Retention Scheme so that I can put employees on furlough leave?
A: The good news is that the Job Retention Scheme applies to all British based businesses. This includes LLP’s, sole traders, limited companies, partnerships and charities. It is important to note that to be eligible your organisation must have created and started a PAYE payroll scheme on or before the 19th March 2020, enrolled for PAYE online and have a UK bank account.
3. How much can I claim via the Job Retention Scheme?
A: You can claim for 80% of your employee’s wages up to a maximum of £2,500 per month. You can top up the employee’s salary by a further 20% to ensure that they receive their full salary whilst furloughed. However, this is not mandatory and there is no legal obligation for companies to do this.
4. What happens to employer National Insurance and pension contributions for furloughed employees?
A: As an employer, you are still responsible for employer National Insurance and pension contributions on behalf of your furloughed employees, however, you can claim for these under the Job Retention Scheme. It is important to note that the reclaimable National Insurance and pension elements are based on the furlough salary, not normal salary. If you decide to top-up the 20% of salary above the 80% grant, you will not be able to claim the top-up amount via the Job Retention Scheme.
5. Are payments to furloughed employees a loan or a grant?
A: The good news is that it is a grant and organisations are not required to pay the money back.
Who can be Furloughed?
6. How many employees can be placed on furlough and how long for?
A: There is no cap on the number of employees that you can place on furlough leave. It is up to you to decide which roles within your organisation are business-critical. Remember, a furloughed employee is legally unable to do any work while on furlough, so the scheme should be considered as a last resort, as you may need them to help the business during these uncertain times. Employees must be placed on furlough leave for at least three weeks. You can also rotate employees should you wish to do so.
7. Can employers place new employees on furlough leave and claim 80% of their salary through the Job Retention Scheme?
A: The simple answer: no. You can only claim furlough for employees that were on your payroll on or before the 19th March 2020. If new employees were not on the payroll system by the 19th, they are not eligible for the scheme. The new employee could ask their old employer to reinstate their employment so that they can be placed on furlough leave, however, this would be at the discretion of the employee’s former employer.
8. Can former employees who had their employment contracts terminated or who were made redundant be reinstated and put on furlough leave?
A: Yes. The aim of the scheme is to support businesses to prevent employees being made redundant during this pandemic. You can rehire any former employees who had been made redundant or had their employment terminated after the 28th February 2020. They can be placed on furlough leave.
9. Can I place employees who are currently off sick from work on furlough leave?
A: Any employee who is on sick leave from work or is having to self-isolate should not be put on furlough leave straight away. In the first instance, they should get Statutory Sick Pay. Upon returning to work you can place them on furlough leave, if it has been decided that there is no work for them to do and the alternative is redundancy.
10. Can employees with serious health conditions who are ‘shielding’ be placed on furlough leave?
A: The current guidance makes it clear that employees who need to shield can be placed on furlough leave. ‘Shielding’ is a measure to protect extremely vulnerable people by minimising their social interaction betweenThose who are shielding should not be leaving their homes and should be avoiding all unnecessary contact with others. The majority of people who need to shield have received letters from the NHS advising them to shield for a period of 3 months.
11. How do I put employees on furlough leave?
A: Despite being in the midst of a pandemic, you must follow the correct procedure to ensure you are keeping in line with employment law. The first thing you need to do is check your employment contracts, if they contain a ‘lay off clause’ you can place the employee on furlough leave automatically. If your employment contracts don’t contain this cause, and the majority of companies in the UK do not, then you will need to follow the consultation process (Question 12). Remember to check that you have a signed version of your employees’ terms and conditions for employment.
12. My organisation does not have a lay off clause in our employment contracts. What do I need to do?
A: If you do not have a lay off clause in your terms and conditions of employment, there is no need to panic. You must have individual consultation meetings with all impacted employees as you cannot legally change an employee’s terms and conditions of employment without their consent. During the meeting explain the logic and reasoning for wanting to place the employee on furlough leave. Following the meeting send a letter to the employee outlining that you want to place them on furlough and change their employment terms and conditions. You need to seek their agreement for these changes. Ask the employee to reply stating that they agree to the changes. As the majority of employees are working from home this can be done by email. The email accepting these changes should be saved to an employee's personnel file, to avoid any future claims for breach of contract.
13. Can an employee refuse to go on furlough?
A: Technically an employee who does not have a lay off clause in their employment terms and conditions could refuse to go on furlough leave. However, given the current situation, employees are likely to agree to go on furlough, rather than risk being made redundant.
14. If an employee refuses to go on furlough leave what options do I have?
A: In the unlikely event that an employee refuses to go on furlough leave you can either make them redundant or terminate their contract of employment. Please note that if an employee has over two years of continuous service you will need to follow a fair redundancy process. Failure to do this could result in an unfair dismissal claim. That is the last thing you want to be dealing with now, so be careful! If the employee has under two years’ service, you can terminate their employment as long as you pay the relevant notice period or make a payment in lieu.
15. Do employees on furlough leave continue to accrue annual leave?
A: Yes, during furlough leave employees will continue to accrue statutory annual leave. This is due to the contract of employment continuing during the period of furlough. It is also worth noting that any additional annual leave on top of the basic statutory minimum will also continue to accrue, the only exception being if the contract of employment states otherwise.
16. What happens to employees who have been unable to take their statutory annual leave due to the coronavirus lockdown or because they needed to work?
A: Ultimately this comes down to you as the employer. The UK government has just announced temporary legislation that allows employees to carry over up to four week’s paid annual leave over a two-year period. The reasoning for doing this is so that employees who have been directly affected by the coronavirus such as those who have had to self-isolate or key workers who have had to cancel holidays so they can continue working won’t lose out on any accrued statutory annual leave. However, as the employer, you do not have to agree to allow your employees to carry annual leave over. It is advisable to encourage all employees to use their paid annual leave in their current leave year as it is important from an employee wellbeing perspective.
17. Are furloughed employees allowed to take on another job whilst on leave?
A: When the Job Retention Scheme was announced by the Chancellor back in March this was a grey area, however we can now report that employees are allowed to take on another job whilst being on furlough leave. However, when an employee is on furlough they are legally still employed with your organisation. Check your employment contracts as you may have a clause which prevents an employee from working for another organisation whilst being employed by your company. If an employee wants to take on an additional job whilst on furlough leave, they should speak to the HR department.
The Job Retention Scheme Portal
18. When does the Job Retention Scheme portal open?
A:. The online portal to claim for furloughed employees opened on the 20th April 2020. On the first day of the scheme opening the Government had received 67,000 claims within the first half an hour of the portal going live. It is estimated that 9 million employees have been placed on furlough leave.
19. What information will I need to provide the government to claim the grant?
A: You will need to input the following information into the portal to claim the furlough leave payments from the UK Government:
- Your employer PAYE reference number;
- The number of employees being furloughed;
- The National Insurance Numbers for the employees being furloughed;
- The names of the employees who are being furloughed;
- Payroll/works number for the employees being placed on furlough;
- The organisations Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number;
- The claim period (start and end date);
- The amount claimed (remember that the minimum length of furlough is 3 weeks);
- Your company’s bank account number and sort code;
- Your contact name and work telephone number.
20. When will the Job Retention Scheme end and what happens next?
A: The scheme is due to finish at the end of June 2020; you can only claim the grant for the wages of furloughed staff up until then. Depending on the situation the UK government may extend the scheme, however, a further extension has not yet been announced. Once the scheme ends employees will be expected to return to work.
We appreciate that this is a stressful and worrying time for your business and for the employees being placed on furlough leave during this pandemic, and hopefully we’ve been able to answer some of your questions.
The online portal is open now. Submit your claims to ensure you receive the grant as soon as possible.