19 Apr UPDATED – Coronavirus briefing note for employers
Employment Solicitor Karen Coleman shares her updates to the previous Covid-19 employment briefing and includes subjects previously covered but also covers changes and developments since that time. This briefing replaces all previous briefings and is correct as of 8pm on Sunday 19 April 2020.
I am continuing to receive lots of enquiries, particularly about Furlough leave. This document provides general information and I will continue to respond to specific enquiries as they arise.
Some answers to a few questions are still unclear, so whilst I will attempt to answer the questions based on the latest guidance issued, existing employment law and common sense, unfortunately the advice supplied cannot be definitive and is subject to further legislation, guidance or other information as it becomes available.
The Coronavirus Job Retention Scheme (CJRS) – Furloughed employees
From the initial brief announcement on Friday 20 March 2020 the government issued updated guidance on 26 March, 4 April 2020 and since my last briefing, on 15 April and 17 April 2020 and links to the latest guidance for employees and employers are:
Separate new guidance was issued on Friday to assist employers to calculate what they can claim under the scheme, including giving examples. and this is at https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme. As of tomorrow, 20 April 2020, this guidance should include a link to an online calculator which employers can use to calculate their own claim. 2
The portal to claim is also expected to go live tomorrow, Monday 20 April 2020, or if not, sometime this week. HMRC have said that would expect to be paying out the first payments on 30 April 2020 but teething problems I would think are inevitable.
Also, this week the legal basis of the scheme has been brought in via a Treasury Direction issued under the Coronavirus Act 2020. This counts as legislation and it is this Treasury Direction which HMRC must abide by, rather than the guidance. There are unfortunately a few inconsistencies between the two which I highlight below.
The key points as updated are set out below.
Employer’s eligible for the scheme:
- This is open to all employers save for public sector employers or non- public sector employees who receive much of their funding from public sources- this caveat however is only included in the guidance and not the Treasury Direction. This does appear to leave such employers with the possibility of furloughing staff, but it may have implications in other ways, e.g. risk future funding and I would recommend such employers be cautious and consider all possible risks before deciding whether to furlough staff.
- The intention of the scheme was initially to help pay salary for the employees who would otherwise be made redundant or laid off without pay. The Treasury Direction confirms that it applies to any employee has been furloughed “by reason of circumstances as a result of coronavirus” so employees absent through “shielding” or looking after childcare are eligible to be furloughed.
- The latest guidance reinforces that HMRC will have the right to retrospectively audit all aspects of the scheme with scope to claw back fraudulent or erroneous claims. Indeed, HMRC has put in place an online portal for employees and the public to report suspected fraud of the scheme. Criminal prosecutions for fraud could result.
- The scheme covers the following individuals, provided that they were on the employers’ PAYE payroll on 19 March 2020 and, the real sting in the tail, provided the employer had submitted real time information payroll data by 19 March 2020, regardless of their contract type: full-time employees; part-time employees; employees on agency contracts paid PAYE by their agency; employees on flexible or zero-hour contracts.
- All employees who were made redundant or left employment since 28 February 2020 can qualify if they are re-engaged by their former employer.
- Employees who have started since 19 March 2020 or who started earlier, even before 28 February, but their employer had not submitted a real time payment submission which included them (which will be the case for employers who submit a monthly payroll after 19th of the month), will not be covered. Whilst this is principally an anti-fraud protection, it does also prejudice employees who have recently moved jobs.
- Employees on unpaid leave cannot be furloughed, unless that unpaid leave started after 28 February 2020.
- Employees on Statutory Sick Pay, which should be used for short term sickness absence (e.g. 2/3 weeks) cannot be furloughed but the employer can now agree to furlough those on longer term sick or keep them on SSP/ contractual sick pay. There are a number of different factors to consider here and I would encourage employers to take advice before deciding whether to furlough such an employee.
- Employees who are “shielding” can be furloughed and the guidance has also been changed to include that employees who need to stay at home with someone who is “shielding” can also be furloughed. On 16 April 2020 a change to the SSP regulations was passed which also now makes employees who are officially “shielding” entitled to SSP, although it is not clear whether they cover any period prior to 16 April 2020. Most employers may have already chosen to furlough such employees but for those employers who can’t furlough, e.g. public sector employers, then “shielding” employees will at least be entitled to SSP.
- It has also now been confirmed that employees who are unable to work because they have caring responsibilities can also be furloughed.
- If you have employees currently on unpaid leave due to either of these reasons, they could now be asked to sign a furlough leave agreement backdating furlough until the date when they first went off.
- An employer who has picked up employees under either the TUPE (Transfer of Undertaking (Protection of Employment) Regulations) 2006 or PAYE business succession rules since 19 March 2020, can still furlough such employees and claim under the CJRS. This date has changed from 28 February 2020 and it now appears that employers who took transfers of staff between 28 February 2020 and 19 March 2020, will not be able to claim under the CJRS.
What is furlough and how is it implemented?
- The term “furlough” has no designated meaning. It is used in the US but has not been defined and is alien here to employment law in the UK.
- Both the guidance and the Treasure Direction state that the furloughed employee must NOT undertake any work for their employer.
- The employer will not, therefore, be able to seek reimbursement in respect of wages costs for employees who are still working on reduced hours.
- If you have the contractual right to remove work, i.e. lay off or short time in the employment contract, then the guidance did, and still does, say that you can notify employees that they are now designated as furloughed. The Treasury Direction however says that the employer and employee must have agreed in writing that the employee will cease all work. Whilst I have seen barristers’ commentary that if HMRC refused a claim because this had not been agreed in writing, an employer would be able to apply for judicial review of the refusal as it had acted on the government’s guidance at the time, I would rather clients did not have to take this risk. I will now be advising clients to get the employee to sign the furlough letter which was issued to them at the bottom with a sentence which will confirm that the employee agrees to do no work. If you are a client and believe this applies to you, please do contact me and I will be checking this with all my clients over the next couple of weeks.
- If you have no such contractual provision (all of my retainer clients and those for who I have prepared your contracts of employment will have), then the employee will need to agree also to the reduction in wages to 80%, and this may require some degree of consultation. Essentially, if the choice is be made redundant (with or without redundancy money), go home on no pay but with a claim against the employer for unpaid wages, or stay at home and get 80% of salary, this is unlikely to be a difficult decision as most employees will want to be furloughed. If more than 20 employees are involved and agreement to the change is required, then the collective consultation regulations which require employee representatives to be consulted (and elected if none exist) could be argued to apply and further advice should be sought.
- Critically, it is the employer who must designate the employee a furloughed worker and the employee cannot choose to be.
- Normal employment law does apply in respect of the selection of furloughed employees, in particular equality and discrimination laws. Please be comfortable that you can justify how you have decided which employees to furlough and, also of relevance now, to return from furlough, and which not, for non-discriminatory reasons. If you think it possible that any of the affected employees will object to be putting on furlough or returning or indeed, for anyone not chosen, that they will argue that they should be chosen due to a protected characteristic e.g. medical condition, then seek advice as consideration may need to be given to either seeking volunteers and/or doing a selection matrix. The obligation to make reasonable adjustments for disabled employees should also be considered and when furloughing staff, this could be argued to include selecting those with disabilities which make them particularly vulnerable to Covid-19.
- A common question is whether employees can be rotated on furlough leave. The latest guidance has confirmed this is possible, subject to each rotation being for the minimum 3-week period.
What earnings does the scheme cover?
As noted above, separate new guidance was issued on Friday to assist employers to calculate what they can claim under the scheme, including giving examples. and this is at https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme. As of tomorrow, 20 April 2020, this guidance should include a link to an online calculator which employers can use to calculate their own claim.
- The guidance provides HMRC will reimburse 80% of earnings and any regular payments you are obliged to make (see further below), up to £2,500 per employee per month plus employers NI contribution and minimum employer auto-enrolment contribution on that reduced amount.
- The 80% will be calculated for salaried employees based on their salary in February 2020.
- For those with irregular earnings employed for a full 12 months prior to the claim, the employer can claim the higher of the same month’s earning from the previous year or an average of monthly earnings from the 2019-20 tax year.
- If the employee has been employed for less than a year, the employer can claim for an average of their monthly earnings since they started work.
- If the employee started employment in February 2020, their earnings so far should be pro-rated.
- Employees can NOT be paid less than the 80%. Employers may choose to top up to 100%, but are not required to do so, and if you have a requirement for some employees to continue working, my recommendation would be to keep the differential.
- The CJRS period has been extended this week until 30 June 2020 and employees should not be advised that they will be furloughed beyond this period, if and until the government extends the scheme. If you need to extend the furlough period for any staff, then if your original letter or agreement allowed for this, they can be notified of the extension and I would recommend that the employees be asked to sign to confirm the final length of their furlough period when they return. If you require employees back sooner than the end date of the scheme, then any letters or agreements prepared by me will have included the ability to bring them back earlier and seek advice if you anticipate any difficulties with bringing employees back early and be aware that if you bring any employee back within 3 weeks, you will not be able to claim for them under the scheme .
- The 80% can reduce a low paid employee below the National Minimum Wage (NMW) but for any hours when such an employee is undertaking training, they must be paid at least the NMW for those hours, calculated at the increased rates applicable from 1 April 2020.
- Regular payments you are obliged to make can be included in the 80% calculation e.g. past overtime, non- discretionary overtime, non-discretionary bonus and non- discretionary commission but discretionary commission, bonuses and other contractual benefits e.g. car, insurance cannot be included in the 80% calculation.
- Conditional payments can also not be included which arguably would include a furlough payment which has been made conditional on the employer receiving the money from HMRC.
- The entirety of the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money. No part of the grant can be netted off to pay for the provision of other benefits or a salary sacrifice scheme.
- Both Student Loan and Apprenticeship Levy payments must be paid and cannot be reclaimed.
- The latest employer guidance has confirmed that redundancy payments will not be covered by the scheme which indicates that an employer cannot claim for weeks during which an employee under notice of redundancy is working their notice. There seems however no reason why redundancy consultation at least cannot be started whilst employees are on furlough.
How does an employer make a claim under the scheme?
- HMRC will be reimbursing the employer via grants which need to be applied for and as noted above, HMRC have advised that they expect the system to operational from tomorrow 20 April 2020. Whilst the first payments are advised by HMRC to be paid out from 30 January, they have said they would then expect claims to be paid within 4-6 working days. HMRC told a select committee this week that they believe the system will be able to cope with high demand, having tested it with 450,000 claims being made an hour. Issues and delays however are still widely expected so this may still present cash flow issues.
- Employers must be registered with HMRC’s existing PAYE online scheme and if not already registered. I have seen guidance that this should take @10 days to register. https://www.gov.uk/paye-online
- A claim must relate to a minimum 3- week furlough period, which can start from whenever any employees are eligible to be treated as furloughed (i.e. the date from when they last worked) after 1 March 2020 and another reminder that the scheme is currently due to end on 30 June 2020.
- Employers access the scheme through the online portal, providing details of the affected furloughed employees and information about their earnings and any other information required, such as the employee’s NI number.
- To claim for 100 or less employees, the information the employer will need to submit will include: the employer’s PAYE reference number, the number of employees being furloughed and their National Insurance Numbers, the claim period (start and end date), the amount claimed, the employer’s bank account number and sort code (UK bank account), contact phone number.
- Employers can only submit one claim at least every three weeks, as this is the minimum length an employee can be furloughed for. Reimbursement will be paid via BACS payment to the nominated bank account.
- The claim can only be made at the point at which the employer runs payroll or up to 14 days in advance of an imminent payroll because actual payroll amounts need to be submitted and must be made on or before the date the employee is paid.
- I have asked Emma Crowe, of CE Back Office, a specialist payroll bureau whether the furlough payments need to be shown differently on a payslip and as of Wednesday 15 April 2020, she replied: “Where possible we are splitting out – but only for our record keeping and reporting rather than legal requirement. The breakdown doesn’t currently get reported on RTI so HMRC would only see if they are doing an inspection and there is no requirement to split on the payslip (that I am aware of!!!). We are calling the payments furloughed pay (80% element), uplift pay (20% uplift) and uplift holiday pay (for bank holiday /holiday uplift payments). We’ve decided to split out the holiday separately to assist with transparency for employees.” I have not spoken with her since the additional guidance came out Friday night. Where you have your own payroll agent, they will be able to advise how they are dealing with it.
- Some lawyers are also including a right for the employer to defer making payment to the employee until it is received from the CJRS. I don’t consider this good HR practice but for businesses who can’t or who are concerned they may not meet the April payroll without it, it could be included and see if the employee/s agree to it.
- The system is open to abuse so record keeping is essential. The latest guidance has confirmed that each individual furlough letter/agreement should be kept for a minimum of 5-years for HMRC audit purposes.
What happens with holiday during furlough?
- Employees will continue to accrue holiday during furlough leave. The employer could ask employees to agree to limit their accrual to the minimum 5.6 weeks statutory holiday during the furlough period within the furlough agreement.
- The additional guidance issued on Friday has finally confirmed that bank holidays and pre-booked leave can be taken during a furlough period, but as I expected, the employer will need to top up the employee’s payment for such days to 100% of normal holiday pay (and for the avoidance of doubt, the 20% top up will not be reclaimable under the CJRS). If employers are unable to do this or would rather not do it, then the unpaid holidays days will be added to their entitlement for the remaining holiday year after the furlough period. I remain however not confident that employers will be able to force employees to take holding during the furlough period as this is not addressed in the guidance. This may however still change as the guidance includes as a foot note to the holiday section: “During this unprecedented time, we are keeping the policy on holiday pay during furlough under review.”
- New regulations have been brought in which allow up to 4 weeks statutory holiday to be carried over into 2021/2022.
- Directors of personal service companies may claim under the scheme for 80% of PAYE earnings as of February 2020 but only provided they do no work for their company beyond complying with their statutory duties as a director which the Treasury Direction details as work to fulfil a duty or other obligation arising from an Act of Parliament relating to the filing of company’s account or provision of other information relating to the administration of the company. This is a very restrictive interpretation of statutory duties.
- If an employee had 2 or more jobs prior to 28 February 2020, then each employer could claim under the scheme.
- The guidance has confirmed that employees may work elsewhere during this period and indeed I am aware of the local government writing to employers to ask them to encourage furloughed employees to volunteer or assist with their Covid-19 response effort. My latest agreement includes that an employee should seek permission from their employer prior to doing this to try and minimise the risk of an employee competing in some way but there is unlikely to be any reason why non-competing work need be prohibited provided the employee is able to return to the normal work when required by the employer.
- An employee may undertake volunteer work provided it is not for the employer or otherwise circumventing the requirements of furlough leave which is likely to be considered fraud.
- An employee may also undertake training provided it does not include the provision of services or generating revenue for the employer. The employee’s pay for such hours of training must be topped up to at least the National Minimum Wage for such hours (based on the rate applicable at the time the training was undertaken, which have increased from 1 April 2020) and that element of top-up will not be reclaimable under the scheme.
Statutory sick pay
The current position on this is as follows:
- The Government has made legislation to deal with the issue – The Health Protection (Coronavirus) Regulations 2020 which confirms that those who self-isolate pursuant to Public Health Guidance (see https://www.gov.uk/government/publications/covid-19-stay-at-home-guidance/stay-at-home-guidance-for-households-with-possible-coronavirus-covid-19-infection which effectively requires people with symptoms to self-isolate for 7 days and for those living with someone with symptoms, for 14 days) to Statutory Sick Pay (SSP).
- SSP for coronavirus will be from day 1 and small and medium businesses (less than 250 staff) will be reimbursed for the first 14 days SSP The regulations to introduce the former are now in and they apply retrospectively to absence from 13 March 2020 whilst regulations for the latter are still awaited but expected soon.
- The note required to get SSP will be given by NHS 111 and not just doctors. Employees can self -certify for the first 7 days and for any period after then, they can now get a note online from NHS 111 https://111.nhs.uk/covid-19 to cover them after this time.
- If someone is “shielding” for 12 weeks in line with a letter from their GP or hospital clinician, as noted above, regulations were passed on 16 April 2020 to entitle those “shielding” to SSP. As it is not clear whether these are retrospective, previous time off will either be unpaid, or the employer is free to elect to cover such absence under its company sick pay scheme, or employers eligible to claim under the CJRS may furlough such employees. If they have already been on unpaid leave, such employers could now ask them to agree to go on furlough and back date it to when they were first instructed to shield.
- If they live with someone who is shielding, then they are not automatically entitled to be off work. They are not required to adopt these protective shielding measures for themselves. They should do what they can to support the vulnerable in shielding and they should stringently follow guidance on social distancing, reducing their contact outside the home. This means they should still be at work unless they get symptoms and does not entitle them to stay at home. However, the latest guidance confirms that if they need to stay at home with someone who is shielding, an employer could still agree to furlough them. This could however result in other employees coming forward asking to be furloughed and there are associated risks of discrimination and/or arguments of the breach of the duty of trust and confidence from disgruntled employees. You should take legal advice to minimise any risk to your business in that regard.
- Everyone is supposed to be following the social distancing guidelines wherever possible, including at work places however work places are currently allowed to remain open, even if they are not an essential business, but employees should not be required to attend work where they are able to work from home.
- Any employee who chooses to not come to work as they are concerned about the situation but who is not required to self-isolate under the Public Health guidance, is not entitled to SSP. In light of the government guidance to stay at home however, it is likely now to be unfair to discipline or dismiss someone who refuses to come into work unless they are in an essential job or role. The time off would therefore become Unpaid Leave.
- NB: not all employees are entitled to SSP and the same criteria apply as before to be eligible.
Many employers now have this in place. If you already had an existing home working policy, then this can be issued to employees not previously home-working. If you did not have one, then it may be unlikely that you have had a chance to implement one but as the situation calms down, consideration should be given to implementing one.
Issues to consider include:
- Data protection
- Reporting requirements (to supervisory staff)
- Hours of work
- Rest breaks
- Insurance provisions
- Employers’ rights in terms of agreed terms to enter the home to inspect company property, carry out Health and Safety checks and all other reasonable checks
- An agreement on returning company property installed in employees’ homes.
In simple terms, all reasonable checks that would be necessary in the normal place of work. See further the ACAS Working from Home Guidance.
If you require a home working agreement, I would be happy to supply a sample agreement without charge.
School closures and key workers
The blanket school closure has now been in place for 4 weeks. All children are to remain at home unless their parent is a key worker. The list of key workers can be found here.
If an employee is looking after their children due to school closures and cannot come in or is not really working from home, then this is unpaid time off or an employer eligible under the CJRS can agree to furlough them. If they have already been on unpaid leave, the employer could now agree with the employee that they go on furlough and back date it to when they were first off after the schools shut.
If employees are working from home and their children are off school, managers may decide to have a frank discussion from them as to what actual work can be done from home. Are they really working 8-hours during the day, as parents have a timetable of learning from school and now have a teaching role? Realistically, the ability to work full time hours may also depend on the age of the children and the supervision required. Are some employees now, in reality, working a 2/3-day week and should their pay be reduced accordingly if there is a short-time working clause within their contract?
Must I close my business
Many hospitality and non-essential shops are now under orders to close so have now had the choice removed. Currently, the advice is that if an employee can work from home they should.
If they cannot work from home, then essential travel to work is allowed. The work itself does not currently have to be essential. I anticipate, however, that we may see further measures soon with all non-essential businesses and building sites etc being made to close their doors (as has happened with Scottish building sites). This may require further planning and home working measures.
All employers remaining open or looking to return to work should ensure that they have undertaken the appropriate risk assessments.
On 26 March 2020, the Coronavirus Act was introduced which includes the right for employees to take unpaid emergency volunteering leave. This is intended to allow workers to leave their main job and volunteer temporarily in the NHS or social care sector. Certain authorities (e.g. NHS Board) can certify an individual as an emergency volunteer and that person will then be able to take leave if he or she gives her employer 3 working days’ notice and produces the certificate.
The period of leave is unpaid and must be either two, three or four weeks long, and must be specified in the certificate. There is no provision for employers to refuse leave. Workers can take one period of leave in each “volunteering period”. Initially, there will be one 16-week volunteering period, but subsequent volunteering periods can be set by the Secretary of State. 15
Despite the leave being unpaid:
- An employee on emergency volunteering leave will be entitled to the benefit of all of the terms and conditions of employment (except remuneration) that would have applied if the employee had not been absent
- The employee will be entitled to return from leave to the job in which he or she was employed before the absence on no less favourable terms and conditions.
Other measures for businesses/individuals
The Chancellor has also announced other measures for businesses such as deferral of July interim tax payment for the self-employed to January and deferring any VAT payments. Other measures such as mortgage payment holidays for individuals and business rate relief for certain businesses have also been announced. These are however outside of employment law so not covered here but the gov.uk site has various information and is being updated daily.
Want to know more?
Employment Solicitor Karen Coleman is an advocate of Team Leek and is happy to help with the employment law questions that you may have. Get in touch on 01782 703052, drop her an email or visit her website www.colemanHRlaw.co.uk.
Disclaimer: This briefing note does not constitute legal advice and employers are encouraged to take specific legal advice on the scenario they face. This update is a statement of the current position as at the time it is written. It may, and is likely to, change following further developments and guidance issued by the government during the course of this current Covid-19 pandemic.