Update - this article was originally written in June 2020, since when the government’s legislation has now changed. As of 1st July 2021, employers must pay 10 per cent of their furloughed workers’ usual wage, while the government will continue to pay the other 70 per cent.
From 1st August, the employers’ contribution rises to 20 per cent, with the government’s contribution reducing further.
HMRC have recently published a new policy paper which explains the changes to the Coronavirus Job Retention Scheme which apply from 1st July 2021.
With developments moving so quickly, we'll keep updating this blog and promise to share any developments with you as soon as we can.
- What is Coronavirus JRS?
- Who does it apply to?
- When does it apply?
- How employers can use it
- Changing an employee's status
- Paying furloughed workers
- How long will the scheme last?
- Cashflow and grant approval time
- Cutting salaries and subsidies
- Tax, NI and pensions
- Making up the 20%
- Reducing the workforce
- Furlough and annual leave
- Holiday accrual
- Furlough and new starters
Coronavirus JRS Frequently Asked Questions
On Friday 20th March, the government announced a job retention scheme (JRS) to avoid job losses and/or redundancies during COVID-19. The details are currently very high level and therefore we need to approach any action with a level of caution. This document is intended to set out what we do know and what is yet to be advised. Please note that as thee situation is evolving, all point in this article are subject to change. We will do everything we can to keep this post up to date.
What is the Coronavirus Job Retention Scheme?
To avoid job losses and redundancies, the government have agreed - where the employer cannot afford to pay - to fund up to 80% of an employee’s salary up to £2,500 per month - where the employer cannot afford to pay them.
Who does it apply to?
Employees of any type of organisation (e.g. Ltd, PLC, LLC etc).
When does it apply?
Employment costs can be claimed from 1 March 2020 for those employed on or before 28 February 2020.
How can I use it?
You need to designate affected employees as ‘furloughed workers’ and notify your employees of this change.
Changing the status of employees remains subject to existing employment law and depending on the employment contract, may be subject to negotiation.
How do I change an employee’s status?
If you have existing contractual clauses that relate to lay-off, you can invoke that clause. If not, you need to consult your employees for their consent to this change.
What if they don’t agree to the change?
Ultimately options become quite limited for an employee when there is no work available. Currently as we see it, you have three options that you would give to your employees:
- Unpaid leave
You can ask them to select what they would like and use the correct process for what they have chosen.
Now I have made my employees furloughed workers who pays them?
You do. They would remain on payroll and you continue to pay them. The government are working to set up a system where you would submit information to HMRC for reimbursement.
How long will this last for?
The government have said that the scheme will be available initially for 3 months from 1 March 2020 but will be extended if required.
What happens if I cannot afford to pay staff while waiting for the government grant?
Currently there is no guidance on this, and our advice is to contact your financial institution to see what arrangements they have on offer.
I've cut salaries already; would the subsidy cover the difference?
No. This is not a mechanism to boost salaries of employees still working. It is a scheme designed to safeguard jobs and keep employees on payroll, where there is no work to undertake.
Will tax, NI and pensions still be deducted?
Yes - as the situation currently stands.
Can companies make up the balance of the 80% to 100%?
Yes – if you wish to but you are under no obligation to.
How to reduce the workforce as there is not enough work for all?
If you need to choose a proportion of your workforce to furlough then you would need to implement a fair and transparent process to determine who to keep and work.
What happens if an employee has a period of booked annual leave while on a period of furloughed?
You can either defer the period of annual leave or “interrupt” the period of furlough, as long as you have been on this status for a minimum of 3 weeks, take the period of leave and then go back on to furlough status. This is of course, subject to the approval of your employer.
What happens to holiday accrual?
Employees would continue to accrue holidays at their standard entitlement based in the contracts of employment.
I am due to have a new starter join the business in a couple of weeks, can I furlough them as soon as they commence employment if there is no work for them to do?
Unfortunately not, only employees that have been employed on or before 28 February 2020 are eligible to be furloughed.
Do I still work as a furloughed worker?
No, you do not attend work or do any work from home for the Company during this period.
What if I am on sick leave or self-isolating before being a Furloughed Worker?
You will continue to be on sick leave or selfisolating until the end of that current period and will then be become a Furloughed Worker following this. If you become sick or need to selfisolate during the period of being a furloughed worker, normal reporting procedures apply.
What if I am due to start maternity, shared parental, paternity or adoption leave when being a furloughed Worker?
Normal rules apply and you are entitled to claim up to 39 weeks of pay or allowance.
What happens for employees whose pay varies?
Look at the individual’s pay from the month in the previous year, compare against current month and use the higher figure of the two, i.e. for April 2020 salary, use salary from April 2019 and use the higher amount of the two. You can also use the average monthly earnings from the 2019/2020 tax year.
There are still many unknowns about this scheme and this guidance will be updated as new information becomes available.
If you have any questions or need advice please email ForrestHR team or give them a call on 01892 726060.
Author: Nick Hardy