The Coronavirus Job Retention Scheme: latest developments

We have previously commented on both the Government's Coronavirus Job Retention Scheme (CJRS) and package of measures to help the self-employed for those businesses which have lost income due to COVID-19 (coronavirus).

The Government guidance which has now been updated on both 4 and April 2020, adds some clarifications and detail to the original guidance published on 26 March. Key changes or clarifications include the following:

• Eligibility for a grant: employers must confirm in writing to their employee confirming that they have been furloughed. A record of this communication must be kept for five years.
• Redundancy and dismissal after 28 February: Employees on an employer's PAYE payroll on 28 February 2020 who were subsequently made redundant or dismissed for any reason can be re-employed and then furloughed by that employer. Employers will still be able to claim a grant to cover 80% of regular wages, up to a monthly cap of £2,500.
• Furlough and working for another employer: To be eligible for the grant, when on furlough, an employee cannot undertake work for, or on behalf, of the organisation or any linked or associated organisation. This includes providing services or generating revenue. Employees can be put on furlough by one employer and continue to work for another. If they are put on furlough by more than one employer, they will receive separate payments from each employer. If contractually allowed, an employer's employees are permitted to work for another employer whilst it has placed them on furlough.
• Three weeks minimum furlough: Employees placed on furlough must be furloughed for a minimum period of 3 consecutive weeks. When they return to work, they must be taken off furlough. Employees can be furloughed multiple times.
• Furlough payments: will include wages, past overtime, fees and compulsory commission payments. Discretionary bonus (including tips) and commission payments and non-cash payments should be excluded as should benefits provided through salary sacrifice schemes. Employers cannot claim for additional NICs or pension contributions they make because they chose to top up an employee’s salary.

Workers on payroll are covered

The updated guidance makes clear that where workers are paid through PAYE, they can be furloughed and receive support through the CJRS. These are individuals who satisfy the definition of ‘worker’ in s.230(3)(b) Employment Rights Act 1996.

Treatment of employees on family related leave

Normal rules for leave and pay apply to employees on maternity leave, adoption leave, paternity leave or shared parental leave. Employers can claim through the CJRS for enhanced (earnings related) contractual pay for employees who qualify.

Shielding Employees

Employers can claim for furloughed employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home and an employer would otherwise have to make them redundant.

Employees with caring responsibilities

Employees who are unable to work because they have caring responsibilities resulting from coronavirus can be furloughed. For example, employees that need to look after children can be furloughed.

Fixed term contract and apprentices

An employer can furlough the employees on fixed term contracts and choose to renew or extend the contract during the furlough period. Apprentices can be furloughed in the same way as other employees and continue to train. They must be paid at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage as appropriate, for all of the time they spend training, even if this is more than 80% of their normal wages.

Employees on work visas

Employees with certain work visas will not be regarded as breaching their visa conditions if they receive funds under the furlough scheme. Employees on all categories of visa can be furloughed.

Public sector employees

The government expects that the scheme will not be used by many public sector organisations, as the majority of public sector employees are continuing to provide essential public services or contribute to the response to the coronavirus outbreak.

Agency workers

Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through this scheme, including where they are employed by umbrella companies. Furlough should be agreed between the agency, as the deemed employer, and the worker. As with employees, agency workers should perform no work for, through, or on behalf of the agency that has furloughed them while they are furloughed, including for the agency’s clients. Where an agency supplies clients with workers who are employed by an umbrella company that operates the PAYE, it will be for the umbrella company and the worker to agree whether to furlough the worker or not.

Office holders

Those remunerated by PAYE can be furloughed. Where an individual is a company director or member of a Limited Liability Partnership (LLP), the furlough arrangements should be adopted formally as a decision of the company or LLP.

Company directors

As office holders, salaried company directors are eligible to be furloughed. If they need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would be judged reasonably necessary for the purposes. They should not do work of a kind they would carry out in normal circumstances to generate  commercial revenue or provides services to or on behalf of their company. This also applies to salaried individuals who are directors of their own personal service company (PSC).

Administrators

Where a company is being taken under the management of an administrator, the administrator will be able to access the CJRS. However, the Government would expect an administrator would only access the scheme if there is a reasonable likelihood of rehiring the workers. For instance, this could be as a result of an administration and pursuit of a sale of the business.

Employee transfers under TUPE and on a change in ownership

This position has now been clarified in the amended Guidance. A new employer is eligible to claim under the CJRS in respect of the employees of a previous business transferred after 28th February 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership.

Treatment of pension contributions

Employers' automatic enrolment pension obligations will continue in relation to furloughed employees.  However, the updated Government guidance (last updated 9 April)  says that under the CJRS employers can also claim up to minimum automatic enrolment employer pension contributions based on the subsidised furlough wages under the CJRS. This is in addition to the amount they can claim in respect of those wages.

Whilst this is certainly good news for employers, there may still be some pension contributions for furloughed employees which cannot be reclaimed (for example, if an employer has contractually agreed (say, through a salary sacrifice arrangement or matching scheme) to pay pension contributions which are higher than the automatic enrolment minimum then they will be unable to reclaim the additional amount under the CJRS.  It might be possible as part of the furlough agreement with employees to amend the pension contribution but employers should seek advice if they wish to do this.

According to the Pensions Regulator's guidance issued on 9 April 2020 and the updated Government guidance of the same date, employers who do not calculate their automatic enrolment contributions on the basis of qualifying earnings (e.g. they use basic salary instead), will have to calculate 3% of the qualifying earnings for the purposes of claiming the grant from the CJRS in addition to their normal pension contribution payroll calculations. This is because minimum auto enrolment contributions are calculated differently when not using qualifying earnings. Unless the policy changes, there will be a gap for some employers between their actual minimum employer auto enrolment contribution and the employer pension that they can claim from the CJRS (e.g. the minimum employer contribution on £2,500 calculated on a qualifying earnings basis from 6 April is c.£59 but the minimum calculated on a basic salary basis is £100).

We recommend checking what your automatic enrolment pension contributions are (as they vary depending on which calculation method you use for automatic enrolment) and what your current contractual minimum contributions are in light of the reduced pay so that you can fully assess the costs involved.

Sickness absence and furlough

If an employee is on sick leave or self-isolating as a result of Coronavirus, they’ll be able to get Statutory Sick Pay, subject to other eligibility conditions applying.

Employers are entitled to furlough employees who are off on short or long-term sick leave. It is up to employers to decide whether to furlough these employees. They can claim back from both the CJRS and the SSP rebate scheme for the same employee but not for the same period of time. When an employee is on furlough, they can only reclaim expenditure through the CJRS.

If an employee becomes sick while furloughed they must be paid at least Statutory Sick Pay. It is up to employers to decide whether to move these employees onto Statutory Sick Pay or to keep them on furlough, at their furloughed rate.

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