Update to Covid 19 Government Financial Access

The Chancellor has announced a package of measures to help businesses. One of those being the Coronavirus Job Retention Scheme, part of which is the introduction of Furlough Leave. This updated note explains our understanding of the scheme based on the guidance currently available, and details continue to be provided. 

Furlough Leave: What is it and who is entitled?

The Chancellor has announced a package of measures to help businesses. One of those being the Coronavirus Job Retention Scheme, part of which is the introduction of Furlough Leave. This note explains our understanding of the scheme based on the guidance currently available, and details continue to be provided.

What is Furlough Leave?

This is a scheme intended to support employers by alleviating the pressures of continuing to pay employee wages during the Covid19 pandemic. It is intended to avoid employers having to make redundancies, and support individuals furloughed by reason of circumstances as a result of Coronavirus or Coronavirus disease.

The scheme applies to employees who have been placed on a period of leave known as ‘furlough’ leave.

How do we place someone onto Furlough Leave?

In order to take advantage of Furlough Leave, employers must designate employees as furloughed workers.

Employees should be notified and consulted with about the proposals with a view to reaching agreement (in the absence of an express pre-existing contractual right – for which, see more below).

The employers should explain the reasons for Furlough Leave, their understanding of how the leave is intended to operate, and the likely consequences for employees should they refuse.

To claim furlough, the employer and employee must agree in writing that the employee will cease all work, and documents must be retained for 5 years.

Can an employee work whilst on Furlough Leave?

The Government specify in their guidance to employees that in order to qualify for the scheme, they should not undertake work for their employer while furloughed.  Furlough leave must be applied fairly and adherence to the Equality Act provisions is a prerequisite.

Furloughed employees are however, permitted to do training (online or home study) whilst they are furloughed, provided they are not making money for their employer or providing services to their employer.

Furloughed employees may continue to work for another employer.

 How do I /we reclaim salaries for Furloughed status individuals?

Any employer with a UK payroll and a UK bank account will be able to claim, but the employee must have been on your employer’s PAYE payroll before or on 19 March 2020 and notified to HMRC on an RTI submission on or before 19 March 2020.

The scheme is open to and includes full-time employees, part-time employees, employees on agency contracts and employees on flexible zero-hour contracts.

Once a business has designated an employee as a furloughed worker, they will be required to submit information to HMRC through an online portal.

This portal is scheduled to become live on 20 April, with first reimbursements made on 30^th April. However, at this time there are limited details on how it will operate.

How do you process the claim under the COVID -Job Retention Scheme?

HMRC will review the claim and if eligible, pay it via BACS payment to the companies UK bank account. Employers can reclaim, up to 80% of gross wage costs up to a maximum cap of £2,500 per month, plus (not including) the associated employer NICs and minimum auto-enrolment pension contributions on that wage. Contractual commission payments are included. Discretionary commission payments, bonuses are not included.

How do I calculate entitlement?

The employee’s actual salary, as of 19 March 20, should be used to calculate the 80% furlough leave and must be taken in minimum blocks of three weeks to be eligible for funding. There is nothing in the guidance which prohibits rotating furlough leave amongst employees, provided each employee is off for a period of at least three weeks.

SSP due to sick leave or self-isolating overrides being on furlough. Employees are required to supply evidence of any period of sick and /or isolation claims to the Company. Employees may be re-furloughed after illness or return to work if possible.

What else do you need to know?

Furloughed earnings are subject to Income Tax, National Insurance, and Pension contributions (if applicable) in the normal way.

Company Directors can be furloughed. However, they are permitted to attend to statutory duties. Board minutes and resolutions must be kept recording furlough leave of a director. And in any event Furlough leave must be clarified in writing and be retained for 5 years and annual leave continues to accrue whilst the employee is Furloughed.

Can I furlough redundant employees?

If the employee were employed as of 28 February 2020 and on payroll (i.e. notified to HMRC on an RTI submission on or before 28 February) and were made redundant or stopped working for your employer prior to 19 March 2020, the employee can also qualify for the scheme and the employer can re-employ and furlough the employee.

 What if you don’t have an HR team who can help ?

At GreenKite we have put togther a basic Furlough Toolkit for our clients aimed at supporting them with reaching, recommending and recording the decision to put employees on Furlough Leave. This pack is available from [email protected] for £195 plus VAT.

Our Head of Practice & HR Team – Paul Leach Chartered FCIPD an experienced HR & OD Director is already working alongside a number of organisations both large and small helping them to continue operating through COVID 19. We are also able to help manage your process and support you, your business and your people at this unpredictable time at a reduced rate of £120 plus Vat per hour, which we can charge in 15 minutes blocks. Please contact us for further support.

Note: The Treasury issued a Direction (15/4/2020) to HMRC under the powers conferred by the Coronavirus Act 2020. Because of this Direction, several minor amendments have been made to the original scheme.

As at close of business on Friday 17/4/20 HM Treasury announced the coronavirus job retention scheme (furlough) has been extended to end of June 2020

Disclaimer

The information in this document is true to the best of our knowledge. It is based on our understanding and interpretation of the relevant legislation (and guidance) and is made without guarantee on the part of the author. Green Kite Associates Ltd gives no warranties of whatever nature in respect of the completeness of any information, and/or opinions contained in this document.

Green Kite Associates Ltd cannot be held liable for the use of and reliance of the content of this document.