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Last Update: 20th April 2020
The information provided on this page is for guidance purposes only and you are advised to seek professional advice. The situation with the Coronavirus is constantly changing and you should be aware of this when managing staff within your business.
If you need any assistance with any of the issues raised in this document, please email us using [email protected]
Please be aware that a fee may be charged if you are not a DOHR retained client.
In everything you are having to do at the moment, please hold these key principles in your mind:
We are working in unprecedented times. Just like with all employment law, the Government are writing legislation and giving some clarity, but there is still a lot open to interreptation.
As advisors, whether HR, legal or financial, we can only interpret these new laws based on our experiences of the past and how Employment Tribunals MIGHT behave in the event of a legal challenge against an employer.
There is no case law.
There may be similar cases, but nothing will be based on the new legislation as it is NEW.
We have been advised that the HMRC will be carrying out checks to ensure that any money claimed is not claimed fraudulently. Examples where this may apply include:
- company Directors furloughing themselves and continuing to work
- companies claiming 80% of salaries for staff while they continue to work
What is a lay-off?
An employee is ‘laid off’ during a particular week if the employer is unable to provide any work for them for that week and as a result the employee is not paid.
What is short-time working?
An employee is considered to be on ‘short time working’ for a week where they work for some of the week but are laid off for the remainder of the week. In this instance, they will be paid for the hours they have worked.
What is Furlough Leave?
Furlough Leave is a period of unpaid absence from the business which is usually requested by the employer (rather than a sabbatical which is requested by the employee).
What is Redundancy?
A person is redundant when their role is redundant and therefore their employment is terminated by the company. This may be where a company stops providding a service or where there is not enough work.
Furlough Leave and the Coronavirus Job Retention Scheme
What is Furlough Leave?
This is a term not generally known in the UK before mid March 2020. More commonly used in the US, it is generally used to describe a period of unpaid absence from a role.
What is the Coronavirus Job Retention Scheme?
The Coronavirus Job Retention Scheme (JRS) is a Government initiative introduced in March 2020 to avoid employers making their staff redundant.
Why is Furlough Leave suddenly being used here in the UK?
On Friday 20th March, UK Chancellor Rishi Sunak announced that the British Government, via HMRC, would introduce a Job Retention scheme and would provide 80% of salaries up to £2500 for staff who are designated as ‘furloughed workers’.
Can I furlough some staff and not others?
Who is eligible for payment under the JRS?
- Employees must have been on your payroll on or before 19th March
- HMRC must have been notified (via RTI) on or before 19th March that the employee worked for you.
- Full time, part time, term time only and zero hours employees
- Company Directors and Office Holders
- Must still be employed by your company and on your payroll
How do I calculate pay for zero hour employees?
For employees on zero hours contracts with variable pay, as long as they are paid through PAYE and were employed at 28th February, they will be entitled to payment under the Job Retention Scheme.
Because they receive variable pay, you use the average salary rule and pay the higher of:
- 80% of the same period last year OR
- 80% of average of last 12 months OR
- 80% of average earnings since commencing employment with you (if not employed for 12 months).
You process the payments in accordance with the above and then claim it back from the Government. You can then also claim for employers tax, NI and pension contributions.
Can I withhold payroll until I have been paid by the Goverment?
You should pay employees when they expect to be paid otherwise you are in breach of contract and expose yourself to an illegal deduction of wages claim.
If your employees agrees in writing that they will wait until you have been paid by the Government, then you can withhold the payment, but this is not ideal and employees should not be forced to sign a change to their employment contract allowing you to pay them late.
If you do not have enough money to pay your employees, it is essential that you take advice from your accountant. There is money available from the Government to support companies ahead of the JRS monies being paid.
Can I just tell staff they are furloughed?
No, this is a change to their contract of employment and as such, must be done with their agreement. You should have a discussion and then confirm that discussion in a written letter. The employee should sign the letter accepting the furlough leave and return a copy of the letter to you for your records.
You need to keep all evidence of your Furlough Leave arrangements and JRS claims and payments for 5 years.
How do I designate someone as a ‘furloughed worker’?
HMRC have set up a new online portal to enable employers to submit the required information. This came online on 20th April with payments expected to take 6 working days.
If I made someone redundant in March, can I now furlough them instead?
If they were employed at 28th February 2020 and you rehired them in March, you can now furlough them.
Will HMRC pay this money to our employees?
No, this is a system of reimbursement. HMRC have no way of paying employees, but will be setting up ways to reimburse employers.
Do I still make statutory deductions for furloughed employees?
Yes, the money being provided is being classed as wages and therefore is subject to tax, NI and other deductions in the normal way.
If I reduce the working hours of my staff, can we still claim the payments for the balance of their time?
No, if an employee is still working, even if it is ‘short-time’ working, they are not entitled to the 80% payment. Only employees who are not working (this is defined as providing services or generating revenue for or on behalf of your organisation) will be covered by the Coronavirus Job Retention Scheme.
Can an employee on sick leave be furloughed?
No, once they are fit to return to work, you can furlough them.
While they are off sick, they should be paid subject to their contract of employment or under the sick pay provisions made as a result of Covid-19.
Can an employee who is shielding on Public Health England advise be furloughed?
Yes, someone who has been identified and told they must shield for 12 weeks in line with professional advise can be placed on Furlough Leave.
If my employee has another job can they be furloughed twice?
Can a furloughed employee work elsewhere?
If they were a part time employee for you and take another job i.e. in a supermarket, at times when they would not have been working for you, this is acceptable.
If the employee was full time and is now furloughed and in receipt of Government payments under the JRS, they are allowed to take another job as long as their contract of employment with you permits it OR you waive the restriction. If you do this, it must be done in writing and you need to explain any criteria you are setting around it i.e. return to work when furlough ends.
Can an employee on maternity leave be furloughed?
The JRS is designed to support people who would otherwise be made redundant. There is a lot of protection from redundancy for employees who are on maternity leave and therefore most employers do not make maternity leave employees redundant. On this basis the JRS payment would not be available for them as you are not saving their job by furloughing them and they are already in receipt of Government funds.
You would need to wait for their maternity leave to finish before deciding how best to handle their employment.
However, if you have an enhanced maternity pay scheme in place and top up the Statutory Maternity Pay, you can furlough the employee and claim the 80% of your Company Maternity Pay Scheme.
I am a Director of my business, can 80% of my salary be paid?
At the current time, it appears that only pay via PAYE will be covered by the JRS. Therefore, if you take a salary through PAYE, that portion of your income can be reclaimed, but only if you are a Furloughed employee i.e. not doing ANY work. Dividends and fees are not covered by the JRS.
As a Director, you are still required to undertake your statutory duties, but no work which is considered to be providing a service or generating revenue for or on behalf of your organisation may be carried out.
Is the Coronavirus Job Retention Scheme available to self-employed people?
On 26th March, Chancellor Rishi Sunak announced a scheme for self employed people which is very similar to the Coronavirus Job Retention Scheme. (see below)
Our business is still open, but an employee is furloughed due to childcare issues. We believe her partner has been furloughed and can look after the child, can we ask her?
If she has been furloughed for three weeks, then in effect you need to take a decision whether to furlough her for longer.
On this basis, I would drop her an email when she is coming up to the end of her 3 week initial furlough period and ask her to confirm her availability for work as you are able to provide a safe working environment in line with Government legislation.
Can I insist my employees work from home?
The Government advice is: If you can work from home, you must do so. On this basis, as long as there are no practical reasons preventing an employee from working from home, yes you can insist that an employee works from home.
Can my employee refuse to work from home?
Yes, there may be circumstances under which an employee refuses to work from home if they believe it is not practical for them to do so. This might include who else is in the house or not having adequate space to work safely from home.
In this instance, you can furlough them or enable them to work safely from your workplace.
Do my employees need to do anything before working from home?
The three main things that your employees need to do are to:
- sign a letter confirming that they are willing and able to work from home for a set period of time as a variation to their contractual terms
- set themselves up with a safe and adequate working environment to enable them to carry out the duties you require of them
- carry out a risk assessment of their working environment and return it to you as soon as possible
What are my obligations to home workers?
As an employer, you still have a duty of care towards your employees and therefore you must ensure the following:
- Employees understand what is expected of them and when
- They have a safe and adequate environment in which to work
- They are provided with any equipment or resources which they require to carry out their role (where possible and practical for you to do so).
- You have checked (via their risk assessment) that they are able to work safely from home
- You stay in regular contact with staff and have sufficient communication and supervision tools in place
- The company insurance covers them as employees while they are working from home and provides cover for company equipment they are using when off your premises
Can I furlough a new starter?
Yes, but you can’t pay them under the Coronavirus Job Retention Scheme, so anyone starting in your business after 19th March can be on unpaid leave, accruing service and annual leave entitlement, but can’t be paid unless your business pays them.
I have an employee who started on 10th March, but I only told HMRC when I paid them at the end of March, can I claim under the JRS for them?
No, only employees who HMRC knew about on or prior to 19th March can be claimed for under the JRS.
I have someone due to commence employment, can I withdraw our offer?
If you withdraw an offer of employment, you will be in breach of contract.
If you do withdraw the offer, we suggest you serve and pay notice, inline with the contract of employment.
I have someone due to commence employment, can I postpone their start date?
This is probably the most sensible thing to do, but you need to have a proper conversation and agree the timescales and next steps. Confim your agreement in writing.
If I made someone redundant in February, do I have to take them back?
If you made someone redundant prior to 28th February, they will not be eligible for payment under the JRS and therefore you should not take them back into employment in order to furlough them.
If I made someone redundant in March, do I have to take them back?
If you made them redundant for reasons completely separate to Covid-19 and have a strong business case to support this, then you probably don’t need to take them back.
If you made them redundant as a result of Covid-19, then there is a strong possibility you do need to take them back. We do not yet know how the Employment Tribunals are going to view employers actions during this period and therefore you could be exposing your business to the risk of a claim.
When making someone redundant, you are supposed to have a meaningful consultation and look for ways to avoid redundancy. If you have made someone redundant without utilising the JRS money from the Government, it is possible that this will be interpreted as not having taken all reasonable steps to avoid redundancy and therefore the redundancy may be automatically unfair.
If I made someone redundant (or they stopped working for me) in March, can I take them back and furlough them?
If I re-employ someone, do they have continuity of service?
The choice appears to be yours. We advise re-employing someone without continuity of service as they do not accrue the same rights as someone with continuity of service. i.e. if you do need to make someone redundant, they will not be entitled to the same notice or redundancy pay as they might otherwise have been. Where you are re-employing someone without continuity of service, you need an actual break in employment of at least one week.
In each individual case, you should take advice as your contracts of employment or company policies may require you to do something different.
If I need to make someone redundant the longer Covid-19 goes on, can I?
The Government have introduced a scheme specifically to prevent redundancies at this time.
If you are making people redundant as a way of safeguarding the long term future of your business, this may be seen to be automatically unfair.
As above, there is a legal obligation on you to consult with employees before making them redundant and to take all possible steps to avoid redundancy. If you have a way of avoiding redundancies, i.e. the JRS, you are expected to utilise it.
We don’t know what claims employees may or may not be able to bring against employers who fail to make use of the JRS as a way of avoiding redundancies. You will need to be able to demonstrate that you have taken all reasonable steps to avoid redundancy and this may include claims for Government grants etc.
If someone resigned, do I have to allow them to rescind their resignation?
There is no obligation on you to allow them to rescind their resignation. If they resigned and you agreed a leave date, you are within your rights to insist that they continue to leave.
If someone resigned, can I allow them to rescind their resignation?
As long as they were still on your payroll on 28th February AND have not worked for anyone else since (as their main employment), you can allow them to rescind their resignation and furlough them. In this instance you can claim the 80% pay under the JRS.
There are however some warnings:
- If they left once (or were going to leave), they are probably likely to want to leave again
- You may be stuck with them if they can’t get another job once this is over
- They will continue to accrue annual leave and service rights
- They are an employee just like all your other employees
- If you need to make them redundant, you will need to pay notice and redundancy pay, which you wouldn’t do as they had resigned
Do employees continue to accrue annual leave?
We provide annual leave above the statutory minimum, can we remove this so that it does not accrue?
As this is a contractual entitlement, you can seek to amend the terms of your contract, but you can not insist on it. To do so, runs the risk of a breach of contract claim or a constructive dismissal claim (if the employee has more than 2 years service).
Can employees take annual leave while furloughed?
Can I insist employees take their annual leave while furloughed?
Legally, an employer can insist that an employee takes specific time off by giving them notice which is twice the length of the leave i.e. if you want someone to take off w/c 25th May, you can tell them before 11th May that they are required to take annual leave in that week.
We do suggest you remain flexible so that if someone has an event at the end of the year i.e. has had to postpone a wedding and honeymoon and now wants to take the time later in the year, you are able to accept this as a reasonable holiday request.
If I need someone (who is not furloughed) to work during the lockdown, can I cancel their annual leave?
An employer can cancel someone’s annual leave by giving them notice which is the same as the amount of leave they were due to take i.e. if someone has 2 days off on 29th and 30th April, you can cancel that leave by giving them written notice by 27th April.
We don’t usually allow annual leave to be carried forward, but staff won’t be able to use all their leave this year, what are our options?
- the need to spread out annual leave and keep the business operating
- if the employee leaves in 18 months time and has not used this year’s annual leave, you will need to pay them for it.
Please be aware, the rules around annual leave may change as the Government continue to clarify matters and fill in the gaps in their policy announcements.
If I am self-employed, can I claim for loss of earnings as a result of Coronavirus?
Yes, subject to the rules announced by Chancellor Rishi Sunak on 26th March.
As a self-employed person, what can I claim?
If the majority of your income is from your self-employed status and your profits are less than an average of £50k per annum, the Government is providing a taxable grant of 80% of your profit up to £2500 per month.
How is the 80% of profit calculated?
The amount you are entitled to claim will be based on your self-employed profits over the past 3 years.
Where you have been self employed for less than 3 years, your total profits to date will be used to calculated your average.
You will need your tax returns for 2019. If you have not yet submitted these, you have 4 weeks from 26th March to do so.
If you have not been trading long enough to file tax returns, you are NOT able to claim under this scheme.
When will I get the money?
The money is not available until June, but it will be a single payment backdated to cover March – May.
Self-employed workers now have access to the Business Interruption Loan Scheme, but do get proper financial advice from your accountant BEFORE taking out a loan.
Can I still work as a self-employed person?
It appears that as long as you can maintain social distancing, you are able to continue working as a self-employed person and be eligible to the funding through the Government.
We don’t yet know if this will be clawed back through your tax returns at a later stage if you earn more than the grant available.