We compiled a list of the most-asked questions on furlough leave, so you don’t need to look elsewhere:
Furlough Leave for Employees
How does the Coronavirus Job Retention Scheme work?
- It applies for an initial period of 1st March to 31 October 2020.
- HMRC will pay employers 80% of a furloughed worker’s pay up to a cap of £2,500 per month. From 1 September the government contribution will drop to 70% and 10% must come from the employer. From 1 October the government contribution will drop to 60% and 20% must come from the employer.
- HMRC will cover the associated Employers’ NIC and minimum automatic employer pension contributions until 1 August, after that, the employer is responsible.
- The scheme applies to employees who were on the payroll as of 28 February 2020 and not receiving Statutory Sick Pay then.
- Employers can include any regular payments they are obliged to pay their employees. However, discretionary bonuses (including tips), commissions, and non-monetary benefits should not be included.
Do founders/executive staff and directors qualify as employees under the scheme?
- Yes. But remember, who will run the business if everyone is stood down?
- It’s important to the survival of the business that you identify who to furlough – only place on furlough leave those who are not key staff, those who you can survive without for the next few months.
Do I still need to make pension contributions for employees who have been stood down?
- If on furlough leave, HMRC will cover this under the CJR Scheme until 1 August.
Will holidays accrue for workers who are furloughed?
- Furlough leave is an entirely new concept to employment law in the UK. However, it seems likely that the 5.6 weeks leave under the Working Time Regulations 1998 would continue to accrue during furlough leave.
Are employees permitted to take pre-arranged annual leave while furloughed?
- Yes, if the employment contract continues during the furlough then employees’ rights in terms of annual leave will be unaffected.
What if my employees’ pay varies?
- The normal benchmark is your employees salary in February 2020. Where pay varies month-by-month, you can claim the higher of the employee’s same months earnings from the previous year; or their average monthly earnings for the 2019/2020 tax year.
Can I place my nanny on furlough leave?
- Nannies are included provided you registered as an employer and set up a PAYE scheme to pay your nanny (and had done so since February 28).
Does my employer have to consider the coronavirus job retention scheme before deciding to make redundancies?
- Unfortunately the current position seems to be no. Under the scheme, there is no legal obligation on employers to consider furlough leave before they consider redundancies. You might argue there is a moral obligation to do that, but if your employer is legitimately worried about not having enough cash to pay salaries before the scheme is set up (end of April), it would be a legitimate decision of theirs to make redundancies so the wage bill at the end of the month is lower and they avoid going insolvent.
- To legally make someone redundant, section 139 of the Employee Rights Act 1996 says the requirements of the business for employee to carry out work of a particular kind must have “ceased or diminished or are expected to cease or diminish”. Coronavirus interruption is certainly something that would satisfy that legal test. So, unless and until the government takes a further step and changes the law by insisting employers should first consider the job retention scheme before considering redundancies, an employer would not be acting illegally by making redundancies due to coronavirus.
Will it be an unfair dismissal if an employer makes someone redundant rather than placing them on furlough leave?
- Whether or not such a dismissal is considered unfair will depend on the particular circumstances of the company and whether coronavirus had genuinely led to a diminution of work in the area the employee was formally employed.
- However, if employers are dismissing a number of employees, they should take care that such dismissals are not deemed to be discriminatory in nature. E.g. you cannot choose to make your disabled employee redundant just because they work less efficiently due to their disability than their able-bodied colleague.
Furlough Leave for Non-Executive Directors
- You may wish to ask any paid directors to delay their invoices.
- Any directors are duty bound to act in the best interests of the Company, so they should be willing to agree to a payment plan or temporarily stand down (so long as board quorum is still possible without them).
Furlough Leave for Founders
Can founders furlough themselves?
- If they’re a PAYE employee then, yes, the can be furloughed just like any other employee.
- It’s important to note that while they’re furloughed they can’t work for the company, which means the company effectively goes into hibernation until they unfurlough themselves.
- While they’re furloughed they can still (and must) continue to perform any statutory obligations, such as filing annual returns for the company, etc.
Furlough Leave for Gig Economy workers
- It’s important to honour any outstanding invoices for services provided (you should have had the funds to pay them when the work was first agreed).
- Work agreed to but not yet started can be placed on hold/delayed for a few months.
- Agree payment plans for anything outstanding, put any new work on hold, and let them know a timeframe if you can.
- You’ll need these workers again in the future, so it’s important not to sour the relationship – remember this current situation is temporary.
- Keep in mind that gig economy and self-employed/freelance workers have had the least amount of guidance during this time, and aren’t as well protected under the new Coronavirus measures that the government has put in place – lead with empathy here.