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Employment law

 COVID-19 The Furlough Scheme

The Government has various plans to help businesses that are facing financial hardship due to the impact of COVID-19. This is designed to support businesses and help them continue to pay their employees who are unable to work due to self-isolation or lockdown conditions. We answer some of the most frequently asked questions our employment teams have been receiving.

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What is Furlough?

This is another way of referring to the “Coronavirus Job Retention Scheme (CJRS).” With many workplaces forced to close due to COVID-19, the Government have put in place grants from HMRC to cover your income if you’re temporarily not able to work because there’s no work, you’re affected by COVID 19 or your workplace has closed or reduced its operations due to COVID-19.

This scheme is intended to keep people in their jobs for those who cannot carry out their normal operations due to the coronavirus. It applies to every single employer in the UK, (with the exception of most public sector organisations) including but not limited to limited companies, sole traders and charities. This was a temporary scheme that was initially put in place for three months starting from 1 March 2020. It has since been extended across the UK until 30 September 2021.

Your employer can agree with you to be “furloughed”. You will temporarily not be required to work for an agreed period, and you will usually receive reduced pay.

You will still remain an employee and there will be no termination of employment during furlough.

HMRC have also announced it will publish details of CJRS claims made by employers from February 2021. There will be a public record that your employer has made a claim on CJRS and also an indication of the value of the claim.

You will also be able to see details of claims made for you by the employer although this will not be public.

Please note that there have been various reiteration of the scheme and additional guidance.

How long is the Coronavirus Job Retention Scheme going to last?

The scheme started on 1 March 2020 and has been extended and varied on several occasions since.

It’s currently due to run until 30 September 2021. Your employer may offer a shorter period and extend or shorten this as part of any agreement with you.

Am I eligible for furlough?

Your employer will need to submit a claim to receive the furlough grant from the HMRC. This can be done for employees on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed. Grants under the scheme are not counted as ‘access to public funds’.

For periods ending on or before 30 April 2021, your employer can claim for employees who were employed on 30 October 2020, as long as the employer has made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for you. The employer does not need to have previously claimed for you before the 30 October 2020 to claim for periods from 1 November 2020.

For periods starting on or after 1 May 2021, your employer can claim for employees who were employed on 2 March 2021, as long as they have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021, notifying a payment of earnings for that employee.

There is no requirement to have previously claimed for an employee before the 2 March 2021 to claim for periods from starting on or after 1 May 2021.

There is no requirement for you to have been previously furloughed.

The new guidance issued confirms that employers are able to furlough employees who are unable to work because they are clinically extremely vulnerable, or at the highest risk of severe illness from coronavirus and following public health guidance or who are unable to work because they have caring responsibilities resulting from COVID-19, including employees that need to look after children.

All employers with a UK bank account and UK PAYE schemes can claim the grant.

Other workers who are eligible include:

  • Office holders
  • Company directors
  • Salaried members of LLPs
  • Limb workers
  • Contingent workers in the public sector
  • Contractors with public sector engagements in scope of IR35 off-payroll working rules (IR35)
  • Employee transfers under TUPE and on a change in ownership

What if I am working reduced hours or reduced pay?

After 1 July 2020 you and your employer can agree that you will be flexibly furloughed so that you’ll be able to work some hours (and be paid for these) and claim furlough pay for the hours not worked.

You’ll not be able to undertake any work for the employer during the hours that you’ve been recorded as on furlough.

How will my monthly wages be calculated?

For full-time or part-time employees who are on a salary, the amount you’re entitled to receive will be based upon your salary figure. For further clarification, you should speak to your employer about how they’re calculating this.

If the amount you’re paid fluctuates (e.g. agency workers) and you’ve been employed for a full year, you’ll be entitled to claim for the higher of either:

  • The amount you earned in the same month last year
  • Your average monthly earnings for the last year

If the amount you’re paid varies but you’ve not been employed for a year, your entitlement will be based upon an average of your monthly income from the date that you commenced employment.

For those that have been working for less than one month, your entitlement will use that month’s earnings as a guide and then make a pro-rata calculation (i.e. estimate your likely earnings based on the information they have).

If you would normally be receiving compulsory commission and consistent overtime, the grant that your employer receives will take this into account. However, the calculation will not take into account discretionary commission, payments or bonuses, benefits in kind and non-cash payments.

Who is responsible for paying me and what do I do if I am not receiving pay?

If you’re furloughed and not being paid what you believe you’re entitled to, you may wish to consider raising this with your employer in the first instance and keep a good note of any and all discussions you have with them on this.

You should seek legal advice immediately as you may have a potential legal claim, and the deadline for this is likely to be within three months of when the payment was due.

Employers will not be able to claim for employees who are serving contractual or statutory notice for claim periods on or after 1 December 2020. This includes where employees have resigned and also applies where notice was served before 1 December (although claims for notice in the period before 1 December are permitted).

What happens if I was made redundant?

If you were employed and on the payroll on 23 September 2020 and were made redundant or stopped working for you employer after this date you can be re-employed and furlough payments claimed. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC from 20 March 2020 to 23 September 2020, notifying a payment of earnings for you.

It will be the choice of your employer if they choose to do this.

Your employer should follow the normal rules if they decide to make you redundant. This would usually include providing you with notice and consulting with you.

If you are made redundant, your base statutory redundancy and statutory notice pay should be based on your normal wage rather than the reduced furlough wage.

Can my employer automatically put me on the furlough scheme?

No. Your employer should discuss this with you first. Furlough is a change to your terms and conditions of employment, and you should both be in agreement before it comes into effect.

You should review any document you’re being asked to sign or agree to in relation to furlough and ensure you understand what you’ll be paid, when the furlough technically starts/started, when and how often it will be reviewed and details of who you can contact during this time to keep in touch during your furlough.

If you’re unable to reach an agreement with your employer about furlough, then you should consider taking legal advice at an early stage, as ultimately your employer may then take steps to dismiss you.

What happens if I am an apprentice?

If you’re an apprentice, your employer can furlough you in the same way as they do other employees. This doesn’t mean that your training has to cease, you’ll be able to continue to train whilst furloughed if the circumstances allow for it.

If you’re furloughed as an apprentice, your employer must pay you at least the Apprenticeship Minimum Wage/ National Minimum Wage/ National Living Wage depending on which is appropriate for the amount of time that you’re able to spend in training. You employer has a duty to cover any difference between the amount they’re able to claim through this scheme and the appropriate minimum wage to ensure that you’re not getting less than this.

Can individuals use the furlough scheme?

Yes, if you’re for example a nanny, your employer (as an individual) can use the furlough scheme provided that they’ve been paying you through PAYE and you were on the payroll on or before the 30 October 2020 or the later dates as set out above for payments after May 2021.

What happens if I am pregnant and due to start maternity leave?

In this instance, you’ll start your maternity leave as you would have done, however, if you’ve been placed on furlough or were off sick before this time, it’s possible that this may impact what you’ll receive on maternity leave and your Statutory Maternity Pay. You should discuss this with your employer as soon as practically possible.

What if I am returning from family related statutory leave (e.g. maternity, paternity, shared parental leave etc.)?

The normal rules for maternity and other forms of parental leave and pay apply. However, if you were furloughed and started leave on or after 25 April 2020, your employer may need to calculate your average weekly earnings differently for maternity pay, adoption pay, paternity pay, shared parental pay, parental bereavement pay. If you’re entitled to enhanced contractual maternity pay, your employer can claim for enhanced earnings under the scheme.

If you get maternity allowance and you’re on maternity leave, you will not be eligible to get furlough pay at the same time. If you’ve agreed to be put on furlough, you’ll have to contact Jobcentre Plus and ask that they stop your maternity allowance payments.

Should you wish, you can agree to be put on furlough and end your maternity leave early but you’ll need to give 8 weeks’ notice to be able to do so and you’ll not be eligible for the furlough payment until the end of the 8 weeks.

I work in the public sector, can my employer furlough me?

As most public sectors are continuing to work and provide essential services in the wake of the COVID-19 outbreak, the government does not anticipate that this scheme will be used by a lot of public sector organisations. Where employers, public sector or otherwise, receive public funding for staff costs, that funding will continue and employers are expected to continue to pay their staff in the usual way, so any organisation receiving public funding should not need to furlough staff in the same way. However, some situations may arise where the staff cannot be re-deployed to assist with the coronavirus response and in this instance the scheme may be appropriate for some staff.

I have more than one job, can I still be furloughed?

Yes. You can be furloughed from each job you have. Each will be treated separately, and the payment cap applies to the individual employer.

If contractually allowed, you’re permitted to work for another employer whilst on furlough. You should check your employment contract before working for another employer and you should consider discussing this with your employer first to avoid any possible dispute arising with them on this.

If you’ve had multiple employers over the past year and are being furloughed by your current employer and you’ve only worked for one of them at any one time, you’ll not be eligible for furlough from a previous employer. If you worked for more than one employer at any one time you can be furloughed by one job and receive a furlough payment but continue to work for another employer and receive your normal wage.

Can I take holiday if I am furloughed?

If you’re furloughed, you’ll continue to accrue annual leave in the normal way, how this is calculated, is normally found in your employment contract. You’re able to vary your holiday entitlement as part of the scheme but you’ll not be able to vary it to below 5.6 weeks paid annual leave because this is the statutory minimum.

You can request and take your holiday in the usual way but whether this leave is granted will be at the discretion of your employer. You must get your usual pay in full, for any holiday you take.

Working Time Regulations stipulate that your holiday pay should be paid at your normal rate of pay. In the event that your pay varied (e.g. agency workers), your normal rate will be calculated as an average of what you’ve received over the last year.

If you do take holiday leave whilst on furlough, it will be for your employer to make up the difference between what you’re receiving through the furlough scheme and what your normal pay is.

This includes bank holidays so for those who are furloughed who normally take the bank holiday as leave, your employer will either have to top up pay to your normal rate or give you a day of holiday leave in lieu. If you usually work bank holiday days then your employer can agree that any pay you would receive for these days is considered when calculating your wage for the purposes of the grant.

If you’re a furloughed employee, you’ll still maintain your holiday pay entitlement and you’ll continue to accrue any untaken leave as per your employment contract. There’s nothing to stop you from asking your employer to vary your holiday pay entitlement as part of your furlough agreement but most workers are entitled to 5.6 weeks’ statutory paid annual leave which they cannot vary to go below.

I am self-employed: can I be furloughed?

No. Self-employed workers may be eligible to receive financial support through the ‘Self-Employed Income Support Scheme’. If eligible, self-employed workers may receive a taxable grant of 80% of their average monthly income, up to a maximum of £7,500 in total per grant. The deadline for the third grant was 29 January 221. The fourth grant can now be claimed.

To be eligible for the fourth grant you must be a self-employed individual or a member of a partnership. You cannot claim the grant if you trade through a limited company or a trust.

You must have traded in both tax years:

  • 2019 to 2020 and submitted your tax return on or before 2 March 2021
  • 2020 to 2021

You must either:

You must also declare that you:

  • intend to continue to trade
  • reasonably believe there will be a significant reduction in your trading profits

Reasonable belief

In order to claim the fourth grant, you must reasonably believe that you’ll suffer a significant reduction in trading profits, due to reduced business activity, capacity, demand or inability to trade due to coronavirus between 1 February 2021 and 30 April 2021. You must keep evidence that shows how your business has been impacted by coronavirus resulting in less business activity than otherwise expected.

HMRC expects you to make an honest assessment about whether you reasonably believe your business will have a significant reduction in profits.

Significant reduction

Before you make a claim, you must decide if the impact on your business between 1 February 2021 and 30 April 2021 will cause a significant reduction in your trading profits for the tax year you report them in.

HMRC cannot make this decision for you because your individual and wider business circumstances will need to be considered when deciding whether the reduction is significant.

You should wait until you have a reasonable belief that your trading profits are going to be significantly reduced, before you make your claim.

You do not have to consider any other coronavirus scheme support payments that you have received when deciding if you’ve had a significant reduction in your trading profits.

What if my employer needs to close the business or reduce my contracted hours?

In some situations, an employer might need to close their business for a short time or ask staff to reduce their contracted hours. If your employer needs to do this, they should talk to you as soon as possible and update you throughout any period of closure.

You may be placed on furlough or asked to work reduced hours. This should be agreed with you. However if you refuse, the employer may consider taking other action like making you redundant.

What if my employer has put me on unpaid leave?

If you’ve been put on unpaid leave since 28 February 2020, your employer is able to put you onto the furlough scheme instead. Like other furlough employees, you would be entitled to at least 80% of your normal salary, up to the monthly cap of £2,500.

If you were put on unpaid leave before 28 February 2020 you can only be put on the furlough scheme if a return date has been agreed. Your entitlement to pay under the furlough scheme will begin on the date you were due to return.

You may be entitled to a back dated payment if you did not agree to the unpaid leave.

Can I be furloughed if I am self-isolating or on sick leave?

You can still be furloughed, if you’re unable to work, including from home or working reduced hours because you:

  • are clinically extremely vulnerable, or at the highest risk of severe illness from coronavirus and following public health guidance
  • have caring responsibilities resulting from coronavirus (COVID-19), such as caring for children who are at home as a result of school and childcare facilities closing, or caring for a vulnerable individual in your household

What happens if I become sick whilst I am furloughed?

If you become ill when you’re furloughed, you’re entitled to be paid at least statutory sick pay plus any contractual sick pay you may be entitled to through your contract. Whether you remain on your furloughed rate or receive statutory sick pay will be up to your employer. If your employer decides to no longer have you on the furlough scheme, and instead moves you onto the statutory sick pay scheme, the employer will be responsible for paying you but it may be entitled to a two week statutory sick pay rebate.

What if I am shielding or have caring responsibilities?

If you’re unable to work because you’re shielding or need to stay at home to protect someone who is shielding, you can be furloughed.

Similarly, if you cannot work because you’re caring for someone directly affected by COVID-19, you can be furloughed. This includes those employees who need to stay at home to look after their children.

What if I do not want to go on furlough?

You may not want to go on furlough as you feel that there’s work for you to do and you want to carry on receiving your full salary. This will be particularly desirable if your average monthly wage is higher than the £2,500 cap.

If this has been suggested, we recommend expressing your concerns with your employer in the first instance and seeing if there’s any other work you can take on so as to avoid being furloughed. Ultimately, this will be a decision for your employer based on the businesses needs and if you refuse to be put on furlough you may be at risk of termination of your employment or redundancy, depending on the circumstances.

If you don’t feel that your employer is being fair, it would be worth seeking legal advice.

What if I am on a fixed term contract?

If your fixed term contract has not already expired, it can be extended or renewed.

For periods ending on or before 30 April 2021, your employer can put you on furlough as long as you were employed on or before 30 October 2020. Your employer must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for you.

If your fixed term contract expired on or after 23 September 2020, you can be re-employed and claimed for. This applies as long as you ware employed on 23 September 2020 and your employer made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for you.

For periods starting on or after 1 May 2021, your employer can put you on furlough as long as you were employed on 2 March 2021, as long as the employer have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021.

What if I am an agency worker?

If you’re an agency worker and paid via PAYE, you can be furloughed and receive support, even in the event that you’re employed by as separate umbrella company.

In this instance, the agency as the deemed employer and the agency worker should agree to the furlough scheme. As is the case with employees, you would not be able to carry out work for or on behalf of the agency that has furloughed you, nor, should you carry out work for any of the clients of the agency.

If it’s the separate umbrella company that oversees PAYE, it’ll be for them to act as the employer and decide whether they want to furlough the worker or not.

Can I undertake volunteer work if furloughed?

Yes, you can do volunteer work while you are furloughed as long as it does not generate revenue or provide services for your employer or linked to your employer in any way.

Will I still be liable for tax if I am furloughed?

Yes. You’ll still pay taxes in the normal way and this will come out of your salary as it normally does. You’ll continue to make pension contributions (both employer and employee) unless your employer has opted out of this.

Will I still retain my legal rights as an employee when furloughed?

Yes. You’ll still have the same rights as you would if you were in your normal line of employment. For example, you would still be able to bring a claim (if you meet the requirements) for unfair dismissal, you would still be entitled to a redundancy payment and statutory sick pay, as well as maintaining your maternity rights. These are a few examples and you should seek legal advice as soon as possible if you have any concerns about your employer’s behaviour towards you.

PLEASE NOTE: this information was correct at 22/04/2021

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