The latest update on the “furlough” scheme - government grants to cover employee salaries
30 March 2020
The government has now announced further details on its “furlough” scheme - being a scheme for companies to obtain free grants to cover the salaries of their employees. The key points are:
- You can place employees on furlough status and then receive payment from the government to cover up to 80% of each employee’s monthly wage costs, up to a maximum of £2,500 per month.
- In addition to the above, you can also receive the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on the wages.
- This scheme does not override the usual employment law rights of your employees - therefore you must ensure you are still acting in accordance with their contracts of employment or obtaining appropriate contractual consent to the changes you make. Our Employment Team are able to provide Furlough Agreements specifically tailored for this current situation. This is particularly important if you are seeking to reduce the salary of an employee to 80% of their usual wage.
- The scheme is open to any UK organisations who have started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
- You will use an online portal to claim for the funds from the government. Although it is not expected that the portal will be in place until the end of April, you can place your employees on furlough status now and then claim back the funds when the portal is live. If your business has particular cash flow problems, you may be able to agree with your employees to delay their salaries until receipt of the government funds - this will be subject to usual employment law requirements.
- Furloughed employees must have been on your PAYE payroll on 28 February 2020 (so new employees hired since then will not qualify), but can be on any type of contract, including full-time, part-time or even flexible/zero-hours.
- - In addition, you can even use this scheme to cover salaries of employees that you have made redundant since 28 February 2020, as long as you re-hire them and place them into furlough status (again, you will need to comply with employment law obligations to facilitate this).
- Employees on furlough status are not able to carry out any work for the organisation. The government has clarified that this includes providing services or generating revenue. Therefore, employees who need to continue to carry out certain work, even on a reduced basis, cannot be placed within this scheme. As such, those employees who are on reduced hours (such as short-time working) are not eligible for the scheme. The scheme only applies to those employees who are not provided any work at all. However, the government will allow employees to take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of, the organisation. In practice, it may be difficult to determine whether “volunteer work” breaches the rules and therefore we would not generally recommend this. Note also that if employees are required to complete training courses whilst on furlough then National Minimum/Living Wage rules will still apply.
- - You do not need to place all employees on furlough status, and can choose which should be assigned this status. Again, you will need to ensure in doing so that you comply with all employment laws - including in respect of discrimination or the implied duty to maintain trust and confidence.
- To qualify for the scheme, your employees must be on furlough status for a minimum of 3 weeks. However, there is nothing to stop you from alternating employees on that basis.
- Claims can be backdated until 1 March 2020 if applicable (for example, if employees were on lay-off or had been made redundant).
- For those employees placed on furlough status you must write to them confirming this and keep a copy as your record, in case you need to provide this to HMRC to evidence your entitlement to the grant. To comply with employment laws however, we would recommend using a formal Furlough Agreement.
- Employees with more than one employer are treated separately by each employer and their status with one does not affect their status with the other(s).
- Note that the salary is still paid by the organisation to the employee through ordinary payroll processes, with PAYE and other deductions as normal. The organisation then claims a grant from HMRC.
- Although HMRC will only cover 80% of the salary (plus Employer NI and minimum auto-enrolment employer pension contributions), the organisation can choose to pay the employee higher than that - for example their normal 100% salary.
- Note that you must pay the employee in respect of the grant you receive - for example, you cannot receive the 80% grant but then only pay the employee 50%.
- Employees on furlough status have the same rights in all other respects, including continuing to accrue holiday, SSP rights, etc.
- This government grant scheme is currently set to run for a minimum of 3 months from 1 March - i.e. until the end of May 2020. If the scheme is not extended at the end of that time then you will need to consider the action you take in respect of your employees - i.e. whether you bring them back into work, use a lay-off or short-time working provision, enter a redundancy process, or some other procedure as agreed with employees.
Can we furlough our migrant workers?
There has been much uncertainty up until now about whether sponsored migrant workers could be subject to furlough leave. There is now further clarity on this:
- Non-sponsored migrants (i.e. those not on Tier 2/5 (excluding Youth Mobility) - such as dependants or those on family-related visas) can be treated as per any other locally hired workers.
- Sponsored migrants are ordinarily required to be paid in accordance with minimum salary requirements depending on their visa type and the SOC code allocated to their job as set out on their Certificate of Sponsorship. However, the Home Office has now confirmed that Sponsors:
- Do not need to report employee absences related to coronavirus (including a need to isolate or inability to travel due to travel restrictions); and
- Do not need to withdraw sponsorship if an employee is absent from work without pay for more than 4 weeks.
On the basis of the above, it appears to us that since the Home Office are now willing to accept situations in which migrants are absent without any pay at all, there should accordingly be no reason why Sponsors could not choose to furlough migrant workers and claim the government grant.
Note that the Home Office have not expressly stated that migrants may be absent without pay simply as a result of a reduction in work requirements such as due to reduced client demand (the examples given by the Home Office are as above - illness, a need to isolate or inability to travel). However, our expectation is that the Home Office will be flexible in respect of this unprecedented situation and are not likely to take enforcement action in respect of migrants placed on furlough leave even where that is not for one of the three mentioned examples.
Be aware also that the Home Office stated that they will keep this current policy under review and so it is subject to change at any time. It is a separate policy from the government’s furlough scheme and so it cannot be assumed that it will follow the same timescales.
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