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COVID-19 Job Retention Scheme Q&A

The Government is incentivising businesses to retain their employees by committing to pay up to 80% of salary costs of staff who are unable to work during the COVID-19 crisis.

Wages of up to £2500 per month will be covered, for an initial period of three months, with payments backdated to 1st March. All UK businesses are eligible to apply for the scheme and HMRC are working urgently to set up a system for reimbursing employers.

Based on the latest Government guidance about the scheme and how it will be implemented we have put together the following Q&A which we hope will answer some of the queries you may have about it.

NB. Following further clarification, this Q&A page was last updated at 9:00am on Wednesday 1st April 2020.

 

Criteria and eligibility


Q. What criteria do individuals need to meet to qualify for the Government’s Job Retention Scheme?
A.  To qualify for the scheme, individuals must:

a) be employees on PAYE and have been on payroll on 28th February 2020. They can be on any type of contract, including:

  • full-time employees
  • part-time employees
  • employees on agency contracts
  • employees on flexible or zero-hour contracts

The scheme also covers employees who were made redundant since 28th February 2020, if they are re-hired by their employer.


b) be reclassified as a furloughed worker and kept on the payroll.


Q. Can furloughed workers continue to do work?
A. No
 

Q. Do Companies need to top up the 80% Government grant to qualify, i.e. pay the remaining 20% for each furloughed employee.
A. Government guidance states that the employer may choose to do this but does not have to.


Q. Are fixed term PAYE employees covered in this scheme?
A. As it stands all employees on the payroll on 28th February 2020 would be eligible and this will include those on a fixed term PAYE contract.


Q. Can we use the retention scheme even if short term almost hired staff have not signed contracts?
A. If the employees were on the payroll by 28th February 2020 they would be covered.
 

Q. What if I laid off employees over the past few weeks, before this support Scheme was announced. Can I re-employ these individuals for the sake of furloughing them?
A. Yes. Employers can agree to re-employ employees made redundant from 28th February 2020 and place those employees on furlough instead. Employers will be able to claim a grant to cover 80% of the employee’s monthly earnings, up to a monthly cap of £2,500.

Q. If an employee is on a fixed term contract that runs across 28th February 2020 and that contract and the work they were doing was due to come to a natural end after 28th February 2020, can I re-employ this individual for the sake of furloughing them?
A. This is a very complex question. At the moment the government has not clarified how such employees would be treated. Because these employees are on the payroll on 28th February 2020 there is an argument that they are eligible for furloughing under the Retention Scheme.
 
Pact is urgently seeking clarification from HMRC on this point. In the interim, we advise that employers take the following approach:
 
- If there is any remaining work still to be done under the existing contract, which work has been suspended by virtue of the impact of COVID-19, it would be logical to furlough that employee with a view to them completing the contract at a later date.
 
- If the work and the contract have both now ceased, or were due to cease regardless of the impact of COVID-19, the safest approach for now would be to take the view that the COVID-19 Job Retention Scheme does not apply to that individual.
 
This is only a suggested approach, but until greater clarity is received from the government, we advise Pact members to follow this advice and await further updates.


Q. Can staff be moved in and out of furlough status. E.g. Can someone work one day a week and be furloughed for the rest of it?
A. No. If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.


Q. Is there a minimum number of continuous hours/days that the worker must have worked to qualify for furloughed status?
A. No. Although further guidance will be issued by HMRC to help employers calculate their claims.


Q. Is there a minimum number of days a worker must have been furloughed to be entitled to payment? 
A. Yes, the furlough leave must be for a minimum period of three consecutive weeks.



How to furlough someone and apply to the Scheme


Q. Is there a Pact template letter of notice which I can use to furlough employees or workers who are eligible for the Scheme?
A. Yes, Pact has created two letter of notice templates which members can access here.


Q. What are the steps I need to take to furlough someone?
A. Pact has created a 5-step guide which you can find here.
 

Q. Do I need to consult with my employees before furloughing them or not?
A. Government guidance states that employees need to be ‘notified’, but that is subject to employment law and the terms of their contract. It is believed therefore that employee consent is required in most cases and an amendment letter issued to the contract.

Pact has created two template letters for members to use, and step-by-step guidance for how to furlough someone which can be found here.


Q. Should staff be paid the furloughed amount through the company payroll?
A. Yes, that is what the government guidance seems to suggest. Employers will be reimbursed by way of a grant which can be backdated to 1st March 2020.
 

Q. Has the government provided guidance on what information will need to be submitted to claim relief for furloughed employees?
A. So far, the Government has stated that employers will have to submit information to HMRC about the employees that have been furloughed, and their earnings, via a new online portal. However, this portal is not yet available.


Q. How long will the online portal system take to set up, and how long will it take for grants to be paid to employers?
A. A Government speech mentioned getting the portal set up before the end of April but this is yet to be confirmed in writing. Grants would then hopefully be paid out to companies in a matter of weeks after their claims are made through the portal


Q. Can the furlough period be extended beyond the original contractual period?
A. It may be possible to extend the fixed term contract beyond the furlough period but this is not confirmed.
 


Calculating salary and other details, employment rights


Q. The 80% coverage for furloughed workers will apply to existing salary. How is existing salary being calculated?
A. Existing salary is being calculated as the employee’s regular wage. Employers will receive a grant from HMRC to cover 80% of an employee’s monthly earnings, up to a maximum of £2,500 per month plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.

An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.

HMRC will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live.


Q. Will deductions such as tax, NI and pension contributions still be deducted from the furloughed employee’s salary payment?
A. Yes, while on furlough, the employees wage will still be subject to Income Tax and National Insurance as usual.

In addition to employee’s monthly earnings, employers will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.Employers will receive a grant payment to cover 80% of the employee’s monthly earnings up to a maximum of £2500 per month plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.


Q. Does employer NI accrue for the furloughed worker payments or will this be covered by grants?
A. This will be covered by the grant.


Q. Do furloughed employees accrue annual leave?
A. The government have not yet addressed the issue of annual leave, though as all the employee’s rights remain the same it is likely that they retain the right to accrue annual leave.


Q. Can I request my employees take annual leave while furloughed?
A. This is not yet outlined by the government so is unknown. It is also not known if the recent change to Working Time Regulations enabling employees to carry over annual leave applies to those furloughed. 


Q. What about Maternity Leave?
A. For individuals who are on, or plan to take Maternity Leave they must take at least 2 weeks off immediately following the birth of their baby. This is a health and safety requirement. In practice, most women start their Maternity Leave before they give birth.

If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.

Employees who qualify for SMP, will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020.

If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.

The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.


Q. Do all employment rights otherwise remain the same for a furloughed employee?
A.  Yes, employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.


Q. If we dismiss an employee on grounds of redundancy during this time and don’t furlough them, is this likely to be deemed unfair?
A.  Employers can still make employees redundant whilst they’re on furlough or afterwards. Rights as an employee are not affected by being on furlough, including redundancy rights.

 

If you have any questions which are not covered in this Q&A, please e-mail emily@pact.co.uk. We may not be able to provide a definitive answer right away but can add it to our list, as other indies may also wish to know the answer when it is available.

We will be updating this Q&A document as regularly as possible when we have new information and clarifications from Government.

The full government guidance for employers for claiming wage costs through the Coronavirus Job Retention Scheme can be found here.

For the latest COVID-19 information for indies, including guidance on contracts, production and other resources, click here.

All Pact staff continue to work remotely and are available to support Pact members. A list of Pact staff and their contact information can be found here.

 

Please note: Government guidance is changing rapidly and whilst we are doing everything we can to keep our information up to date we advise you to look carefully at the date that it was posted/last updated. Please also keep checking your e-mails from Pact for the most up to date announcements and information.