Chelsea Brooke-Ward discusses Coronavirus Job Retention Scheme (CJRS) process, procedure and eligibility
Chelsea Brooke-WardIn the midst of this uncertain time, employers and employees are struggling to grasps the new Government Schemes and understand what if anything they are entitled to claim to help support them through this crisis. Chelsea Brooke-Ward discusses the new HMRC guidance.
Under “The Coronavirus Job Retention Scheme”, employers will be able to claim back 80% of the wages (with a cap of £2,500 per month) of employees who have been furloughed (i.e. put on a leave of absence) in response to the COVID-19 pandemic. A furloughed worker essentially means that you must not carry out any duties under your employment contract. This means that whilst on furlough, an employee cannot undertake work for or on behalf of the company. This includes providing services or generating revenue, because if that is the case then the employer is liable for the salary as the normal (as far as can be expected) duties are being carried out and he employer benefits from this.
Which workers are eligible?
To be eligible for the funding a Furloughed employee must have been on PAYE payroll on 28 February 2020, and 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 28 February 2020, if they are rehired by their employer.
Which workers are not eligible for the funding?
If an employee is working, but on reduced hours, or for reduced pay, they are not be eligible for such scheme and will have to continue to be paid through payroll subject to the terms of the employment contract you agreed. That is because whilst the carry out their duties they are in essence still working and employers should be responsible for this.
Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
Procedure for implementation
Employers should be open with their employees and make any changes to the employment contract by agreement. If you are considering making such changes, I would advise that you speak with an employment lawyer to discuss how the contract can be unilaterally changed and the process for doing so.
It is important to employers that the “Rule of Law” still applies, and a fair process and selection must still be undertaken. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way. If you believe that you had been unfairly selected or discriminated against during this period, then I would advise to seek independent legal advice.
To be eligible for the support employers should write to their employees confirming that they have been furloughed and keep a record of this communication and all such communications. I would also advise that a record of the procedure carried out in the selection process should also be retained in the unfortunate event that a Tribunal claim is issued for unfair selection.
How will scheme work in practice?
The CJRS was announced on 20 March 2020. The new HMRC guidance is the first detailed overview of how the scheme will work in practice. It confirms that the scheme will be in place for at least three months from 1 March 2020. HMRC has said that they propose to establish an online portal through which employers will be able to reclaim wage costs plus the employer’s NI contributions and the minimum automatic enrolment employer pension contributions on that wage.
The scheme will be open to all UK employers, including charities, recruitment agencies and public authorities, so long as they have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
Do employees have to consent to being a furloughed worker?
This will be dependent upon the employment contract, the clauses contained therein, the type of work the employee does, and the intention of the employer whether top wages up to full pay. I would recommend seeking legal advice from a specialist employment lawyer. As mentioned above, many changes to an employee’s contract of employment maybe deemed to be a unilateral change, to implement the same employers would be best advised to seek consent to such changes. There are situations where unilateral changes can be implemented irrespective of agreement and I would advise seeking advice if you intend to force through such change.
More often than not, in the current climate, employees are likely to accept being furloughed, as for most, it will be a more desirable outcome than a redundancy or termination situation.
There is no obligation on the employer to apply for the scheme at present.
How much can be claimed?
During the period of furlough, the employer should pay the employee at least the lower of 80% of salary or £2,500 whichever is the lower sum. Employers can also make up the rest of their employee’s wage if they so wish but there is no obligation, it would seem, to do so. For full-time and part-time salaried employees, the employee’s actual salary, before tax, as at 28 February 2020 should be used to calculate the 80%. The guidance makes clear that fees, commission and bonuses should not be included in the calculation.
As for as those employees whose salary varies, in the case of employees who have been employed for at least a year, the employer will be able to claim for the higher of the employee’s earnings in the same month from the previous year, or the employer can average the employees monthly earnings from the 2019/20 tax year.
In the case of an employee who has been employed for less than a year, the employer will be able to claim for an average of the employee’s monthly earnings since he or she started work.
In the case of an employee who only started in February 2020, the employer will be required to pro-rata the employee’s earnings so far.
Individuals who are on or plan to take Maternity Leave must take at least 2 weeks off work (4 weeks if they work in a factory or workshop) 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.
National Minimum Wage
The Guidance makes clear that Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working, so therefore, furloughed workers, who are not working, must only be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW, because they are not carrying out the duties as expected the NMW principles may not be applicable.
However, if workers are required to for example, complete online training courses whilst they are furloughed (which is acceptable), then they must be paid at least the NLW/NMW for the time spent training, even if this then equates to more than the 80% of their wage that will be subsidised.
If you require any specific or additional legal advice which Chelsea Brooke-Ward has not covered in this article above, please get in touch with Miss Brooke-Ward’s clerks on clerkscivil@psqb.co.uk or call 0113 245 9763.
The guidance, published on 26 March 2020, provides some very welcomed detail on which businesses and employees will be covered, what counts as ‘furloughing’ for this purpose and how employees’ wages will be calculated. The scheme is expected to be up and running by the end of April 2020
The Guidance can be found here
https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme