Coronavirus Frequently Asked Questions
Since the guidance was issued by HMRC on Friday we have developed a further set of FAQs which should help to answer most queries. It is important to emphasise this probably will be modified when the Finance Bill is published next week which is the mechanism for bringing this into law and also when HMRC publish the portal details which will enable you to apply for the 80% grant. If you intend using the furlough you MUST get your employees to agree by signing a document agreeing to a change to their terms and conditions.
If an employee does not have the virus but is living with someone who does, should they be signed off sick?
They certainly should stay at home. If they are not ill but can work from home then there is no need for them to be treated as being on sick leave. If they cannot work at home then the Statutory Sick pay scheme has been amended to make it clear that the time they spend self-isolating will count as a period of incapacity for work. However rather than place them on sick leave the employer may choose to take advantage of the Government’s proposed job retention (furlough) scheme.
What evidence can I ask for that an employee is genuinely ill or required to self-isolate?
The normal practice of obtaining a fit note from a GP is clearly no longer a feasible option. The Government has introduced an online scheme through NHS 111 under which an employee, after answering a series of questions can be emailed an ‘isolation note’ indicating that they should remain at home either because they have coronavirus symptoms or because they should be self-isolating. This note will be deemed to be adequate evidence of their inability to work for the purposes of SSP – essentially equivalent to a fit note.
Can an employee refuse to come to work for fear of contracting the virus?
If the workplace is not one that the Government has ordered to close then the position remains that employees can be required to work. The strong advice from Government is that the employee should work from home whenever this is possible. But where homeworking is simply not an option the advice is that employees can still travel into work.
This means that in most circumstances the employer can still require the employee to come to work as normal. This assumes of course that the employer has, as far as is possible, put in place the appropriate social distancing measures so that the workplace is as safe as it can be. If the employee reasonably believes the employer is instructing the employee to work in unsafe conditions and refuses to come into work, and is dismissed as a result, that will be an automatically unfair dismissal (and the normal two years’ service is not required).
Employers will want to be sensitive to employees who have good reason to be particularly cautious because of an underlying condition or because of their contact with vulnerable people. In these circumstances – and where home working is not an option – the employee is probably best treated as either being off sick or ‘on furlough’ (see below).
If I am required to close my premises, am I still obliged to pay employees?
That depends on the terms of their contracts. Salaried employees will be entitled to full pay if you close the workplace unless there is a clause in the contract allowing you to lay them off for a temporary period without pay. The same goes for hourly paid employees with a minimum number of guaranteed hours. Where there is no set obligation to provide a minimum number of hours then the employer will not be obliged to pay for hours that the employee is not actually asked to work.
When is the Government’s ‘Coronavirus Job Retention Scheme’ and when does it come into effect?
The Government has announced a radical job retention scheme that will cover 80% of the wage costs of employees who are ‘furloughed’ by their employer – up to a maximum of £2,500 per month. We now have some detailed guidance of how the system will operate but it is not yet up and running. The Government plans to have it in place in time for the April payroll (although we think that is optimistic), and it will be backdated to cover the period from 1 March 2020.
What does furlough mean and how is it different from being laid off?
Furlough means ‘temporary leave of absence’ and it is not a term that has been used in UK employment law – until now. It seems that an employer will be asked to designate an employee as being ‘furloughed’ meaning that they are being kept on the payroll, but not being given any work to do. This is in reality no different from a ‘lay-off’ but the Government seems keen not to refer to it in that way. This may be because the term ‘lay-off’ is sometimes used (inaccurately) as though it is interchangeable with ‘redundancy’ – even though they have distinct and separate meanings in employment legislation.
Which employees are covered by the scheme?
Potentially, any employee who was on the employer’s PAYE system by 28 February 2020 is covered. This does leave any employees who were in the process of changing jobs and who joined their new employer at the beginning of March in some difficulty. It could also mean that employees who are transferred under TUPE (the Transfer of Undertakings (Protection of Employment) Regulations 2006) are left out. Although they will be deemed to have been continuously employed by their new employer, this will not alter the fact that they were not actually on the PAYE scheme at the relevant date. This is the sort of issue that HMRC may be asked to revisit when, for example, recently transferred canteen staff find that they may not qualify to be furloughed.
Does the scheme apply to zero-hours contracts?
It seems clear that the scheme will apply to anyone who is on the employer’s payroll. This mean that zero-hour staff will be included provided they are paid through PAYE. Those who are not on the payroll will not qualify under the furlough scheme but could benefit from a separate scheme aimed at the self-employed. This is something that they will need to pursue directly with HMRC.
Does the scheme apply to agency workers?
It appears that it does. An agency worker who is on the PAYE system of the agency will qualify for furlough provided that he or she is not working. That would seem to mean that the end user can terminate the assignment of a particular agency worker and the agency would then be able to place that worker on furlough. Importantly the pay that the agency worker would qualify for would be calculated based on the either the earnings in the corresponding month of 2019 or on the basis of average earnings in the last tax year. It would not be dependent on the pay the worker was receiving in the most recent assignment.
Can we choose which employees to place on furlough and which to ask to come into work?
The guidance published so far suggests that it will be for the employer to designate an employee as furloughed in which case the choice of who to place on furlough will be essentially one for the employer to make. It would be sensible when making the choice to take into account the personal circumstances of individual employees. Those with caring commitments for example might find it much harder to continue working – even from home – than those without. Ultimately however the employer will be able to make its decision based on the needs of the business ensuring that it retains access to the skills and experience that it needs to continue operating as best it can.
What wages will it cover? How will pay be calculated?
The scheme covers 80 per cent of wage costs 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. Commission and bonuses are not recoverable and it seems likely – although the guidance does not address the point – that tips and gratuities will also be excluded.
The amount payable will be based on the employee’s normal salary. Where the pay is variable then the employer can claim for the higher of either the same month’s earnings from the previous year or the average monthly earnings from the 2019-2020 tax year. Where the employee has been employed for less than a year, the employer should take an average of their earnings since they started work.
Could we temporarily increase the pay of employees so that they can recover more under the scheme?
It would be surprising if the scheme – when it is published in full detail – contained a loophole to allow this. Guidance already indicates that where pay is variable, the amount covered by the scheme will be based on past payments. Where the employee is on a fixed salary the scheme is likely to require some evidence from the employee’s PAYE records showing how much the employee earns. Increases agreed after March 1 (the date to which the scheme will be backdated) are highly unlikely to be covered.
Does it only apply if we don’t pay the wages – or will be able to recover wages that we have already paid?
The scheme is intended to help those employers who have chosen to keep employees on the books rather than make them redundant. We can certainly expect that it will refund employers who have already been paying employees from March 1st provided that the employees have not been doing any work in that period.
Can I bring back employees who have already been made redundant?
The Government is encouraging employers to reemploy staff that were dismissed for redundancy after 1 March 2020 but before the scheme was announced. It seems that the employer will be able to claim in respect of such employees even in respect of the time they were unemployed. There will, however, be no obligation to take this step.
What do I have to do to bring employees within the scheme?
The guidance published by the Treasury says that employees will need to designate affected employees as ‘furloughed workers’ and notify them that you have done so. The online portal through which claims will be made is still being developed. But essentially the employer will simply need to give its PAYE reference number, specify the number of employees being furloughed, the period over which the claim is being made and the total amount being claimed.
The guidance emphasises that HMRC will retain the right to retrospectively audit all aspects of an employer’s claim.
Do I have to place all of my employees on furlough, or can I be selective?
It is clear that the Treasury does not envisage an all or nothing approach. Some employers will need to maintain a skeleton staff even if the majority of their operations are shutting down. Some will only need to send a relatively small proportion of their employees home while other parts of the business carry on almost as normal. It is clear that employers and employees will be able to benefit from the scheme in either scenario.
Can we change which employees are furloughed at any one time – can an employee be furloughed, brought back to work and then furloughed again?
The guidance makes it clear that the minimum period for which an employee may be furloughed and take advantage of the scheme is three weeks. However there is nothing to suggest that an employer cannot rotate staff in and out of the furlough scheme provided that each rotation is at least three weeks long. This not only allows the employer to focus on those areas of the business that need attention at any one time, but also allows a fair distribution of work and leave among employees.
Can we place sick employees on furlough or do we have to keep paying them SSP?
The guidance says that an employee on sick leave – or any other form of unpaid leave – will not qualify for furlough. However, once the leave ends the employer will be free to designate the employee as furloughed. Indeed the employer would also benefit from no longer having to pay sick pay. This is something of an anomaly because it means that someone who is actually off sick with coronavirus will actually be worse off financially than a healthy employee who is sent home on furlough. We may see employees declaring themselves fit for work in order to be placed on furlough by their employer. Obviously it is important in such cases that the employee in question does not attempt to actually come into the workplace.
What if a furloughed employee becomes sick?
It is unlikely that an employer would be obliged to notify HMRC if a furloughed employee becomes ill. Indeed as long as the furlough lasts there is unlikely to be any reason for the employee to even tell the employer that they have developed symptoms.
Could someone return early from maternity or adoption leave to benefit from the furlough scheme?
It seems that they could. The operation of maternity and other forms of family-based leave is unaffected by the furlough scheme. An employee on maternity or adoption leave can return to work early provided she gives the employer eight weeks’ notice of the early return (or shorter, if both sides agree). The employer would then be free to place the employee on furlough from the date of her return. Employees should bear in mind, however, that the employer is not necessarily obliged to place them on furlough and may instead find work for them to do.
The furlough scheme does not pay all of an employee’s salary – do I have to top up their pay to the full amount?
The guidance says that this is voluntary – but it is in reality a matter for the contract of employment. For most employees on a salary, or with a guaranteed minimum number of hours the employer remains obliged to pay the employee in full if it is not in a position to offer work. To that extent the furlough scheme subsidises the employer’s wage cost but does not replace the obligation to pay wages.
If there is a clause in the contract allowing the employee to be laid off without pay then the payments made under the furlough scheme will be in addition to the employee’s contractual entitlement and there will be no obligation to top up the employee’s pay to the full amount.
This means that even with the benefit of the furlough scheme the employer may be facing a substantial contractual obligation to employees for whom it can provide no work. One option is to agree a temporary reduction in salary so that the amount paid by the furlough scheme represents the full amount to which the employee is entitled. The employer could make the employee’s consent to such a change dependent on the employer designating them as furloughed rather than making them redundant.
Can I reduce the hours that employees work?
This depends on the terms of the contract. The more important question (see below) is likely to be whether an employer is able to reduce the pay of an employee who has been given fewer hours to work. Very few employees will actually have a contractual entitlement to work a full working week provided that the employer is prepared to pay them as normal. Where the employee’s reward package is dependent on commission or a bonus paid on output then there may be an argument that the employer is in breach of contract if they do not give the employee the chance to work a full week. In the circumstances of the current crisis however, there must be a strong argument that it would not have been possible to earn much commission anyway.
What does a reduction in hours mean for pay?
A salaried employee whose hours are reduced will still be entitled to be paid in full unless he or she agrees otherwise – perhaps as an alternative to redundancy –
Can I instruct employees to take annual leave if I cannot offer them work?
Under the Working Time Regulations an employer can instruct a worker to take annual leave by giving notice that is at least twice the duration of the leave that must be taken. So if the employer wants the employee to take two weeks’ of annual leave entitlement then it must give the employee four weeks’ notice of this. There is of course nothing to stop employers and employees from agreeing that any given period without work should be treated as annual leave – although the terms of the furlough scheme will reduce the incentive to reach agreements of this sort.
Can I instruct employees to take annual leave while they are on furlough?
Nothing the guidance so-far published by the Government would seem to prevent this. However an employee forced to take annual leave would normally be entitled to be paid in full for that period rather than at the capped figure provided for in the job retention scheme.
What about if they are off sick or self-isolating?
It is well established that a worker cannot be forced to take annual leave while off sick.
How do I stop too many employees taking what is left of their annual leave later in the year?
The Government has amended the Working Time Regulations to allow employees who have been prevented from taking their basic four-week annual leave entitlement to carry over that leave for up to two years. Where it is not reasonably practicable for employees to take their full entitlement this year, therefore, they will be able to defer their remaining leave to next year. The additional leave of 1.6 weeks must still however be taken in the current holiday year.
The Regulations also make it clear however that the employer can only defer the employee’s request to take annual leave where it has ‘good reason’ to do so. While a rush in demand for leave towards the end of the year may well satisfy this requirement, the employer should make every effort to accommodate requests for leave where possible.
Does the prospect of the furlough scheme make it unfair to make employees redundant?
It will certainly be a relevant consideration. There may well be circumstances in which any reasonable employer would conclude that the job retention scheme means that there is no need to make employees redundant. The extent to which the employer could recover its wage costs by placing employees on furlough will certainly affect the reasonableness of any decision to proceed with redundancies.
The job protection scheme does not in itself protect employees against redundancy. Nor does it cover all of the costs associated with employing somebody. In the absence of an agreement from an employee to accept the sum provided by the scheme for the duration of the furlough, and depending on the terms of the contract, the employer of furloughed employees could still be facing considerable costs.
It would seem likely however that an employment tribunal would take the view that a reasonable employer would at least explore the options presented by the scheme and whether an employee would accept the associated drop in pay for the duration of the furlough before concluding that employees should be made redundant. While the scheme itself does not require employers to take part, it is difficult to see why an employer would refuse to at least consider doing so and discuss the matter with employees who would otherwise be made redundant.
Can employees be furloughed during their notice period?
There is nothing in the scheme to prevent this.
Can a furloughed employee still claim a redundancy payment if laid off for four weeks or more?
No. There is an incredibly complicated procedure under which an employee who is laid off without pay can claim a redundancy payment after four weeks when there is not likelihood of a return to normal working within the next four weeks. To qualify, however, the lay-off in question must be unpaid. Since furloughed employees will be paid up to 80 per cent of their wages, their period of furlough will not count as a lay-off under the statutory procedure for claiming a redundancy payment.