Furlough pay type resource hub

Coronavirus Job Retention Scheme, Furlough pay Q&A

We will continue to publish advice as we receive further information, if anyone would like any specific help then please contact Richard Hartley, Chief Product Officer, at richard@s4labour.co.uk

For a full list of all Q&A and all topics furlough, the S4 system and others, please go to the help centre.

S4 and furlough pay

Q: How does Furlough Pay Type work in the S4 system?
A: Please see our resources section here for full details on how to place an employee on furlough within S4.

Q: How is Furlough Pay Type calculated in the S4 system?
A: Please see our resources section here for full details on how furlough pay is calculated within S4. 

Once the rate of an employee’s salary has been calculated, we then work out the amount of Employer National Insurance Contributions and holiday accrual as per usual within S4labour.

The basics

Q: How does furlough pay work?
A: As an employer you will be able to claim a grant from the government of up to 80% of an employees pay, up to £2500/month.

Q: The payments for furloughed employees, are they a grant or a loan?
A:Government guidance has confirmed that employers will be able to receive a grant from HMRC, not a loan and is therefore not repayable. This grant will cover 80% of the Furloughed Workers’ usual monthly wages (up to a maximum of £2,500).

Q: When will we receive the first payment?
A: HMRC confirmed to a Parliamentary Select Committee that it hopes to make the first payments by 30 April 2020.

Q: How long should an employee be furloughed for?
A: An employee must be furloughed for a minimum of 3 consecutive weeks

Q: Can employers backdate the furlough period to 1 March for all employees, even those who have been working since then?
A: The coronavirus Job Retention Scheme allows employers to backdate claims to 1 March 2020. Unfortunately, if employees have continued to work for the employer since 1 March 2020, they cannot be furloughed back to this date. Employers are only able to backdate an employee’s furlough to the day the employee ceased working for them – e.g. if the employee’s final day of work for the employer was 10 March 2020, the employee can be furloughed from 11 March 2020.

Eligibilty

Q: Who is eligible?
A: Following recently updated guidelines, for an employee to be eligible they must have been on your PAYE payroll on or before 19 March 2020 and were notified to HMRC through an RTI submission notifying payment on or before the 19th March.

Q: Which type of employees are eligible?
A: Full-time employees, part-time employees, employees on agency contracts, employees on flexible or zero-hour contracts are all eligible. Foreign nationals are also eligible.

Q: Are you eligible if you have been made redundant?
A: If you were employed as of 28 February 2020 and on payroll (i.e. notified to HMRC on an RTI submission on or before 28 February) and were made redundant or stopped working for your employer after 28th February, you can also qualify for the scheme if your employer re-employs you and puts you on furlough.

The calculation

Q: Is the 80% or £2,500 gross or net?
A: The 80% or £2500 is gross pay and deductions will still need to be made from this pay for National Insurance, Income Tax and any pension contributions.

Q: How is furlough pay applied for salaried staff?
A: For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February is used to calculate the 80%. Fees paid by the government, commission and bonuses should not be included. Any “top up” of payments are added to this government supported rate.

Q: How is furlough pay applied for employees whose pay varies?
A: If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:

  • the same month’s earning from the previous year
  • average monthly earnings from the 2019-20 tax year

If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.

If the employee only started in February 2020, we use a pro-rata for their earnings so far to claim.

This calculation is run every week, ensuring the rate applied to each week during furlough, compares the relevant week/month from the previous year.

Q: Can employers claim NI or pension contributions?
A: Employers will also be able to claim for National Insurance contributions and pension contributions up to 3%.

Q: Can furloughed workers still get their full pay?
A: Employers can chose to top up pay above the government supported level but they will be liable for the this cost as well as the associated National insurance costs and pension contributions.

Q: What if my employee’s average monthly earnings include commission and bonus?
A: Employers can claim for any regular payments they are obliged to pay their employees.
• This includes past overtime and compulsory commission.
• They should not include discretionary payments such as tips or bonus.

Q: Minimum wage / living wage increased on 1st April, do I have to implement this if my team are furloughed?
A: The government have still implemented these rate changes from 1st April 2020 so employers will need to implement this change. For furloughed workers, what employers can claim is based on earnings from before 1st April 2020 so these new rates will not be reflected in these payments.

Q: Are we required to still pay an Apprenticeship Levy
A: Yes, this should still be paid as usual. The JRS does not cover this and it cannot be claimed for.

Flexible Furlough

Q: How does the calculation work for flexible furlough for full time and part time employees?
A: For Flexible Furlough the system will look at the contracted hours for the employee and take away any worked hours. It then generates a Pro Rata furlough payment for the employee based on the hours left. If an employee works over their contracted hours there will be no furlough amount.

Q: How does the calculation work for flexible furlough for employees whose pay varies?
A: For Flexible Furlough the system will look at the usual hours for the employee and take away any worked hours. It then generates a Pro Rata furlough payment for the employee based on the hours left. If an employee works over their contracted hours there will be no furlough amount and these hours will be paid at their normal rate.

The ‘usual hours’ for an employee who works variable hours will be calculated based on the higher of either:

  • the average number of hours worked in the tax year 2019 to 2020
  • the corresponding calendar period in the tax year 2019 to 2020

Holiday

Q: Do employees continue to accrue annual leave whilst furloughed?
A: Yes, employees are still entitled to accrue holiday whilst furloughed inline with the employees contract. This can be varied if agreed with the employee but not below the statutory 5.6 weeks. Employees on variable or zero hours contracts will continue to accrue holiday in the usual way.

Q: Can employees take holiday whilst furloughed?
A: Holiday can be taken while on furlough although this would need to be paid at the employees normal rate of pay meaning that employers will have to pay the top up over the grant amount.

Q: Can I require employees to take holiday whilst furloughed?
A: Employers may request or restrict when their employees take holiday as long as they provide double the amount of notice to the period of leave which is being requested. Requesting or restricting holiday means that there will be a careful balance between short term cash flow and the longer term issue of a burdening holiday accrual. Government have stated that they are keeping their policy on holiday under review during these unprecedented times. S4labour will release the ability to put employees on holiday while furloughed and calculate the top up amounts within the next week.

Q: What are employees paid when taking holiday whilst furloughed?
A: Employees will need to be paid 100% of their salary / wages for any period classified as annual leave, this does not affect the furlough status. Employers can continue to claim 80% of wages based on the scheme rules.

Making the claim

Q: How do I make a claim?
A: The HMRC portal to make claims became operational on Monday 20th April 2020
Full guidance on how to calculate your claim can be found at

https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-toclaim-through-the-coronavirus-job-retention-scheme

Employers will need to calculate the amount they are claiming. HMRC will retain the right to audit every claims

Q: What information will an employer need to enable me to make a claim via the HMRC portal?
• your ePAYE reference number
• the number of employees being furloughed
• National insurance numbers and names for all the employees being furloughed
• the claim period (start and end date)
• payroll/works numbers for the employees being furloughed
• their self-assessment unique taxpayer reference or corporation tax unique taxpayer reference or company
registration number;
• amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
• the claim period (start and end date);
• the employers bank account number and sort code
• employer’s contact name
• employer’s phone number

Q: How do I furlough my employees (No Lay off / Short Term Working Clause)
A: Employers should discuss with their staff and make any changes to the employment contract by agreement. 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. To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming the CJRS. There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years.

Q: Can they make one claim for all employees, or do they have to be separate? 
A: If an employer is claiming for fewer than 100 furloughed workers, they will be required to process the details of each employee directly. However, an employer claiming for 100 or more Furloughed workers will be asked to upload a file containing the relevant information (i.e. name, national insurance number, claim period, claim amount and payroll number for each employee). Whichever means is used, the employer must retain the data used to make such calculations in respect of claims.

Making the claim

Q: How do I make a claim?
A: The HMRC portal to make claims became operational on Monday 20th April 2020
Full guidance on how to calculate your claim can be found at

https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-toclaim-through-the-coronavirus-job-retention-scheme

Employers will need to calculate the amount they are claiming. HMRC will retain the right to audit every claims

Q: What information will an employer need to enable me to make a claim via the HMRC portal?
• your ePAYE reference number
• the number of employees being furloughed
• National insurance numbers and names for all the employees being furloughed
• the claim period (start and end date)
• payroll/works numbers for the employees being furloughed
• their self-assessment unique taxpayer reference or corporation tax unique taxpayer reference or company
registration number;
• amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
• the claim period (start and end date);
• the employers bank account number and sort code
• employer’s contact name
• employer’s phone number

Q: How do I furlough my employees (No Lay off / Short Term Working Clause)
A: Employers should discuss with their staff and make any changes to the employment contract by agreement. 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. To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming the CJRS. There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years.

Q: Can they make one claim for all employees, or do they have to be separate? 
A: If an employer is claiming for fewer than 100 furloughed workers, they will be required to process the details of each employee directly. However, an employer claiming for 100 or more Furloughed workers will be asked to upload a file containing the relevant information (i.e. name, national insurance number, claim period, claim amount and payroll number for each employee). Whichever means is used, the employer must retain the data used to make such calculations in respect of claims.

Working during furlough

Q: Can employees be put in and out of furlough during this period?
A: Employees must be furloughed for a minimum of three weeks at a time but can come in and out of furlough.

Q: If I furlough my employees, can they undertake a small amount of work?
A: No, however they can undertake “training or volunteer” as long as they are not making money or providing services for the employer. If time spent training attracts a NMW entitlement in excess of the furlough payment, the employer must pay the additional wage for this time

Q: Can an employee work part-time during furlough?
A: No. For an employer to claim the grant from HMRC under the coronavirus Job Retention Scheme in respect of a furloughed worker’s salary, the Furloughed Worker cannot undertake any work for the employer, at all. Therefore, a furloughed worker can’t work part-time.

Q: We have some employees who have been furloughed, and we think they may still be working, do we have to stop them? If so, how?
A: If employees who have been designated as furloughed workers continue to undertake work for their employer, this may jeopardise the validity of the employer’s claim under the coronavirus Job Retention Scheme. If HMRC becomes aware of such work, the employer’s claim is likely to be found to be fraudulent, and the employer will not be able to receive the grant in respect of such an employee. The employer may also face fines for making fraudulent claims if they are aware of the employee undertaking such work.

Therefore, it is advised that employers stop employees from undertaking any form of work. Employers should make it crystal clear to all furloughed workers that they are not to undertake any work for their employer during their period of furlough, including even minor actions such as replying to or even forwarding on an email.

If the employer is concerned about some employees continuing to work, it may wish to consider blocking the employee’s access to emails or work-related information in an attempt to prevent any work being undertaken.

Q: I am a director of the business, can I furlough myself and carry on working?
A: You cannot continue working once you are a furloughed worker except to carry out your statutory duties as a director.

Q: I am proposing to furlough some employees and not others, am I able to do this?
A: Yes, but please remember that during your selection process, equality and discrimination laws will apply in the usual way.

Q: Can my employees continue to complete their apprenticeship programme whilst furloughed?
A: Yes, employees can continue their apprenticeship programmes whilst furloughed. Employers must pay apprentices AMW,NLW or NMW for all the time they spend training so must cover any shortfall from the scheme.

Q: Can a furloughed employee continue to carry out work for an alternative employer and still receive payment through this scheme?
A: If an employee was already on another employer PAYE payroll scheme before 28th February 2020 then they can continue working for that employer. Employees can obtain alternative work whilst furloughed. However, if the employee’s contract of employment prevents them carrying out work for an alternative employer, then the employee may be in breach of contract. Employers can allow a temporary variation of contract if they are willing to allow employees to work elsewhere whilst on furlough.

Q: What if the employee has a secondary income from their own business or a second job? Can we still apply to the scheme?
A: The coronavirus Job Retention Scheme treats each job separately. Therefore, if you have an employee who works either for other employers or for themselves, this will not prevent you from placing them on furlough. The employee can be furloughed in respect of each employment (and may be able to seek support under the self-employed income support scheme in respect of any self-employment).

Each employer is entitled to furlough the employee irrespective of whether they are furloughed for their other job(s) or whether they continue to work for another employer/ themselves. The cap of £2,500 per month will apply independently to each of the employee’s employers – i.e. your employee having other employment will in no way affect the claim you can make for them under the scheme.

Notice, redundancy & furlough

Q: A member of my team is working their notice and have asked if they can be furloughed rather than to leave employment.
A: Nothing in the scheme prohibits you from extending an employee’s notice period and furloughing them. However, if your business remains operational and employees continue to have meaningful work to carry out, then it may be against the spirit of the scheme.

Q: Due to a downturn in business I may need to make redundancies can I use the grant money to support any financial payments?
A: Whilst the grant cannot be used to subsidise redundancy payments, it can be used to account for some of the notice period. The consideration here is that if you will need to pay notice at 100% which is not 20% greater than what is being claimed on furlough but their normal wage or average earnings over a 13 weeks period. Where employers have removed some benefits such as commission, car allowances
this would need to be included in any notice payment and new NMW / NLW would
also need to be applied to average hours. However, the amount that you can claim through the scheme would remain based
on the current calculation.

Q: What if an employee refuses to be furloughed can we make them redundant?
A: An employer cannot furlough an employee without their written consent to changing their status from employee to furloughed worker and their agreement to cease all work for the employer. If the employee will not consent to furlough, and the employer cannot sustain the employee in work, the employer can consider making the employee redundant.

The ordinary redundancy process should be followed in this situation to ensure that the employer minimises the risk of an unfair dismissal claim being made by the employee. If 20 or more employees refuse to be furloughed, and thus the company is considering 20 or more redundancies, collective consultation obligations will arise.

Sickness and furlough

Q: What if an employee who is on furlough becomes sick? Does this break the period of furlough?
A: Furloughed workers will continue to be entitled to their statutory rights during any period of furlough. Therefore, Furloughed workers are entitled to receive at least statutory sick pay for any periods of sickness absence.

If a furloughed worker becomes sick during the period of furlough, the employer can decide whether to:

  1. Move the furloughed worker onto statutory sick pay (or company sick pay if applicable); or
  2. To keep the furloughed worker on furlough and pay them at their designated furloughed rate.

If the employer moves the furloughed worker onto statutory sick pay, the employer must bear this cost themselves (although the employer may be eligible to obtain a rebate of two weeks statutory sick pay). If a furloughed worker is moved onto statutory sick pay, the employer can no longer claim under the Job Retention Scheme for the aforementioned employee’s furloughed salary. Alternatively, if the employer keeps the sick Furloughed workers on furlough, the employer will remain entitled to claim for such costs (i.e. the employee’s furloughed rate through the coronavirus Job Retention Scheme).

Q: I have employees who are currently self isolating as per the instructions from the government, can I furlough these employees?
A: Employees self isolating should continue to receive company or statutory sick pay but can be furloughed after this period.

Q: Can an employee who is shielding be furloughed?
A: Yes, you can claim for furloughed employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home and you would otherwise have to make them redundant.

Other

Q: I have an employee who is on maternity leave how should I treat their payments?
A: If the employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply. If the employer offers enhanced (earnings related) contractual pay to women on Maternity Leave then this is included as wage costs that you can still claim through the scheme.

Q: We have a layoff / short term (LOST) working clause in our contract how should we go about furloughing our employees?
A: As you have a LOST clause in your contract it is not necessary to seek agreement to this change. However it is best practice to following the process above to ensure you have the relevant records should you need them.

Q: Do I have to continue supplying a company car/car allowance whilst an employee is furloughed?
A: This will depend on what their employment contract states about cars and personal use given the furloughed employee will be on temporary leave and not required to work. If cars are provided for business use only then an employer could ask for them to be returned, but if cars are provided for business and personal use then the furloughed employee would be entitled to keep the car. The position with car allowances will depend on whether it is paid as a separate benefit or part of normal basic pay.

Q: If an employee is unable to work due to caring responsibilities can they be furloughed?
A: Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed. For example, employees that need to look after children can be furloughed.

Q: What if paying 80% of an employee’s salary will then them under the national minimum wage?
A: Individuals are only entitled to receive the national minimum wage (“NMW”) for the hours that they work. As a result, if they are designated as furloughed workers, and 80% of their salary takes them below the national minimum wage, this is not a breach of the rules as the employee is not working. The employer is, therefore, not required to ensure the national minimum wage is received.

The employees are, however, entitled to be paid the national minimum wage for any time spent training.

 

This is intended for general information purposes only and is not legal advice. All
information was correct as of 14:00 on 10th August 2020. S4labour Ltd accepts no liability for any action taken as a result of the information provided. We will continue to publish advice as we receive further information, if anyone would like any specific help then please contact Richard Hartley, Chief Product Officer, at richard@s4labour.co.uk

For some further guidance, please listen to this great podcast.

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