The Coronavirus Job Retention Scheme (Furlough Leave) 

The Coronavirus Job Retention Scheme will support companies by helping them pay employees who would otherwise be laid-off or made redundant. The scheme is in place until October. In November, it will be replaced by the Job Support Scheme

How Does Furlough Work? 

Employees subject to the scheme will be kept on their employer's payroll and will receive 80% of their wages. A worker must be furloughed for at least 3 weeks for their employer to be eligible to claim support. The scheme will back date pay to 1st March 2020. 
Originally the scheme did not apply to workers whose hours are reduced, but who are still working part time. From July, employees were able to return to work part time. Employers still pay the employees wages as normal for the hours worked, and may continue claiming grants for the hours not worked. There are no requirements around the number of hours the employee must work.  
If the employee’s contract of employment allows the employer to temporarily lay off the employee, then they may do so and access this support. Otherwise, both the employer and the employee must agree to the ‘furlough’ arrangement. It is likely many employees will agree given the economic climate, as the alternative is likely to be redundancy
Employers must confirm in writing to their employee that they have been furloughed, and a record of this communication must be kept for five years. However, claims should start from the date that the employee finishes work and starts furlough, not when the decision is made or confirmed in writing. 

Flexible Furlough and Tapering Support 

The Coronavirus Job Retention Scheme will finish at the end of October 2020. The government has announced a plan to help businesses restart slowly while still receiving some support: 
July: Employees may be brought back to work on a part time basis, with employers paying their wages for the hours worked and claiming grants for the hours not worked.  
August: Employers will start paying National Insurance and pension contributions. 
September: Grants will cover 70% of employees' wages up to £2,190. Employers will top up the grants so that employees continue to receive 80% of their wages, up to £2,500 per month. 
October: Grants will cover 60% of emplyees' wages up to £1,875, with employers topping up the grants.  
November: The Coronavirus Job Retention scheme ends. It is replaced by the Job Support Scheme, which will run until April 2021. This scheme will only support 'viable' jobs, where the employee can work at least one third of their normal hours. The hours worked will be paid at the normal wage, with the burden of the remaining unworked hours split between the government, the employer and the employee.  

Who is Eligible? 

Only employees taken on before 19th March 2020 are eligible for furlough leave. However, employers may re-employ staff who have been made redundant or stopped working for the employer since 19th March and place them on furlough leave. 
Though the scheme is primarily to help employers that have been severely affected by coronavirus to continue paying their employees and avoid individuals being left out of work, all employers are eligible to claim. Any entity with a UK payroll can apply, including businesses, charities, recruitment agencies and public authorities. 
Types of contract 
Employees on any type of employment contract, including full-time, part-time, agency, flexible, fixed term or zero-hour contracts, are eligible for furlough leave. Fixed term contracts may be renewed or extended during the furlough period. Individuals can furlough employees (for example a nanny) so long as they are paid through PAYE. 
Company Directors 
A company board of directors may place individual directors on furlough leave so long as they consider it in compliance with their statutory duties under the Companies Act 2006. 
Agency Workers 
Agency workers paid through PAYE are eligible. Furlough should be agreed between the agency, as the deemed employer, and the worker, although in practice clients should be involved in the discussion. Agency workers must not undertake any work for, through or on behalf of the agency or its clients while they are furloughed. 
Foreign Nationals 
Foreign nationals are eligible to be furloughed. 
Publicly Funded Organisations 
Employers who receive public funding for staff costs are expected to use the existing funding to pay staff, so long as it is continuing. 
Employees who are shielding, self-isolating or unable to work 
Employees who have coronavirus or are self-isolating on government advice are entitled to Statutory Sick Pay (SSP) from the first day of absence. You cannot claim furlough allowance for employees while they’re getting SSP but you can furlough them and, once they are no longer receiving SSP, claim support for their wages. 
You may furlough employees who are unable to work because they are unable to work from home while shielding based on public health advice. Similarly, you may furlough an employee who is unable to work because of caring duties resulting from coronavirus (for example, childcare is no longer available). 
Apprentices can be furloughed in the same way as other employees. However, if they continue to train whilst furloughed they must receive at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage for time spent training. The employer is responsible for paying any extra wages required to meet this level. 

What Happens While on Furlough Leave? 

Employees on furlough cannot undertake work, provide services, or generate revenue for or on behalf of the organisation. Employers should allocate critical business tasks to staff that are not furloughed. 
From July, employees may be brought back to work on a part time basis. Employers will pay their employees wages for the hours worked, and may continue to claim grants for the hours not worked. An employee must not work during the hours being claimed through the scheme.  
A furloughed employee can undertake volunteering or training, so long as it does not provide services to or generate revenue for the organisation. Employees are entitled to receive the National Minimum Wage for the time spent training at the request of the employer, and it is the employer’s responsibility to top up the employee’s wages, if necessary, to meet this level. 
If contractually allowed, employees are permitted to work for another employer whilst on furlough. Employees who already have more than one job can be furloughed in one role and continue working in the other, receiving their normal wages. If they are furloughed in each role, the cap on wages is individual to each employer. 
Directors may carry out duties to fulfil their statutory obligations provided they do no more than would reasonably be judged necessary for that purpose. They should not continue doing any work that generates revenue or provides services to the company. This also applies to salaried individuals who are directors of their own personal service company (PSC). 

What Happens After Furlough Leave? 

Currently, employees must be taken off furlough when they return to work. However, employees can be furloughed multiple times as long as each separate instance is for the minimum period of 3 consecutive weeks. 
There is no requirement that the employment continue after furlough leave is concluded. However, the normal requirements and protections of redundancy apply during and after furlough leave. Employers will receive a £1,000 grant for each employee who returns from Furlough leave and is employed until January 2021. This grant may be claimed even if the returning employee is placed on the Job Support Scheme.  
HMRC will continue to monitor businesses after the scheme has closed. 

Calculating the Amount to Claim 

HMRC will reimburse the employer 80% of the employee’s wages, up to £2,500 per month. From September, HMRC will reimburse 70% up to £2,190, reducing to 60% up to £1,875 in October. Employers must top up the grant so that their employee still receives 80% of their wage, up to £2,500.  
Employees with variable earnings will be eligible for 80% of whichever amount is the higher, either their earnings for the same period last year or their average earnings for the last 12 months. If the employee has been with the employer for less than 12 months, they will receive 80% of their average earnings over their time with the employer. 
Regular payments that employers are obliged to pay, such as past overtime, fees and compulsory commission payments, may be included in calculating the employee’s wage. 
Discretionary bonuses, commission payments and non-monetary benefits should be excluded. Benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also be excluded. However, employees are able to switch out of such schemes, as Coronavirus is being classed as a ‘life event’ that warrants changes to the agreement. 
As furloughed workers are not carrying out work, they are not entitled to the National Living Wage or National Minimum Wage during this time. However, if an employee is required to undertake training while on furlough leave, they must receive the appropriate minimum wage for the time spent training. It is the employer’s responsibility to pay the extra cost to meet this level. 

Financial Considerations 

Employers may choose to top up their employee’s salary so that they receive their usual wage, but are not obliged to. Employees receiving their full salary still must not complete any work for their employer. 
Employers must pay their employee the full grant. Grants cannot be used to substitute redundancy payments, or otherwise deducted from. 
Employees will still pay the taxes they normally pay out of their wages. Employers continue paying their National Insurance and pension contributions on behalf of furloughed employees and may claim for these contributions until August, when they must begin paying these contributions themselves. These amounts will be based on the lower of 80% salary or £2,500 per month, rather than the usual amount. They may not claim for additional costs if they choose to top up their employee’s salary to 100% or make pension contributions above the mandatory contribution. 

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