ESB Accountancy explains what furlough means and how is it different from being laid off for Gloucestershire employers?
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.
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.
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.
For more information on Furlough and what it could mean for your business in Gloucestershire, please see our next post: Furlough – Frequently Asked Questions for Glos Employers
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