Coronavirus (COVID-19) and employment – further update on Job Retention Scheme
BREAKING NEWS for employers 6 April 2020
Overnight on Friday 3 April 2020, the Government updated the guidance on the Coronavirus Job Retention Scheme ('the Scheme'). The key changes and clarifications are set out below. If you need a copy of our previous guidance on the Scheme, please email us; alternatively, you can find a copy on our website here.
Employees CAN seek new alternative employment whilst on furlough
Whereas the old guidance was silent on this point, the new guidance expressly permits it. As a result, employees might be in a position where they receive 80% of salary from their existing employer, as a result of being furloughed, and earn 100% of an additional salary from a new employer at the same time.
The guidance makes the point that, in order for employees to take advantage of the above, the ability to work for another employer has to be permitted under the employee's contract of employment. It is often the case, particularly in certain sectors, that employment contracts will not permit this, and will include a clause to the effect of "whilst employed by us, you will not carry out work for any other employer".
However, we see no reason why, even if your employment contracts include such a clause, this cannot be relaxed on a temporary basis in order that your employees can seek additional work to maintain their previous level of income and ensure that they are still able to meet their outgoings. As long as an employee is not undertaking work which is competing with your business in any way, this would be a reasonable stance to take.
Employers CAN re-hire employees who left work after 28 February 2020
There has been a huge amount of talk about this potential development, particularly from 'Money Saving Expert', Martin Lewis. Some of our clients have already been contacted by employees who have voluntarily left employment after 28 February 2020, to ask whether they could be re-employed and then furloughed.
The new guidance has confirmed that employers are able to re-employ and then furlough those employees who have left after 28 February 2020, even where they have left voluntarily and have not been made redundant.
Importantly, there is no obligation on employers to do this – just the option to do so.
An employer CAN include contractual overtime, commission and fees in calculation of 80% salary from HMRC
The previous guidance stated that commission and bonuses were not included in the calculation of an employee's salary for the purposes of the reimbursement under the Scheme.
The new guidance amends the previous position, and expressly states that 80% of 'compulsory' commission, past overtime and 'fees' can be reclaimed. There isn't any definition of 'compulsory', but we assume that this refers to contractual commission. We would also assume that the Scheme only relates to contractual overtime and 'fees', as the guidance states that 'you can claim for any regular payments you are obliged to pay your employees'.
There is no express statement that contractual bonuses are included in the calculation. The guidance expressly references that discretionary bonuses (including tips) are excluded, but does not confirm the position in relation to contractual bonuses. This is something which we would have expected to be clarified in this latest round of updates.
The clarification regarding 'fees' is of little practical use, as it is entirely unclear to what the Government intends to refer when it uses the term 'fees'.
Employees CAN be furloughed on multiple occasions
This was implicit in the previous guidance, and we have already been advising our clients that, subject to the minimum three-week furloughing period, they can administer the Scheme in this way in order, for example, to provide fairness amongst employees.
The new guidance has simply confirmed our view – employees can be furloughed, brought back to work and then re-furloughed, as long as each period of furlough is at least three weeks.
Employers MUST notify employees of their furlough status in writing
This was not set out explicitly in the previous guidance, but it is an obvious measure that employers should be taking as a matter of course, and we have advised all of our clients to keep such a paper trail since the Scheme first went live on 20 March 2020.
The new guidance is helpful in clarifying that such written notification needs to be kept by the employer for five years. This is useful to know, particularly as, prior to this, employers would have had to make a decision based on what was 'no longer than necessary' under the GDPR.
An employer CANNOT claim the cost of any non-monetary benefits
The 80% reimbursement does not include the monetary value of e.g. health insurance or a company car. Similarly, benefits provided through salary sacrifice schemes, which reduce an employee's taxable pay, should not be included.
POSSIBILITY for employees to 'switch out' of salary sacrifice schemes
In normal circumstances, an employee cannot freely extract themselves from a salary sacrifice scheme unless there is a 'life event'. However, HMRC has agreed that Coronavirus (COVID-19) counts as a 'life event' which could allow changes to salary sacrifice arrangements, as long as the employment contract is updated accordingly.
Company directors CAN be furloughed
Although, once again, this was fairly clear from the previous guidance, it has been confirmed that executive directors, who are also employees of the business, can be furloughed from their employment and permitted to perform their statutory duties only. It is important that they do not otherwise work for the business during a period of furlough (as they might be minded to do!), as this will negate the entitlement to reimbursement under the Scheme.
Other useful clarifications
- Apprentices can be furloughed and can continue to train whilst on furlough. However, employers must pay their apprentices at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (as applicable) for all the time which they spend training. The practical implication of this is that the employer must cover any shortfall between the 80% reimbursement from the Scheme, and the appropriate minimum wage.
- Employees who are unable to work, because they have caring responsibilities resulting from Coronavirus (COVID-19), can be furloughed. This may most commonly apply to those employees who need to look after children not in school as a result of Coronavirus (COVID-19). This means that, even where you have employees in sections of your business which might otherwise not be subject to furloughing (because, for example, there is an upturn in work for that department), you could still seek to agree to furlough with those who are having difficulty attending work due to childcare.
- Employees on fixed-term contracts can be furloughed. Even prior to this clarification, this was undoubtedly the case, and we have been advising clients that the contracts of such employees can be renewed or extended during a period of furlough without breaking the terms of the Scheme. However, where a fixed-term employee's contract ends because it is not extended or renewed, then the employer will no longer be able to claim HMRC reimbursement for them.
- For those employees who are on maternity leave, adoption leave, paternity leave or shared parental leave, the normal rules for maternity and other forms of parental leave and pay apply. However, employers can claim through the Scheme for any enhanced, earnings related pay (i.e. contractual 'company' maternity or other family leave pay).
- There is still no clarity on the interaction between furlough and annual leave, and any employer right to require employees to take annual leave during a period of furlough.
- The situation in respect of employees who have been transferred to a new employer by virtue of TUPE, after 28 February 2020, is not addressed. Our current view (but, NB, only our interpretation of the guidance) is that such employees would not be caught by the Scheme and, as a result, their new employer would not be able to claim 80% of their salary from HMRC. We suspect that this is an unintended consequence of the way in which the guidance has been drafted, and is something which has clearly not been considered by the Government to date. We are hopeful that clarification will be provided soon.
[CONTENT CORRECT AS AT 6 APRIL 2020]
If you would like to discuss any of the issues raised in this article, or have other concerns about the impact of Coronavirus, please contact Rachael Lloyd, James Baker or Andrew Tobey in Michelmores' Employment team.
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This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact our specialist lawyers to discuss any issues you are facing.