Your questions answered: furloughing

Last month Ceri Stoner and Seth Roe of Wiggin LLP  invited you to ask questions on the Government's Coronavirus Job Retention Scheme. Here are their answers to the issues you raised.

To see the video of Ceri and Seth's original presentation on Monday 20 April, 2020 go to: Media lawyers explain Government coronavirus support

Eligibility

Are employees on fixed term contracts that have ended eligible to be furloughed?

Subject to the applicable cut-off dates (see below), it has been confirmed that employees or PAYE workers on fixed term contracts that have expired can be re-engaged and furloughed:

  • Workers whose contracts expired between 28 February 2020 and 19 March 2020, will be eligible if an RTI submission was notified to HMRC on or before 28 February 2020; and
  • Workers whose contracts expired after 19 March 2020, will be eligible if an RTI submission was notified to HMRC on or before 19 March 2020.

Employers are not obliged to re-engage and furlough an ex-employee/worker so some individuals who are technically eligible may still find that they are unable to receive support under the scheme.

Is an employee eligible to be furloughed if their contract came to a natural end on 28 February 2020?

Yes, as per the above question, if an employee’s contract ended on 28 February 2020 (for any reason) they can be re-engaged and furloughed provided they were on payroll as at 28 February 2020 and an RTI submission was made to HMRC on or before 28 February 2020. This would not be the case if the contract came to a natural end before 28 February and they were therefore not employed on 28 February.

Is an employee eligible to be furloughed if the show they were working on wrapped before 28 February 2020 but they were paid until 4 March 2020?

This will depend on whether the employee was still employed on or after 28 February. If their employment terminated prior to 28 February 2020 they will not be eligible, even if there was an RTI submission notifying payment in respect of them after this date.

If the employee was still employed on 28 February 2020, they can be re-engaged and furloughed provided that there was an RTI submission notifying payment in respect of them on or before 28 February 2020.

Is an employee eligible to be furloughed if they were employed prior to 28 February 2020 but not paid until 31 March 2020?

No, an employee in this situation will not be eligible as the RTI submission will not have been made by either of the relevant cut-off dates (28 February 2020/19 March 2020).

Is an employee eligible to be furloughed if they were paid on 28 February 2020 but their contract had already ended prior to this date?

No, an employee will only be eligible if they were employed on or after 28 February 2020.

If an employee started work on 8 March 2020 but the RTI wasn’t submitted until 20 March 2020 will they be eligible and if not is there any scope of this being changed?

As it stands the employee would not be eligible as the RTI must have been submitted on or before 19 March 2020. The current guidance is very clear that an RTI on or after 20 March 2020 will not be acceptable. We consider that it is very unlikely that this position will change.

Is the cut-off date likely to be extended past 19 March 2020?

No. The Coronavirus Job Retention Scheme was announced on 20 March 2020 so the 19 March date is a cut-off date in order to prevent abuse, e.g. individuals hearing about the scheme and then adding friends/family members onto their payroll. The chances of this cut-off date being changed are very remote.

Are individuals who have had their contracts postponed eligible under the scheme? If not, is there anyone at HMRC that they can speak to about this?

Unfortunately, if an individual did not start work prior to 19 March 2020 they will not be eligible to be furloughed. The Government seem unlikely to change their stance on this position (particularly because they will be relying on RTI submissions to verify claims) so such individuals would be best placed to see what other support may be available to them. For example, if they have carried out self-employed freelance work they may be eligible for a grant under the Self-Employed Income Support Scheme or depending on their circumstances they may be eligible for Universal Credit.

If an individual is re-engaged by their old employer can their furlough leave be backdated to the date after their contract ended?

The current language in the guidance indicates that furlough periods in respect of re-engagements should not be backdated. We therefore consider that in the case of re-engagements, an individual’s furlough leave should start from the date on which they are actually put back under contract.

Arrangements during furlough leave

If an employee is furloughed can they carry out work for other employers and, if so, how will that affect their furlough pay and their tax?

Employees are permitted to volunteer or work for other employers while they are on furlough leave provided that their contract allows for this. If it is not permitted under their contract, they will need to seek permission from the employer that furloughed them.

An employee can receive furlough pay from one employer and their usual pay from another employer, both of which will be taxable.

What does the guidance mean when it states that the employee cannot conduct work for a company associated with their employer?

Companies will be ‘associated’ with their employer if they are part of the same corporate group or a partner in a joint venture. Furloughed employees should not carry out any work for such companies during their period of furlough leave. 

What is the position if an employer offers to backdate furlough leave to the date an employee’s contract ended and provides that an employee cannot work elsewhere during that time, but the employee has already carried out work elsewhere?

There are two issues here: 1) the backdating of furlough leave; and 2) carrying out work elsewhere.

As noted above, an employee on furlough leave can work elsewhere provided that their contract doesn’t prohibit this/their employer consents. This will therefore not technically impact the employee’s eligibility to be furloughed and will be a matter to be resolved between the employee and the employer.

In terms of the backdating, the current guidance implies that employers should not backdate the start of someone’s re-engagement and that claims should be made from the date on which individuals are actually put back onto contract.

In this scenario, the employer may therefore not be able to reclaim the sums for the backdated period (or, if such sums have already been claimed and the grant has been received, it is possible that HMRC could seek to recover them at a later date following an audit).

Do you think the guidance will be updated to allow employers to claim the holiday accrued during furlough as part of the grant?

The Government’s guidance suggests that holiday taken during furlough leave should be paid out at the full rate of the individual’s pay. It is therefore unlikely that the Government would amend the scheme to allow full reimbursement of this amount as this could make the scheme significantly more expensive for the Government than it already is (given holiday costs for those earning substantially more than the furlough pay cap could be significant) and we suspect that any extensions to the scheme will be aimed at increasing its duration rather than addressing holiday costs. However, the Government has made clear that the policy on holiday pay will be kept under review so it is possible that there may be some changes to the guidance in this respect.

Calculations

If an employer runs a monthly payroll for people on a weekly rate and pays based on the number of working days in each month (meaning that the individuals’ pay varies each month) how should the employer calculate the furlough payments?

The employer should calculate the furlough payments in accordance with the guidance on employees who have variable pay.

The employer can claim the higher of:

(i) their same month’s earnings from the previous year; or

(ii) their average monthly earnings in the 2019-20 tax year; or

(iii) if an employee has been engaged for less than a year, their average monthly earnings since starting work until the date they are furloughed; or

(iv) if an employee has been employed for less than a month, a pro-rata of their earnings so far.

The employer can use the Government calculator which is available here. Please note that there have been some teething issues with the calculator. We understand that these are being addressed but, in the event that the calculator provides a different answer from that you expected having reviewed the guidance, it may be worth contacting HMRC for clarification. If this isn’t forthcoming, we recommend using the figure provided by the calculator, but keeping a record of this, e.g. a screenshot of the figure provided by the calculator.

Maternity leave

If an employee is currently on furlough leave but is due to go on maternity leave in August 2020, should the employer continue to follow its existing maternity policy?

Yes, based on the current guidance, the job retention scheme will end on 30 June 2020.  Therefore, assuming that the employee returns to work following (or before) this date, her employer would then handle her maternity leave in accordance with its usual policy.

The Government guidance has recently been updated to confirm that the normal rules for maternity apply, but that employers may need to calculate an employee’s average weekly earnings differently if the employee was furloughed and started maternity leave on or after 25 April 2020. The guidance for employees confirms that if an employee’s earnings have reduced because they were put on furlough and then started maternity leave after 25 April 2020, the amount they receive in pay should not be affected.

Dismissals

If the scheme is not extended past June and there is a need for redundancies, what obligations does an employer have?

This will depend upon the specific contractual arrangements and the number of employees impacted. However, if an employer is contemplating dismissing 20 or more employees at one establishment within a 90 day period they will need to comply with the collective consultation obligations.

In addition, for those employees with at least two years’ service, employers will likely want to ensure that they consult on an individual basis and follow a fair process when carrying out such a redundancy to avoid potential claims for unfair dismissal.

For employees with less than two years’ service, employers may be able to avoid a typical redundancy consultation process but would still need to comply with any contractual provisions regarding termination of the contract.  

Mechanics of claiming

Should an employer’s claim period align with their payroll submission?

The Government guidance suggests that it is up to each employer to decide the length of their claim period, but recommends that an employer should think about how frequently they run their payroll. It therefore makes sense for an employer to tie in their claim period with their payroll submission. It is worth remembering that an employer can only make one claim during a claim period and that an employer cannot make further claims for the same or overlapping periods. Employers should therefore ensure that they include all employees furloughed during the relevant period in their claim.

Is it possible for an employee to find out when their RTI information was submitted without asking their employer?

If the employer uses an external payroll provider the employee could ask them to provide this information or alternatively the employee could contact HMRC directly. However, due to the current volume of queries that HMRC are receiving, the most efficient way to confirm an RTI will be to contact the employer and ask for written confirmation of the position. It is worth noting that even if an RTI was made by the relevant cut-off date, an employer is still not obliged to furlough any employee.  

Data relating to an employee’s RTI submission is likely to constitute personal data and could therefore be sought pursuant to a data subject access request (DSAR) under the GDPR and the Data Protection Act 2018, albeit respondents to such requests have a month to comply with these so this will not be of immediate benefit to an employee in the short term.

Disclaimer

This FAQ was produced on 5 May 2020 and is for general information purposes for members of ScreenSkills only. It is not to be distributed more widely. It is not addressed to any specific parties and does not constitute advice (legal or otherwise) to any person. The application of the Treasury’s Direction and HMRC’s associated guidance relating to the Job Retention Scheme and Self-Employed Income Support Scheme can be complicated. Readers should be aware that these rules are subject to ongoing revisions by the UK government and HMRC and therefore cannot be considered as finalised at the time of writing these FAQs. ScreenSkills and Wiggin LLP do not accept any ongoing responsibility for updating these FAQs in line with the latest legislation, regulations, guidance or case law after the date of publication of these FAQs. Furthermore, please note that ScreenSkills and Wiggin LLP do not accept any liability in any circumstances to any other parties for any losses arising in relation to any actions, inactions or determinations made in relation to these FAQs. We recommend that anyone with any specific concerns or questions seek up to date advice in respect of their particular circumstances.


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