COVID-19 HR & Staffing

French Duncan


 

Full details of how we can help you around COVID-19 / Coronavirus is available on our special page (www.frenchduncan.co.uk/covid-19) which you can access by clicking here, which now includes a set of Furlough Template documents for FREE DOWNLOAD. We will be keeping all our information updated as things progress and schemes are clarified, so please check back regularly, or follow us on Twitter or LinkedIn to keep informed of all the changes. 

COVID-19 / Coronavirus Job Retention Scheme

Written Sunday 22 March, but we undertook a full update at 2pm Monday 7th April. If you read the blog before that date, please review again as many details have now been clarified by the Government.

The impact of COVID-19 on the world is beyond unprecedented in terms of the health and societal impact, alongside the stark challenges presented to business.

For the majority of companies in the UK, staff are their biggest asset but also their biggest cost. As the virus continues to rapidly spread across the UK, it is affecting people’s ability to attend work and the ability of business to operate, and with this there is a growing concern as to how to cover costs to survive.

In response, the Chancellor has set out a package of temporary measures to support companies through the severe cash flow issues they face. As part of this, on 20 March 2020 the government announced support to employers to temporarily pay part of their salary costs. We have set out below the current information relating to this, and will continue to update this as detail emerges.

 

The word ‘furlough’ – why’s it important and what does it mean?

The dictionary definition of furlough is a “leave of absence”. Furlough is a not a legal definition in the UK or commonly used in employment law, but the government intend to use this terminology in relation to what they are calling the Coronavirus Job Retention Scheme.

The basic principle of this scheme is that employers will be able to access this support to continue paying their ‘furloughed’ employee’s salary in part as an alternative to either lay off or redundancy.

 

Our 10 Step Guide to Furloughing Employees

We have created a 10 step guide to support you in the practical steps of how to furlough your employees under the Coronavirus Job Retention Scheme.

Step 1: Understand what you can claim

All UK businesses (of any size and in any sector) will be eligible to access this scheme, providing they have:

  • created and started a PAYE payroll scheme on or before 28 February 2020;
  • Enrolled for PAYE online
  • A UK bank account

Simply put, you can claim the lower of 80% of an employee’s regular wage or £2,500 per month. You can also claim the associated Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions.

Step 2: Determine whether you have sufficient cash flow to furlough staff

The funding available from the government to support employers through the current crisis is unprecedented. The HMRC are currently building the portal and intend to have this ready for the end of April. It not yet clear when payments will be made, but it is anticipated that a large proportion of employers will be accessing this which could cause capacity issues.
Bearing this in mind, employers considering furlough need to forecast whether they have sufficient cash flow to retain and pay their employees on the payroll until they receive their grant claim. If there is not sufficient cash flow, other options such as lay off or unpaid leave may need to be considered.

Step 3: Designate the employee(s) as ‘furloughed workers’

The employees an organisation are able to furlough will vary. Within leisure, hospitality and non-essential retail, all employees could be furloughed whilst the business is temporarily closed. For other organisations where staff can work remotely, they may be experiencing a downturn in work, and wish to operate a reduced staffing level – in this scenario, an operational review would be required.

The following points are important to bear in mind when considering designating staff as furloughed: 

You CAN:

  • Furlough employees who were made redundant or stopped working for you (e.g. resigned) since 28 February 2020 providing they are re-employed;
  • Furlough employees who are ‘shielding’ and or have caring responsibilities as a result of the coronavirus; and
  • Furlough salaried company directors providing this is formally adopted as a decision of the company and noted in the company records. The director can continue to carry out statutory obligations but they cannot do anything which could generate revenue or provide services to or on behalf of the company.

You CANNOT:

  • Have a furloughed employee cannot undertake any work during this period, and therefore this is not open to staff on reduced hours;
  • Furlough an employee hired after 28 February 2020 – in order to qualify for the grant, the employee MUST have been on your PAYE payroll on or before 28 February 2020; and
  • Furlough employees where you receive public funding for staff costs.

Step 4: Notify the employee(s) they have been identified as furloughed 

The government guidance states you MUST do this in writing and retain this documentation for 5 years.   Please download our FREE TEMPLATES by clicking here.

Whilst on furlough leave, employees CAN:

  • Continue to work for a second whilst furloughed by you, and they can be furloughed by that employer also;
  • Start work with a new employer if you are in agreement with this – they should ensure their new employer arranges for them to complete an HMRC starter declaration and they should choose Statement C (i.e. they have another job);
  • Volunteer for another organisation; and
  • Undertake training (you should pay for this for staff on the national minimum wage).

Step 5: Agree with employee(s) to reduce their pay by 20%

Some employers may be in a position to ‘top-up’ the additional 20%, but it is anticipated many will need to reduce employee pay to 80% and you will need to agree this with employees, along with their consent to be furloughed. This should be agreed with the employee and documented – again please see our FREE TEMPLATES for advised wording.

Step 6: Process any pay amendments through payroll

If you are reducing pay, you should ensure you update your payroll system or your outsourced payroll provider of the employees who are furloughed. To calculate what employees are due, you would apply the 80% as follows:

  • For salaried employees, you would use the employee’s actual salary before tax, as of 28 February 2020
  • • For employees with variable pay who have 12 months service prior to the claim, you would claim the higher of:
    • The same month’s earning from the previous year
    • Average monthly earnings from the 2019-2020 tax year
  • For employees with variable pay who have less than 12 month’s service, you would calculate for the average of their monthly earnings since they started.
  • For employees who only started in February 2020, you would calculate the pro-rata of their earnings so far.

You can claim for employer National Insurance and minimum automatic pension contributions up to the 80%. You can also claim for past overtime, fees and compulsory overtime, but you cannot claim for discretionary bonus or commission payments, or non-cash payments.

Please note, where you are processing employee’s on the National Living Wage or National Minimum Wage, it is acceptable for them to be paid less than the current rates where you apply the 80% because they are not carrying out work whilst furloughed. The only exception is where they undertake training for you, they should be paid for this as normal as detailed above.

Step 7: Keep your plans under review

The scheme is due to run until 31 May 2020, but may be extended. In order to qualify for the grant, your employees must be furloughed for a minimum of 3 weeks so we would suggest reviewing operations and developments in line with this and making adjustments accordingly.

Please note, you can furlough employees multiple times providing each instance is for a minimum of 3 consecutive weeks. This could be beneficial for employers who wish to rotate staff to maintain a skeleton operation.

Step 8: Keep in touch with your employees

Whilst your employees cannot work for you in any way whilst they are furloughed, it is advisable to keep in touch with them regularly and in particular where there are developments, such as if restrictions are lifted allowing you to open your premises.

Step 9: Making your claim

You will make your claim via an HMRC portal which is not currently available. It is expected to be ready by the end of April 2020.

You will need to tell the HMRC certain information, such as:

  • Your ePAYE reference number
  • The number of employees you have furloughed
  • The period of your claim
  • The amount you are claiming – you will be required to calculate this
  • Your bank and contact details

On receipt of your claim, if you are eligible for the grant, the HMRC will make a payment to you via BACS.

Step 10: Review your future requirements

The government has said that the scheme will be in place as long as it is needed. The impact of the crisis on business is likely to be long lasting - returning to normality, even when restrictions are lifted, will not be overnight. With this in mind, businesses should ensure they are conscious of what they need going forward to maintain business critical functions. This may require streamlining your activities and considering reducing your headcount.

 

How French Duncan can help

The French Duncan HR team are on hand to help you in implementing furlough and other measures to survive the current crisis. 

If you would like to arrange a free telephone consultation with our HR team or discuss resources available, please contact 0141 221 2984 and we will direct you to our team.

Points of contact:

 

Further Information

For more information on the various others issues and assistance available around COVID-19 / Coronavirus, please visit https://www.frenchduncan.co.uk/covid-19/, which now includes some FREE TEMPLATES for Furloughing staff.

Here you will also find information HMRC deferralsbusiness loans including Coronavirus Business Interruption Loan Scheme (“CBILS”), personal tax & self-assessmentdebt assistance & restructuring and much more. You can also find contact details of the key staff able to help you further. 

 

 

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