The Furlough Guidance -further Guidance, TUPE, Holidays.

By Michael Duggan Q.C.

The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. We expect the scheme to be up and running by the end of April. It is designed to support employers whose operations have been severely affected by coronavirus (COVID-19). The Government has given further Guidance (https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme?mc_cid=177bacbc11&mc_eid=fbb90dbedd.). ACAS has also provided guidance on holidays. The main points are:

(1)         How much you can claim

You’ll need to claim for:

·              80% of your employees’ wages (even for employee’s on National Minimum Wage) - up to a maximum of ￡2,500. Do not claim for the worker’s previous salary.

·              minimum automatic enrolment employer pension contributions on the subsidised wage.

The Guidance does appear to now state that you take the gross salary and work out the 80% from that; it. You gross down.

(2)         Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed. However, you must pay your Apprentices at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) as appropriate for all the time they spend training. This means you must cover any shortfall between the amount you can claim for their wages through this scheme and their appropriate minimum wage. Guidance is available for changes in apprenticeship learning arrangements because of COVID-19. 

(3)         Administrators

Where a company is being taken under the management of an administrator, the administrator

will be able to access the Job Retention Scheme. However, we would expect an administrator

would only access the scheme if there is a reasonable likelihood of rehiring the workers. For

instance, this could be as a result of an administration and pursuit of a sale of the business.

(4)         If your employee is self-isolating or on sick leave

If you’re employee is on sick leave or self-isolating, they’ll be able to get Statutory Sick Pay.

You cannot claim for employees while they’re getting Statutory Sick Pay, but they can be

furloughed and claimed for once they are no longer receiving Statutory Sick Pay.

(5)         Shielding Employees

You can claim for furloughed employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home and you would otherwise have to make them redundant. 

(6)         Employees with caring responsibilities

Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed. For example, employees that need to look after children can be furloughed.

(7)         If your employee has more than one job

Employees can be furloughed in one job and receive a furloughed payment but continue working for another employer and receive their normal wages.

(8)         If your employee is on a fixed term contract

Employees on fixed term contracts can be furloughed. Their contracts can be renewed or extended during the furlough period without breaking the terms of the scheme. Where a fixed term employee’s contract ends because it is not extended or renewed you will no longer be able claim grant for them.

(9)         Eligible individuals who are not employees

As well as employees, the grant can be claimed for any of the following groups, if they are paid via PAYE: * office holders (including company directors) * salaried members of Limited Liability Partnerships (LLPs) * agency workers (including those employed by umbrella companies) * limb (b) workers

(10)        Office Holders Office holders can be furloughed and receive support through this scheme. The furlough, and any ongoing payment during furlough, will need to be agreed between the office holder and the party who operates PAYE on the income they receive for holding their office. Where the office holder is a company director or member of a Limited Liability Partnership (LLP), the furlough arrangements should be adopted formally as a decision of the company or LLP.

(10)      Company Directors As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned. Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

(11)      Salaried Members of Limited Liability Partnerships (LLPs)Members of LLPs who are designated as employees for tax purposes (‘salaried members’) under the Income Tax (Trading and Other Income) Act (ITTOIA) 2005 are eligible to be furloughed and receive support through this scheme.

(12)      Agency Workers (including those employed by umbrella companies)

Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through this scheme, including where they are employed by umbrella companies. Where Limb (b) Workers are paid through PAYE, they can be furloughed and receive support through this scheme. Those who pay tax on their trading profits through Income Tax Self-Assessment, may instead be eligible for the Self-Employed Income Support Scheme (SEISS), announced by the Chancellor on 26 March 2020. Read more information on the Self-Employed Income Support Scheme, including eligibility criteria and how to claim.

(13)      The normal rules for maternity and other forms of parental leave and pay apply. You can claim through the scheme for enhanced (earnings related) contractual pay for employees who qualify for either: maternity pay; adoption pay; paternity pay; shared parental pay

(14)      Agreeing to furlough employees

Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.

IMPORTANT - To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. A record of this communication must be kept for five years.

You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.

(15)      Past Overtime, Fees, Commission, Bonuses and non-cash payments

You can claim for any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.

We expressed concern that this was likely to hugely disadvantage some employees, who receive a very small salary and whose earnings are primarily based on commission. The Guidance makes it clear now that commission can be claimed provided that it was already earned before the 28th February 2020. It will be based upon the calculation set out in the next paragraph. Fees can also be claimed – the Guidance has changed the position. Non monetary benefits such as a car or health insurance are not included.

(16)      Benefits in Kind and Salary Sacrifice Schemes

The reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary.

(17)          Working for a different employer

If contractually allowed, your employees are permitted to work for another employer whilst you have placed them on furlough. For any employer that takes on a new employee, the new employer should ensure they complete the starter checklist form correctly. If the employee is furloughed from another employment, they should complete Statement C.

OTHER MATTERS

STOP PRESS:

(18)      TUPE

In a tweet, David Johnston MP has stated that the Treasury has confirmed that employees transferred after 28th February 2020 can get the benefit of the Scheme.

HOLIDAY ENTITLEMENT

(19)      Requiring employees to take holiday

There was a debate whether employees can be on furlough and take holiday at the same time. ACAS has produced Guidance (https://www.acas.org.uk/coronavirus/using-holiday). The original guidance stated 

“Carrying over holiday

During the coronavirus outbreak, it may not be possible for staff to take all their holiday entitlement during the current holiday year.

Employers should still be encouraging workers and employees to take their paid holiday. Employees and workers should also make requests for paid holiday throughout their holiday year, if possible.

The government has introduced a temporary new law allowing employees and workers to carry over up to 4 weeks’ paid holiday over a 2-year period. This law applies for any holiday the employee does not take because of coronavirus, for example if:

·  they’re self-isolating or too sick to take holiday before the end of their leave year

·  they’ve been temporarily sent home as there’s no work (‘laid off’ or ‘put on furlough’)

·  they’ve had to continue working and could not take paid holiday

The second bullet point suggested that it is not possible to be furloughed and take holiday at the same time. Whilst the first and third categories are understandable and in accordance with existing case law, the second category is more difficult. The employee is limited as to what he or she can do when on furlough so that the argument is that this is similar to being off sick or on maternity leave where the ability to take holi8day is limited (following such cases as Pereda v Madrid Movilidad SA [C-277/08, [2009] IRLR 959 (referred to in our first Bulletin) and Merino Gomez v Continental Industrias del Caucho SA [2004] IRLR 407 – see Duggan QC on Contracts of Employment at K47). On the other hand the quality of the leave is irrelevant provided that there is rest (Russell v Transocean International Resources Limited [2012] ICR 185, Duggan at I17 & 56).  

We were of the view that they can but they must be paid 100% of their salary based upon the reference period

IMPORTANT

The Guidance has been changed by ACAS. It now states:

“Requiring staff to take or cancel holiday

Employers have the right to tell employees and workers when to take holiday.

An employer could, for example, shut for a week and tell everyone to use their holiday entitlement.

If the employer decides to do this, they must tell staff at least twice as many days before as the amount of days they need people to take.

For example, if they want to close for 5 days, they should tell everyone at least 10 days before.

Employers can also cancel pre-booked paid holiday. If they decide to do this, they must give staff at least the same number of days’ notice as the original holiday request.

For example, if an employee has booked 5 days holiday, the employer must tell them at least 5 days before the holiday starts that it’s cancelled.

This could affect holiday staff have already booked or planned. So employers should:

·  explain clearly why they need to do this

·  try and resolve anyone's worries about how it will affect their holiday entitlement or plans”

(20)      The Government gave the right to carry over holiday pay in the  Working Time (Coronavirus) (Amendment) Regulations 2020 which amends regulation 13 of the WTR to allow workers to carry over EU holiday into the next two leave years, where it is not reasonably practicable for them to take some, or all, of the holiday they are entitled to due to coronavirus. This applies to the first 4 weeks but does not cover additional holiday leave. We are of the view that holiday pay must be paid at 100% since it will be calculated on the reference period (after 6th April 2020 on the previous 52 weeks). 

(21)      If holiday leave is incompatible with furlough, it would mean that day’s leave will break the 3-week requirement. This may be particularly an issue when it comes to bank holidays if they are normally regarded as a paid leave day.

Second Intelligence Report: The Furlough Scheme and Self Employed: Practical Examples:  CLICK HERE

Intelligence Report: The Coronavirus Crisis: Employment Law Issues: CLICK HERE

Ethical veganism as a protected characteristic: see Briefing 20: click here

Changing employment terms and conditions: see Briefing 19: click here

Recent cases on TUPE: see Briefing 18: click here

Important Supreme Court Case on Restrictive Covenants: see Briefing 17: click here

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