Further Furlough FAQs – New Guidance Recently Published

Furlough FAQS – Coronavirus Job Retention Scheme

Published 4th April 2020

The government has recently updated its furlough guidance giving answers to questions we all had in relation to the scheme, and how to ensure businesses were able to meet the very vague criteria of the initially published furlough scheme.  We have added the answers to some of our commonly asked questions, now that we are in a position to provide official clarity.

How long will the scheme run for?

This is a temporary scheme designed to help employers who have been severely affected by the COVID-19 crisis and to protect the economy.  The scheme runs for 3 months from the 1st of March 2020.  There are no current plans to extend the scheme beyond the 31st of May 2020 and so employers need to time this correctly, and consider what may happen if there is still no work to do at the end of this period and the scheme ceases to continue.  In this situation there may be redundancies, and usual employment laws apply to this process.

Can I furlough an employee, bring them back, and place them back on furlough leave?

Yes, provided that the employee is off for a minimum of 3 weeks for each period of furlough, and taking into account the end date for the scheme.  This allows you to bring somebody back into the business to undertake essential duties for short periods of time.

What if somebody is sick during furlough?

As it currently stands, furlough leave must be for a minimum of 3 weeks so the employee would need to notify you of their sickness in the usual way.  If they would have been too unwell to work, then this would end their furlough leave and change it to sick leave and could break the furlough leave period of 3 weeks, meaning the employer may not be eligible to receive the grant for any of that furlough leave period.

Can an employee work elsewhere whilst they are on the scheme?

It will depend whether you permit this within your contracts of employment.  The guidance says this *is* possible but HMRC may look at their earnings and there is always a possibility they won’t pay out if an employee is working elsewhere for the same hours they are on furlough leave for you, and being paid 80% of taxpayer money.  This scheme is not legislated so it is down to HMRC to set their own rules and employers should bear this in mind.  If the employee had another job as of the 28th of February 2020 then they can be furloughed from one job, and continue to work in the other.  This date was implemented to prevent fraudulent activity e.g. people hiring family members after the scheme was announced.

Can someone take holiday leave whilst on furlough?

This is a tricky area which has not yet been clarified, and there are arguments for both cases.  The concern is that holiday leave *may* break the period of furlough leave and make employers ineligible for the grant.  You should take specialist advice from our HR experts on your individual situation.

Can my employees undertake training for the company whilst furloughed?

Yes, and this includes apprentices.  The furlough payment they receive from you must cover all the hours spent training at National Living Wage/National Minimum Wage.  If this payment is not enough, then employers need to top it up to the age-appropriate rate.  However, if someone is already paid NMW/NLW or close to this and you are asking them to undertake training for a significant part of their furlough leave, you are advised to seek specific advice.  In addition, this may affect any furlough leave that is designated as holiday leave, if the scheme permits this in later guidance.

What can be included for furlough payments?

The guidance has changed on this point.  The original guidance published on the 26th of March 2020, which we followed for advisory purposes, stated that the payment could not include bonuses, commissions or fees.  It would appear the approach has been relaxed now, and the guidance now states:

“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.”

The scheme goes on to say that any BIKs (Benefits in Kind) are not provided for on the scheme, but the employer may still be contractually obliged to pay these.

There are specific rules about salary sacrifice arrangements and how these may be managed; please take expert advice on this from one of our team.

Can a company director be on furlough leave?

Yes, 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)
  • Casual workers

There are some specific considerations in terms of working out and calculating the pay in each of the groups.  We can provide more specific information depending on the circumstances.

Do I have to rehire someone who has left and can’t be furloughed with their new employer?

There is no obligation for you to do this, but you are permitted to rehire and furlough them.  The decision is a moral one and depends on whether you agree to this as the former employer.  They must have been on your payroll as of the 28th of February 2020.  The scheme allows you to rehire those you have made redundant already, as long as they were on your payroll as of the 28th of February 2020.

Can I undertake statutory duties if I am a furloughed director?

Company directors owe duties to their company which are set out in the Companies Act 2006.  The guidance states that:

“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.”

This also applies to companies which provide a personal service (PSC) with a sole director.

There is a slightly more stringent process to follow in this scenario, which we are happy to guide you through, as well as the calculations for furloughed pay.

Can an employee do any work or volunteer for me whilst on furlough leave?

Not if you want to receive the grant from HMRC!  They have promised to audit this vigorously and will demand repayment of any erroneous or fraudulent claims.  In addition to this, they have the right to impose fines and/or prosecute those abusing the scheme.  Furloughed employees must have their furlough leave agreed in writing with you and you must keep a record of this for a fixed period of time – we are happy to provide a complimentary agreement for our clients to use with furloughed staff.

We are sure there will be many more questions as time goes on and the scheme continues to evolve, and our HR specialists are on hand to provide you with the latest advice to guide you through this difficult time.

Please contact our team on hrmail@nicholsonsca.co.uk and we will be happy to call or email you back as quickly as possible.

Will the grant be taxable?

Yes, HMRC confirmed that the grant must be included as income in the business’s calculation of its taxable profits. It should be noted however that as the grant covers the cost of employment the net effect on profits should be nil.

Posted in Covid-19, HR, HR Covid-19.