COVID-19: Our HR team answer your FAQs

• ‘Furlough’ essentially means a temporary leave of absence. It is not a term that has been previously used in the UK but given the unique set of circumstances UK businesses are facing, it is now very relevant.  Many businesses (including, but not limited to, those in retail and hospitality sector) simply cannot provide work for staff during this temporary period of closure but will need these staff back at work once business can resume. Unlike redundancy, furloughed employees remain on payroll and usually return to their job at the end of the period of absence.  In addition, they retain their employment rights to such things as redundancy pay, maternity rights, pension contributions and holiday accrual.
• In the limited case of businesses whose premises remain open, furlough may also apply to some of your staff who are unable to attend work because they are shielding (or at home with someone who is shielding) based on government health guidance and whose work simply cannot be done from home. Likewise, for employees who cannot attend a functioning workplace (or work at home) because they have caring responsibilities directly stemming from the COVID circumstances (such as childcare, in the absence of their usual childcare or education facilities).
• Importantly, employees designated as furloughed may not carry out any work at all for the employer during the furloughed period.  This includes the provision of any services or generating revenue in any way. Therefore, if staff can work at home (and with children around, in many cases) then you should continue to pay them (and they will not qualify as ‘furloughed’), even if that requires consulting to place them on reduced hours. Much depends on your business: the practicalities of whether certain work can be done remotely, what you can afford, how long you can afford it for, and how your decisions may impact business continuity.
• Furloughed employees can do volunteer work or training –in fact this is encouraged–, provided this neither provides a service for your business nor generates revenue for it. Any compulsory training which they complete for their job whilst on furlough must be paid at least at National Living Wage / National Minimum Wage level, even if the amount of furlough pay they are receiving does not meet this minimum.
• It is possible to move staff in and out of furlough as business needs dictate. However, the minimum length of any period of furlough will be three weeks. This is worth considering as it enables you to rotate staff in and out of the business as needed, and where applicable and possible.

Firstly, all employees who were on payroll on 19th March 2020 and meet the RTI requirement below are covered, including full-timers, part-timers, employees on agency contracts and employees on zero hours contracts. The RTI requirement is that they are on your PAYE system and were notified to HMRC on an RTI submission on or before 19th March 2020. It should be noted that any eligible employees who are on foreign visas can be claimed for; the grant does not constitute ‘access to public funds’, and employers can claim in respect of eligible employees on all types of visa. Unfortunately, anyone joining your payroll after that date (or yet to join but with a signed contract and future start date) will not be covered under this scheme and should apply instead for Universal Credit.

• If you made any of your payrolled employees redundant after 28^th February 2020 but prior to 19th March 2020 as a direct result of the impact of COVID-19 on your business, they will qualify for furlough provided that you re-employ them (even if you do not re-employ them until after 19th March 2020) and place them on furlough instead.  This applies as long as the employee was on your payroll as at 28 February 2020 and had been notified to HMRC on an RTI submission on or before 28 February 2020. Continuity of employment should be reinstated, with their employment rights unaffected.
• Similarly, employees who were placed on unpaid leave since 28^th February 2020 and as a direct result of COVID-19, may be placed on furlough instead. Employees on unpaid leave who do not meet these criteria will not qualify for furlough. If an employee went on unpaid leave on or before 28 February, you cannot furlough them until the date on which it was agreed they would return from unpaid leave.

• Sickness absence does not have a bearing on whether to select a particular employee for furlough leave, but where employees already on sick leave (short or long term) are selected for furlough for business reasons, they should be formally placed on furlough leave, paid at the furloughed rate, and no longer receive sick pay.
• The key point here is that an employer cannot be in receipt of a government grant or compensation for both SSP and furlough pay for the same employee at the same time.  In turn, no employee should be on both sick pay and furlough pay at the same time.  It is an either/or scenario, and therefore up to the employer to decide whether to designate the employee as on sick leave or furlough leave, and then apply the appropriate rate of pay. The same rule applies for a furloughed employee who falls sick; they retain their right to sick pay, but in exercising that right they would forfeit their right (for the duration of the sick pay period) to their furloughed status.

• The usual statutory leave and pay rules apply in such cases. However, for employees on any form of enhanced contractual maternity, paternity, shared parental or adoption pay, this counts as a wage cost and can be claimed back through the scheme.

• Employers will need to submit information regarding furloughed employees and their earnings to HMRC via their new online portal, which is now up and running.
• HMRC will require you to provide certain details via the portal, including your ePAYE reference number, your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number, the number of employees being furloughed (plus their names, National Insurance Numbers, and payroll or works numbers), the claim period (start and end date), the amount being claimed, your business bank details, and your contact details. HMRC may retrospectively audit any aspect of your claim, and you should retain all the records and calculations in respect of your claims.
• You will need to calculate the amount of each employee’s claim, bearing in mind you can only claim for 80% of wage costs up to a maximum of £2500 per month (or £576.92 per week), plus adding in the NICs and employer’s statutory minimum pension contributions associated with those wage costs. Note that the cut-off date for applying furlough has been amended (now 19th March 2020, but previously 28th February 2020). If, based on previous guidance, you have calculated your claim based on the employee’s salary as at 28 February 2020 (and this differs from their salary in their last pay period prior to 19 March 2020) you can choose to still use this calculation for your first claim. The minimum period of furlough per employee is three weeks.  You can, however, make as many claims as you need to during the time that the scheme remains open – thereby enabling you to roll people in and out of furlough as the needs of the business require.
• For employers furloughing less than 100 staff, you will be required to enter each employee’s information (name, NI number, payroll or works number, claim period and claim amount) directly into the system. For those furloughing in excess of 100 staff, you will be required to upload one file containing all the aforementioned information for affected employees.
• Claims cannot be amended once submitted, however, you can save a claim and finish it up to 7 days later. Approved claims will be reimbursed by HMRC via BACS payment. After submitting your claim it is estimated that you should receive funds within 6 days. You are required to retain all records relating to the claim for 6 years (the claim reference number, the dates of the claim period, the amount claimed, and your calculations).
• In RTI, you must report the amount of grant you receive and pay to an employee, in the same way you would report their normal pay.  You should make RTI submissions on or before the date you pay your employee.  Where employers have continued to pay employees during a period of furlough, in advance of receiving ant payments under the scheme, they do not need to make any further RTI submissions when they receive the grant that reimburses those payments made in advance.

• No information has been provided by government as regards the end of this process. However, it is clear that after the scheme is closed, it will be the decision of individual employers, based on the prevailing business circumstances, whether roles remain available or whether alternative action, including redundancies will be necessary.
• In the latter event, statutory and contractual procedures must be applied and followed. As with all potential redundancy situations, employers will be required to consider every possible alternative solution. Where it is anticipated that business may pick up eventually, it may be prudent to consider shorter term solutions such as unpaid leave or reduced hours (by consultation and agreement) in order to protect longer term job security and staffing levels.

• The 80% wage guarantee under the Coronavirus Job Retention Scheme will not cover casual or zero hours staff unless they are on the PAYE system. Nor will it cover income for self-employed individuals, such as freelancers.
• For the self-employed, the government has announced the deferral of income tax payments that would have been due in July 2020 (now not due until Jan 2021). This is an automatic entitlement with no action required by individuals.
• The government has also unveiled an unprecedented support package to cover the millions of self-employed and freelance workers, in the form of a taxable cash grant, worth up to 80% of their trading profits (to a maximum of £2500 per month), where trading profits have been adversely affected by COVID-19.
• Unlike employees on furlough, the self-employed may continue to work whilst claiming under the scheme.
• The funds will not be forthcoming until June 2020, however, will be paid in a single lump sum and, where applicable, backdated to 1^st March 2020. In the event of this causing short term cashflow issues, there is recourse to the Coronavirus Business Interruption Loan.
• This scheme applies to any self-employed individual who traded in 2019/2020 (and intends to trade in 2020/2021, and whose trading profits for 2018/2019 (or on average across the tax years 2016/2017, 2017/2018, and 2018/2019) did not exceed £50,000. It is also a requirement that the majority of income comes from self-employment.
• HMRC will only use those tax years for which a self-assessment tax return has been filed, as a means of calculation of average income, and in respect of tax year 2018/2019, there is a grace period of up to 23^rd April to file late if you have not done so already.
• No action is required, as HMRC will contact those individuals eligible for this scheme and invite them to make an online application. Please be wise to the potential for scam emails and calls.  HMRC does not send texts or make call asking for bank details.
• Grants will be taxable and must be declared in the tax return by January 2022. It is also worth noting that the Chancellor has made clear his intention to level the playing field on income tax across the employed and the self-employed – but this will be at a future point, albeit one to watch.

• A lot of business owners unfortunately fall between the two schemes offered by the government.  There is no compensation provided on either the Self Employment Income Support Scheme or the Coronavirus Job Retention Scheme for any portion of income paid through dividends. The Self Employment Income Support Scheme pays out on 80% of trading profits (up to a max of £2500 per month) but allows the self-employed to continue running their business and working.  Company owner-managers running their own incorporated businesses are not eligible for this self-employed scheme, but may be eligible for the Coronavirus Job Retention Scheme (CJRS) in relation 80% of any PAYE element of their income (which is likely to be small, if they were adopting tax efficient measures – and again is capped at a max of £2500 per month).  They would have to have been on PAYE on 19th March 2020 to qualify. The CJRS approach would also require them to furlough themselves and do no further work that provides a service to or revenue for the business (the only exception to this ‘no work’ rule would be carrying out any duties which are necessary for the fulfilment of statutory obligations as a director. There are seven clearly defined statutory obligations, and care should be taken not to ‘overstep’ these as it would place you in breach of the rules of furlough). In the case of a small (possibly one or two-man) business would mean moth-balling the business for the foreseeable future, which may not be a practical option for many.
• The government has now provided more clarity on the situation for office holders (including salaried company directors), salaried members of Limited Liability Partnerships (LLPs) who are designated employees for tax purposes, agency workers, and limb (b) workers (a ‘worker’ who is registered as self-employed but provides a service as part of someone else’s business, generally carrying out the work personally). All of these are covered under the CJRS, in respect of their PAYE income, and subject to the requirement to have been on the PAYE system by 19th March 2020:
  1. Office holders – furlough must be agreed between the office holder and the party that runs PAYE on their income. If the office holder is also a company director, the guidance below also applies.
  2. Company directors – the decision to furlough a company director should be formally adopted as a decision of the company, noted in the company records, and confirmed in writing to the relevant company director being furloughed.
  3. Agency workers – it falls to the agency, as their direct employer, to decide on and manage the furlough arrangements.  However, if you are reliant on regular services of an individual in this category, it is likely that such a decision would be made in consultation with your business, as it would entail withdrawing the provision of service.
  4. Salaried members of LLPs – the decision to furlough in this case may require a variation on the terms of the LLP agreement, by formal decision of the LLP, in order to accurately reflect the changes that furlough will impose (such as ability to carry out work, impact on remuneration).  The reference salary for the claim would be the LLP member’s profit, excluding any element that was awarded based on individual or partnership performance. You must only include payments that are not affected by the overall amount of the LLP’s profits or losses, whether these are fixed or variable (in the latter case without reference to the overall amount of the profits or losses of the LLP).