The government has published not one, but two new sets of updates on the guidance relating to the job retention scheme over the last week or so. Paul Burton summarises the additional information and clarification provided by the government in this article.
Who is eligible to be furloughed under the scheme?
The government has clarified that workers as well as employees can be furloughed by their employers, as long as they provide a personal service, are not self-employed and were registered for PAYE with the employer on or before 28 February 2020. Apprentices can also be furloughed as well. Before now it was thought only employees could be furloughed.
Can employees be furloughed even if no redundancies are planned?
It has also been made clear that employers can furlough employees whether or not actual redundancies are planned by the employer. All employees can be furloughed as long as the other criteria already set out in the criteria is met. Employers do have to be registered for PAYE with HMRC online and have a UK bank account for the subsidy to be paid into.
Umbrella companies and furlough
If someone is employed by an umbrella company to obtain tax advantages to date, then they can also be furloughed, essentially by their umbrella company, and claim 80% of their wages up to the £2,500 per month cap.
Can company directors be furloughed?
The government has confirmed company directors can be furloughed, as long as they do not carry out any work except for essential statutory duties. The government has not clarified what statutory duties can be carried out, but they are likely to be very limited. Also, a company director can only be furloughed following a formal resolution resulting from a Board meeting.
Do employees have to be notified that they are being furloughed?
Yes and the government has updated the guidance to say this notification has to be in writing and records kept for a minimum of five years. This is an anti-fraud measure and it is likely HMRC will do follow-up checks at a later date. We have advised employers to do this anyway and to seek active agreement from employees that they are to be furloughed.
Is there any more detail on what can be included as part of the wages to be subsidised by the government?
Yes there is. The government has actually done a bit of a U-turn on this point. Previously they said commission and fees could not be included in the calculation. They have now said that contractual commission can be included.
This is good news for both employers and employees in sectors with sales people who earn a lot of their income via commission, such as estate agents and the car sector. Fees can also be included, although it is unclear what the government mean by this.
Discretionary commission and bonuses still cannot be included, also tips cannot be as well. Importantly, the government has clarified that benefits in kind cannot be included, so the value of such items as health cover and company cars cannot be subsidised.
What will we have to provide to HMRC to get the 80% of salary reimbursed?
The government has updated the list of information that will need to be provided to HMRC. It is as follows:
- your employer PAYE reference number
- the number of employees being furloughed
- National Insurance Numbers for the employees you want to furlough
- names of the employees you want to furlough
- payroll/works number for the employees you want to furlough
- your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
- your bank account number and sort code
- your contact name
- your phone number
We have employees who have said they are going to work elsewhere when furloughed, surely they cannot do that?
Surprisingly, the government has confirmed they can. We did not think that would be the case as one of the main reasons for the scheme was to allow people to remain at home and also it means a potential unexpected windfall for an employee.
Can employees do other work while furloughed?
They can theoretically earn 180% of their normal salary, by receiving 80% through the scheme with their current employer and then a full wage working elsewhere. However, the government may have made a practical decision in thinking people will go out and do those jobs for which there is a shortage of resource, such as the health and agricultural sectors.
One point to note is that employees cannot go and work for a linked or associated company of their employer, this has been set out in the updated guidance.
I would like to rotate employees and furlough them multiple times, can I do so?
Yes you can, the government has confirmed this now. As previously announced, the minimum period an employee can be furloughed is three weeks, but, subject to this minimum period, you can furlough employees multiple times. Some employers may want to do this to give everyone the opportunity to both work and take time being furloughed.
What about people off sick?
Before the new guidance it was thought only those shielding at home following the government direction could be furloughed, not those off work sick. However, the government has now said employers can furlough an employee who is currently off sick. If so, they can be moved from sick pay to being furloughed and receiving up to 80% of their salary from the government. Employers do need to ensure that both SSP and the subsidy are not claimed for the same period of time.
We are a public sector employer, can we furlough employees?
The answer is ‘possibly’. If employees’ salaries are publically funded and that funding is continuing, the government has said it is does not expect employees to be furloughed, as those employees can still be paid in full using the funds. However, if salaries are commercially/privately funded then public sector employers can use the scheme to furlough those employees.
I have heard any employees who have transferred under the TUPE legislation cannot be furloughed?
That was thought to be the case, but the government has now clarified that, as long as an employee was on PAYE with the transferor on or before 28 February 2020 then, if they have subsequently transferred to a new employer under the TUPE legislation, they can be furloughed.
The increased clarification from the government is welcomed, although there are still some issues that need further detail, such as annual leave. The key thing we all want to know is when HMRC will have the scheme up and running, this is still not known.