It is coming, a break in the clouds, but how can you get your ducks in a row.
When they finally make the Job Retention Scheme money available it will be a big relief to many employers and employees across the land. There is no doubt going to be an almighty rush as soon as it is announced so what can you do to get ahead of the curve?
First up, decide which employees you are going to make ‘furloughed’ (the word that doesn’t really mean anything legally, but which will be one of the most written this year). For your employees to qualify to be furloughed they need the following:
- To have been on the PAYE payroll as of February 28th 2020
- To be employed by you but not able to work due to the effects of the coronavirus (i.e. your venue closing down)
- Not working part-time or on reduced hours for you
- This includes zero-hours and part-time workers providing they were on PAYE
Once these employees have been identified you need to make them furloughed. For this, experts all agree that, for the benefit of both sides, this should be put in writing. Below is a list of key points that should be put into this agreement however it does include their pay and as we will discuss in a minute that isn’t completely straight forward yet.
As a result you are probably best to fire off an email to all those furloughed employees informing them of their change in circumstance, confirming they will be paid 80% of their wage (or 100% if you are topping up the government part) and that it will be back dated to March 1st 2020. This will get it in writing and allow you to move quicker once it is announced.
Once the details of the way the pay structure is going to be worked out the official letter/email should include these key points according to lawyers Kingsley Napley (who also have a great section regarding frequently asked questions for the Job Retention Scheme):
- Agreement to take temporary leave of absence
- Start date of the leave of absence (including backdating if relevant, where no work has been carried out by the employee).
- In cases of employees already made redundant, agreed withdrawal of termination of employment by reason of redundancy and, if relevant, repayment of any redundancy payments, payments in lieu of notice and/or severance payments already made.
- Mechanism for the employer to end the leave of absence: probably a short notice period of (say) one week.
- Agreement that the employee will not be required or allowed to carry out any work for the employer during the leave of absence.
- Pay during the leave of absence, including (if relevant) agreement by the employee to accept a level of pay lower than contractual.
- Agreement that leave of absence will be treated as using up statutory and contractual holiday entitlement.
- Confirmation that statutory rights, such as rights to maternity, shared parental or adoption leave and pay, will continue.
- If relevant, agreement to disapply enhanced contractual rights to paid maternity, shared parental or adoption leave (or to reduce them to 80% of their contractual level, capped at £2,500 per month).
- If relevant, agreement to accept delayed payment if any payments to the employer under the scheme are delayed.
- Provision of up-to-date contact details for the employee; agreement by the employee to remain contactable.
- Provision for the furlough agreement to be varied unilaterally by the employer (subject to consultation with the employee) to reflect the terms of the scheme and any changes to the scheme which may be introduced.
- Agreement that, subject to the terms of the furlough agreement, the express and implied terms of the contract of employment remain in force. With this in mind, you should check the contract of employment for any additional terms which may need to be temporarily varied.
With regards to how the payment is going to be worked out, it is a little up in the air as to whether it is going to include National Insurance contributions etc or even whether it will be net or gross. It is also unclear if the mechanism will be on the application form to work out the amount or whether you will have to do that for each employee.
Unfortunately, until that is announced it is hard to give a clear example of what your staff will receive. The Institute of Chartered Accountants have made a best guess that it will include the employers NIC contributions and so have given an example of how they think this it will work:
X Ltd employs Mr A at an annual salary of £24,000, so £2,000 per month. Mr A has opted out of auto enrolment.
Each month, Mr A currently receives net pay of £1,665 which is after deducting PAYE of £191 and employees NIC of £144. On this salary, the employer pays employers’ NIC of £174.
The available grant for the employer is the lower of:
(a) 80% of (£2,000 + £174), and
So a grant of £1,739.
The cash required by X Ltd to furlough based on maintaining the existing salary is £435 per month. N.B. This is not legally required.