Many people know that Martin Lewis is the money-saving expert and hundreds of thousands of people have used his website to help save them money. But, to my knowledge, he is not an HR Professional, Employment Lawyer or Tax Lawyer. So, should you be taking his advice on the Furlough scheme?
The Furlough scheme is actually called the Coronavirus Job Retentions scheme and was announced on 26 March. The government advice on this is available here which is being updated on a regular basis. The scheme is so new, no one really knows all the ins and outs of it yet. HMRC who are tasked with the administration of this are currently building the system and dealing with calls and tweets on what-if scenarios that aren’t in the guidance yet. I have, this week, been on a few webinars and conference calls as well as listened to podcasts on this topic some with leading barristers answering the questions and the answers to many of the questions are unclear.
So what is known (and accurate on the day I publish this!) is this:
- A PAYE scheme needs to have been created or started on or before 28 February 2020
- Employers (usually the HR team) will designate affected employees as furlough workers
- Employers will communicate this designation to the employee (this remains subject to employment law, so the employee needs to understand and agree to the change)
- When the portal is live, submit information to HMRC about the furloughed employees and their earnings
Within the more detailed guidance, it shares who can claim and what employee types you can claim for:
- Full time
- Employees on agency contracts
- Employees on flexible or zero-hour contracts
- Those made redundant from their employer after 28 February 2020 if they are rehired by their former employer
The biggest question generator of the document is the wording around what can be done on furlough. This is one of the areas that has changed a lot. It now states:
“.. an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. “
Employers and HR Professionals across the UK are waiting for more guidance on this section alone. Yet if that wasn’t confusing enough, you then need to consider:
- Is the employee simply on reduced hours or have reduced pay? If they are, then they are not eligible for the scheme
- Is the employee on unpaid leave? Then they can be placed on this scheme if they were placed on unpaid leave AFTER 28 February
- Is the employee on SSP? If the individual is on sick leave or is self-isolating, then they get SSP. They can be furloughed on their return to work from the absence. But.. if the employee is shielding then they can be placed on furlough
Confused yet? Let’s carry on and muddy the water some more:
- Does the employee have more than one job? Yes, then they can be furloughed from both employers
- Is the employee undertaking volunteer work? They can be furloughed as long as the volunteer work doesn’t provide services to or generate revenue for the employer
- Is the employee being asked to undertake training? Yes, then this has to be paid in line with the national minimum and living wages for the time that they are training.
Down to the payment itself. This is the lower of the following two figures:
- 80% of the regular wage or
- The cap of £2500 per month
The employee’s actual salary, before tax as at 28 February should be used. Commission and bonuses should not be included. If the employee’s pay varies and they have been employed for a full 12 months then use the higher of the following:
- The same month’s earnings from the previous year
- The average monthly earnings from the 2019/20 tax year
If they started with you within the last 12 months, its an average of monthly earnings since they stated. If they started in February 2020 then you pro-rata their earnings so far.
Don’t forget to calculate the employers National Insurance Contributions and the pension figures too.
All of this is taken from the government websites cited in the text. There are still a lot of unanswered questions, but from a member of the HR community please stop citing Martin Lewis!