Coronavirus Job Retention Scheme -BFA Guidance for Employers

Dear Members,

BFA is pleased to share with you our understanding of, and some FAQ’s about, the Government ‘Coronavirus Job Retention scheme’ which was launched on 20th March.

(In case you can’t access the link, I’ve copied and pasted the whole document below, I hope it helps. Cheryl)

The scheme itself means that:

  • All employers can contact HMRC for a grant to cover 80% of a furloughed (i.e. laid off) employee’s wages, up to a maximum of £2,500 per month;
  • Employers must designate the employee to be furloughed. These people are not allowed to carry out any further work for the employer, but they remain employed.
  • The scheme is currently intended to last for 3 months, backdated to 1st March 2020.
  • The grant is available to all businesses, no matter what the size.

Indications are that you will not receive this grant income until at least late April. Howeverif your situation is desperate and your business cannot not wait, Government advice is for you to call HMRC who will look at providing funds to you sooner. (recent indications are that HMRC is over-whelmed so patience will be required).

Please confidentially let me know your situation as soon as you can, so that I can chase my Government contacts to try to get you help sooner.
In addition, I recommend that you track down your local MP and share your situation with them; the cabinet is very worried about small businesses not coping and is listening to local MP’s situation updates.

This document has been prepared in partnership with our Employment Solicitor, Ben Stanton of Franklins Solicitors. It is updated with all new guidance from government, from ACAS and from other sources.

We are endeavouring to anticipate all your questions but please do let us know if you need the answer to a scenario which isn’t covered here

Stay Safe & Smiling

Lucy

Lucy Reece-Raybould, BFA CEO

 Coronavirus Job Retention Scheme –BFA Guidance for Employers

BFA is pleased to share with you our understanding of, and some FAQ’s about, the Government ‘Coronavirus Job Retention scheme’ which was launched on 20th March

PLEASE NOTE: NEW OR CHANGED COMMENTS ARE SHOWN WITH QUESTIONS IN BOLD AND ANSWERS IN RED.

Frequently Asked Questions

1. Is my business eligible to claim the 80% up to £2500 per month for my staff?
Yes – You will apply for a grant from HMRC. A portal is currently being set up by HMRC and further details will be provided. Please note that the minimum period of furlough leave is 3 weeks. If you bring your employee off furlough leave and back into the business within the 3 week period, you will not be eligible to receive the grant from HMRC.

2. Will the payment be taxable?
Yes, payments will still be subject to PAYE and National Insurance contributions. The Job
Retention Grant will cover the employer’s National Insurance Contributions and the
Employer’s auto-enrolment pension contributions at the same percentage rate in respect of the 80% payment.

3. I have already laid people off am I still be covered under the scheme?

You can backdate any payments to staff laid off/furloughed from 1st March 2020. However, the employee must genuinely have stopped working from that date – if the employee was still working for you, this would not count as furlough leave.

If you have already made an employee redundant, you can also re-engage them and place
them on furlough leave – the purpose of the scheme is to reduce redundancies in any way
possible.

The guidance does confirm that the scheme will cover employees who are made redundant but then reengaged by the Employer, i.e. if their dismissal is overturned. Whilst it does not explicitly say so, the implication is that this will not cover the notice periods of any staff members who have been made redundant and who are being paid their notice pay – the Employer will have to bear the cost of this themselves.

4. Does my business have to pay the “shortfall” between the 80% and the 100% that a person usually earns? Can I furlough my employees on 80% so that I have no liability?
The Government’s guidance on this states that it is up to the employer whether or not to pay the remaining 20% (or excess above £2,500.00) per month). However, this is not the correct legal position; when an employer sends their employees home without work, they are still obliged to pay them 100% of their wages (unless there is already something in the contract of employment to the contrary, as in the case of the NCA). Withholding 20% of an employee’s salary will amount to breach of contract and an unlawful deduction of wages unless the employee gives their consent to doing this.

The entire point of the scheme is to encourage employers not to dismiss employees and
furlough them instead. Employers are unlikely to do this if they have to pay the employee
100% to stay at home; they would generally rather have them performing work for them. As such the intention behind the scheme is that it is reasonable to only pay employees this reduced wage whilst on furlough leave.

It is advisable to seek the employee’s consent to accepting 80% (maximum £2,500.00) of
their wages each month, as this represents a temporary variation to their contract of
employment. It is expected that the majority of employees will consent since furlough leave is a better alternative than unpaid leave, lay-off, or redundancy.

To seek an employee’s consent to being placed on furlough leave, employers will need to:

a. Decide which employees to designate as furloughed employees.
b. Notify those employees of the intended temporary change.
c. Consider whether you need to consult with employee representatives or the union. For
example, where the employer intends to vary the contracts of 20 or more employees,
and it intends to dismiss employees who do not consent to the change in their terms,
this would be classed as a redundancy. It is unclear, however, at this stage, whether
the government expects employers to follow this process before placing employees on
furlough leave. BFA Solicitors view is that you will not be intending to make employees
redundant (as you will expect them to agree to the furlough leave), so that the
consultation process will not apply.
d. Agree the change with the furloughed employees.
e. Confirm the employees’ new furlough status in writing. Ideally, the employer should
advise how long it expects furlough leave to continue, however, this may be difficult in
the current climate. You may wish to put employees on furlough leave for an initial
period, subject to review.
f. Submit information to HMRC about the employees that have been furloughed and their
earnings through the new online portal (further details to come).
g. Ensure that the employees do not carry out any further work while they are furloughed.
As above, if you do not have a contractual right to lay off the employees or to make changes to an employment contract, you should not unilaterally change an employee’s contract or pay without their consent. However, faced with the other alternatives, which are likely to be unpaid leave or redundancy, the majority of affected employees are likely to agree to be placed on furlough leave. However, if the employees refuse, your next step would be to:

a. Consider placing them on furlough leave anyway. Technically, the employees could
resign and claim a breach of contract (a claim that would be unlikely to succeed if you
carried out this process reasonably and appropriately, if there is a good business reason
for placing employees on furlough leave), or could seek to bring a claim in the future for
the difference in salary that they will be receiving.

b. Shortening working hours or reducing salaries, to which you would again be advised to
seek the employees’ agreement; or
c. Make redundancies.

5. Is there a difference between weekly and monthly paid staff?
No.

6. Some of the staff have contracts which include lay-off clauses but my management, office and field sales staff do not have this clause in their contracts. Can I still furlough them and how much do I have to pay them?

You can furlough all employees, regardless as to whether you have an existing contractual
right to do so.

The difference here is that you already have a contractual right to lay off some workers,
meaning you do not have to seek a variation to their contract of employment as outlined
above.
7. Will part time workers have the £2,500 cap reduced?
The payment is at 80% of their wages, up to a maximum of £2,500.00 per month. This applies to all employees equally, regardless of the number of hours they work.

8. I am part of the NCA, my factory staff are covered by a wage guarantee of 75%. Do I have to pay 75% or 80% to my staff?

If you have a contractual right to pay 75% of wages, you are only required to pay 75% of their wages. This new scheme does not place any additional obligations upon you, it merely offers employers another option if they are thinking about making employees redundant. This equally applies if you have already agreed with your employees to send them home on some other reduced wage; you have already entered into a contract with them so you do not need to alter your agreement to match the Government’s new scheme.

9. Section 6 of the NCA states we can send employees home without pay. Why do we have to pay in line with the guaranteed 75%? Does this not say we can actually send home and not pay?

NCA 6.1.8 No employees are liable to be paid for periods for which they are sent home
The BFA Solicitors view of this is that if you are choosing to lay off your employees, you pay them 75%. If you sent the employee homes for any other reason, you are not obliged to pay them anything.

10. Who can be furloughed? Do I have a free choice who I can select for furlough or is there a strict criteria? There is no set criteria. As with any aspect of work, you should not select staff on any discriminatory criteria (i.e. their age, sex, race, disability) but based on your business need.

11. Can I change who is furloughed from week to week or month to month? Recalling them as it suits the business or the reverse laying them off again. The example here is that
you might keep some office staff in but if one of them gets Covid-19 then you need
someone to come back in to replace them.

Whilst further details of the scheme were announced on 26th March 2020, there is still no
specific guidance on this. In the absence of any specific mention of this, my view is that the furlough period can be reactivated, i.e. to allow you to rotate your employees to carry out work depending upon the demands of the business, putting them on furlough now, bring them back in to the business, but then furlough again. Our solicitor suggests that there would have to be a good business reason for this, as HMRC may question the motive behind this.

You must note that a minimum furlough leave period is 3 weeks. If you are going to place
an employee on furlough leave, you must not ‘reactivate’ them for at least a 3 week period,
otherwise you will not be able to receive the grant for that period of time. This would mean, for example, that an employer can select an initial group of employees for furlough, keeping a second group at work. After 3 weeks, the first group comes back to work while the second group go on furlough leave.

12. My member of staff has a second job, can we both put that person on furlough?
Yes you can – this is specifically confirmed in the Guidance.

13. Can someone in the furlough scheme do work for other employers?
Again, whilst the guidance is not clear on this point, my view is that they can (if you are happy for them to do so). The only important criteria is that they do not do any work for you during this time.

If you did want to allow your employee to work elsewhere during the furlough leave period, the terms of your contract of employment may already specify that they should not work for a competitor, or you could make this clear to the employee. In any event, regardless of whether there is a written term, there is an implied duty of non-competition for employees, so you could look to dismiss an employee if they began actively competing with your business.

14. Can furloughed employees do volunteer work?

Yes, this is specifically confirmed in the scheme guidance.

15. If you have no work for the employees and, regardless of the grant scheme, cannot
afford to pay them the wages what should I do?

YYou could:
a. Negotiate laying employees off on unpaid leave or further reduced pay; or

b. Consider making redundancies. If you cannot afford to make redundancies, you can
approach the National Insolvency Service to ask for their assistance in paying
redundancy payments etc. if it would otherwise mean that your business would become
insolvent in paying them.

If you are planning to make 20 or more redundancies, the scheme makes it clear that your
collective consultation obligations would still apply. These mean that if you are seeking to
make 20 or more people redundant within a 90 day period, you must observe a consultation period of at least 30 days’ before serving notice of termination.

16. Does this apply also when an employee is partially laid off? E.g. only required to be
furloughed for one day per week. No – the policy only applies to those employees who are fully furloughed, i.e. who are not working but are kept on the payroll.

The scheme also does not apply to employees who you have kept employed on reduced
hours – it only applies to those employees who will be doing no work at all.

17. Do other employee benefits still accrue during the furloughed period?
The £2,500.00 is the maximum monetary payment that an employee can receive. You then deduct their normal auto-enrolment pension contribution as usual.

The scheme covers your Employer’s NICs and your usual percentage of auto-enrolment
pension payment as well, on top of the 80%/£2,500.00. Please note that if you pay the
employees more than the minimum auto-enrolment percentage, you will not be able to claim this additional part from the scheme. Further, any pay above 80%, and the extra Employer’s NICs above 80%, will not be recoverable under the scheme.

If you already provide other benefits such as private healthcare, you would not be able to
claim the cost of benefits though the grant scheme. You would have to continue to provide
these benefits to employees unless you agree otherwise (and many employers may have
already paid for the cost of these benefits in any event).

Employers that offer permanent health insurance or death-in-service benefits should check with their scheme provider about what salary would be used in the event of a claim, i.e. 80% or 100%.

18. Do employees accrue holiday entitlement during furlough?
Yes. Your staff accrue holiday at their usual rate.

19. Can people take their holiday allowance while furloughed?

Disappointingly, the Government guidance makes no mention of whether an employee is
permitted to take their holiday entitlement during furlough leave. What has subsequently been announced is emergency legislation, permitting an employee to carry over 4 weeks’ untaken leave where it was not reasonably practicable to take it in the leave year “as a result of the effects of the coronavirus (including on the worker, the employer or the wider economy or society)”. This therefore allows you to stagger an employee’s holiday
entitlement over the next two years, rather than having all of your employees taking their
holiday entitlement when they return to work.

Technically, taking holiday means that your employee is not working, something that they
would not need to do if on furlough leave. As a result of the change to the holiday rules above, my assumption is that the Government agrees that holiday leave is incompatible with furlough leave, hence the need to allow employees to take this over the next two years. However, this is just not clear. Until any further guidance is released, you have the following choices:

In the event that you/the employee wishes to take annual leave during furlough leave (or
already have annual leave booked), you proceed as normal and pay them 100% of their
wages during that period, but still class them as remaining on furlough leave. I am not
currently confident that HMRC would reimburse the 80% grant if it was aware that the
employee had been placed on holiday leave for that period.

In the event that you/the employee wishes to take annual leave during furlough leave (or
already have annual leave booked), you proceed as normal and pay them 100% of their
02 April 2020 wages during that period, but remove them from furlough leave at the same time. When the the annual leave is over, they will be placed back onto furlough leave. You must make sure that you you observe the minimum initial furlough period of 3 weeks, otherwise you will not be able to recover a grant for any of the initial furlough leave period; or Suspend all annual leave for the furlough period, using the change to the holiday rules to defer up to 4 weeks’ holiday in to the next holiday year.

20. Will employees qualify for additional state benefit support?
Employees will remain entitled to the same support as they currently receive. The furlough scheme will pay the equivalent of up to £30,000.00 per year, so we do not believe that there would be additional benefits available to employees earning that amount of money (other than existing child benefits etc.) but it will depend upon the income coming in to the family house and the number of dependents.

21. Is the 80% contribution 80% of what the employer pays the employee in a given week
or 80% of their usual wage. If the employee usually earns £400 in a week, and this week
because we were on short time before the furlough they are only getting £350 but next
week once in furlough they will get how much? Which option:

a. 100% of a usual week £400 of which the government will re-pay the employer £320
b. 80% of a usual week £320 of which the government will re-pay the employer £320
c. Based on short time week -£280 of which the government will re-pay all or only
£224 to the employee

If an employee works variable hours each month, their ‘wages’ will either be based on their earnings in the same month they worked in 2019, or an average of their monthly earnings last year. If the employee joined you in 2020, you should take an average of their earnings to date.

22. What is the position if 80% of pay is less than national minimum wage based on normal working hours? Employees on furlough leave do not need to be paid national minimum wage as they are not carrying out any work.

23. Once an employee is furloughed can we ask them to do anything or do they become a worker again, for example – even if it’s just a phone call to ask where something is filed?
As above, the policy only applies to those employees who are fully furloughed and not given any work. However, you will still be able to speak with/socialise (social distancing permitting) those employees, so we do not believe asking them a question would be a breach of this scheme. The purpose of the furlough scheme is to help businesses, not hinder them, so there will be a degree of leniency and common sense applied to the scheme in order to allow you to continue to run effectively.

24. When staff are called back into work are their wages immediately the responsibility of the employer? Wages are always the responsibility of the employer; the scheme allows the employer to claim back 80% (up to £2,500.00) from HMRC. The employer is therefore responsible for paying wages whilst the employee is furloughed (albeit they can claim monies back from HMRC), and then still be responsible for paying wages when the furlough leave ends (with then no ability to claim monies back under the furlough scheme).

25. Can you rotate staff? This week group A work, next week group B, then C, then A, then
B and so on, and still be within the law of the Coronavirus Job Retention scheme? Are
they furloughed for the week they aren’t working?

As above, our solicitor believes that the furlough period can possibly be reactivated, i.e. put them on furlough now, bring them back in to the business, but then furlough again, although he suggests that there would have to be a good business reason for this (and it must not interfere within the minimum 3 week furlough leave period for that employee).

26. If I need to keep some staff working to support staff else-where – such as those still working in stores or warehouses – can I reduce their hours, still pay them at their full-time rate and claim the 80% on the reduced part of their salary?

You can vary your employee’s hours of working – you would again ideally seek their consent to this change, as it represents a change to their contract. You can then reduce their salary.

However, this is not the furlough scheme – that requires you to send employees home without work. In this scenario, you could not claim back the 80%.

27. If someone is “feeling ill”? members should send them home, and pay them SSP or treat that person as laid off?

If someone is ill, they are sick. If they are sick, they are entitled to receive sick pay only.
If you choose to send an employee home when they are not sick, you would have to pay them their normal full pay.

28. If someone is off with Covid-19 and therefore is being paid SSP, when they inform me that they have recovered do I pay them as a furloughed member of staff? If the employee is fit to work and you do not want them to work, you would to pay them their
normal full pay. You could then place them on furlough leave if you wanted to try to reduce the payments due to them.

29. If someone is self-isolating due to illness or childcare issues should they be on sick-pay or if they would usually be laid-off with everyone else should they be paid as the rest of the staff.

If an employee is looking after their children, you do not have to pay them – time off for the purposes of childcare is unpaid.

If an employee is self-isolating, they are considered to be sick and would be entitled to sick pay.

If the employee is ready and able to work, you would either have to provide them with their normal pay, or you could seek to place them on furlough leave.

In terms of childcare issues only, you will need to assess each case in your business,
considering the employee and whether the business can manage without their services for a period.

30. If someone is already off and is being paid SSP, for reasons other than Covid-19, and
they inform me that they are better what should I pay them?

If the employee is fit to work and you do not want them to work, you would to pay them their normal full pay. You could then place them on furlough leave if you wanted to try to reduce the payments due to them.

31. If someone who has been furloughed gets Covid-19 or is suspected of it should you move them onto sick pay or keep them as if they are laid off?If you place the employee on furlough leave, you may be able to place them on to SSP if they tell you that they are now ill. However, practically speaking, the employee is not going to tell you if they are unwell anyway, so I think the chances of this applying are quite remote.

32. Can an employee insist on becoming a furloughed worker?
No – an employee can request to go on furlough leave but has no right to be placed on
furlough leave. Potentially redundant employees do not have a right to require their employer to place them on furlough leave as an alternative to redundancy either.

33. Can an MD/CEO/Owner lay themselves off along with their staff?

Any employee can be placed on furlough leave, as long as they are not carrying out any
work. It may be the case that the CEO/MD will still be required to carry out some work, so
they may not be able to satisfy this critieria.

34. Does it apply to all types of employees, regardless of length of service?
Yes.

35. Can I ask an employee to still work “on the side”?
No – furlough leave only applies to those employees who are not working but kept on the
payroll.

36. My member of staff has a second job, can we both put that person on furlough?
Yes, you can.

37. How should members treat the working rights of the individual at this time – should they write, consult and inform individuals or treat their staff collectively?
As above, employers will need to:
a. Decide which employees to designate as furloughed employees.
b. Notify those employees of the intended temporary change.
c. Consider whether you need to consult with employee representatives or the union. For
example, where the employer intends to vary the contracts of 20 or more employees,
and it intends to dismiss employees who do not consent to the change in their terms,
this would be classed as a redundancy. It is unclear, however, at this stage, whether
the government expects employers to follow this process before placing employees on
furlough leave. My view is that you will not be intending to make employees redundant
(as you will expect them to agree to the furlough leave), so that the consultation process
will not apply.

d. Agree the change with the furloughed employees.
e. Confirm the employees’ new furlough status in writing. Ideally, the employer should
advise how long it expects furlough leave to continue, however, this may be difficult in
the current climate. You may wish to put employees on furlough leave for an initial
period, subject to review.
f. Submit information to HMRC about the employees that have been furloughed and their
earnings through the new online portal (further details to come).
g. Ensure that the employees do not carry out any further work while they are furloughed.

38. Can a factory put everyone on furlough mid-week – i.e. weekly paid staff placed on furlough today would get 100% for yesterday and 80% from today or do they have to pay 100% this week?

Furlough leave would start from whenever the employee was sent home without work. Any days spent working by the employee would not be considered to be furlough leave. You would pay the employee 100% of their wage in respect of the work they have carried out this week, and 80% of their wage from the date on which they were sent home without work.

39. If someone is furloughed, what happens if they go on maternity, paternity, adoption or bereavement leave?

If you pay your employees more than the statutory minimum entitlements, the guidance says that employers can claim for enhanced maternity pay through the furlough scheme. This therefore suggests that employees can furlough employees on maternity leave.

Employers can reclaim Statutory Maternity Pay in the normal way and can then claim for any enhanced contractual pay on top through the furlough scheme.

If an employee takes any period of statutory leave such as maternity or paternity leave, the terms of that leave would override furlough leave. As such, an employee can still be on
furlough leave but you would only pay the employee their statutory minimum entitlements. I cannot imagine the incentive for an employee to place himself on paternity leave if he stands to receive less than if he was on furlough leave, but this could happen and the employer would only have to pay the statutory minimum entitlement.

40. Online operations remain a slightly grey area. It is clear that physical stores that aren’t
considered ‘essential’ should shut, but not so clear about online distribution centres. Can we still run operations to allow our digital businesses to continue trading?

Online retail is still permitted to operate as normal in the current climate. Parts of those
physical shops which are open to the public should close. Further guidance is here:
https://www.gov.uk/government/publications/further-businesses-and-premises-to-close

41. Can employees on furlough leave undertake training?

Yes. If the employer requires the employee to complete training during furlough leave then, whilst this will not bring their furlough leave to an end, the employer must make sure that the employee is paid at least the national minimum wage in respect of time spent on the training (if their monthly pay would otherwise be less than National Minimum Wage). This should be agreed with the employee and reflected in the correspondence confirming furlough leave.

42. What happens at the end of the furlough leave period?
The intention is that employees return to work after their furlough leave. However, if there is no longer a need for these employees, you will have to consider making redundancies.

What is interesting is that other European countries that have similar schemes in place are imposing restrictions on employers making redundancies, whereas there are no such
conditions under the UK scheme.

43. Can I make redundancies whilst an employee is on furlough leave?

Yes. The same rules would apply, in that you would need to follow a reasonable procedure
and justify why you were selecting specific employees for redundancy, but nothing prevents you from still dismissing employees (if you have a fair reason and follow a reasonable procedure) whilst they are on furlough leave.

44. How can I follow a redundancy procedure if my employees are on furlough leave?
It may be helpful to consider furlough leave to be the same as, say maternity leave; you would still be able to speak with an employee about circumstances affecting them at work, albeit you would have to arrange suitable times on reasonable notice to have these conversations.

There is nothing within furlough leave which prevents you from speaking with your employees, only that they should not be carrying out work for you. If you do need to make redundancies, you should follow a usual and fair procedure. This can involve engaging employees in videoconferencing, although I would advise against speaking to many people all at once; limit these conversations to a manageable number of people.

If you are planning to make 20 or more employees redundant within a 90 day period, you
must give at least 30 days’ notice before issuing notice of termination. You would need to
elect a few workplace representatives (if you do not have one already) and all of the
discussions can go through those people. You could arrange a video conferencing call with
all representatives at the same time, as it is important that you engage in genuine and
meaningful consultation prior to issuing notice of termination.

PLEASE NOTE: The above information has been provided in consultation with Ben
Stanton, Franklins Solicitors representing the BFA. They are intended as a guide to
BFA members only. You do not have permission to share this document with anyone
without the express permission of a Director of the British Footwear Association.