Furlough scheme guidance updated

The guidance makes clear that the Scheme is designed to help employers whose operations have been severely affected by coronavirus to retain their employees and protect the UK economy but states: "However, all employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus". This suggests that employers can claim under the Scheme even if redundancy is not the only other alternative for furloughed employees.

Claims can be made in relation to anyone who was on the employer's PAYE payroll on 28 February 2020 (the payroll rule). The updated guidance makes clear that this includes:

Workers

Individuals who work for you under a contract where they have to provide a personal service and where the employer organisation is not a client or customer of the individual can be furloughed.  Casual workers and those on zero hour contracts are therefore included subject to the payroll rule.

Office holders and company directors

If office holders, including company directors, are paid through PAYE payroll, they can be put on furlough.

The guidance states that company directors can fulfil their statutory duties while on furlough but they should not carry out any other work for the company.

LLPs and companies should ensure that they follow proper decision-making protocols and that the decision to furlough is formally adopted and minuted.

Agency workers

Agency workers who are paid through payroll, whether that is the agency's payroll, or the payroll of an umbrella company, can be furloughed. These agency workers would not be able to carry out work for the agency or umbrella company during furlough.

Apprentices

There is clarification that apprentices can be put on furlough. As with other employees, apprentices can undertake training during furlough and should be paid at least the relevant national minimum wage for time when they are training.

Fixed term employees

Those on fixed term contracts can be furloughed. Employers can take the decision to renew or extend the contract during the furlough period.

Yes. People who are engaged by individual employers and paid through PAYE payroll can be furloughed. This might include carers, support workers, personal assistants, nannies, cleaners etc. However, if these workers are paid in cash and the employer is not registered with HMRC for PAYE, a claim will not be able to be made through the Scheme.

Yes. Employers can choose to re-employ staff and make a claim for them under the Scheme, whether they were dismissed for redundancy or any other reason, or if they resigned. Employers should be aware that continuity of service is likely to continue to accrue if someone is re-employed. They should also be aware that HMRC can retrospectively audit the claim and could query payments which have been made outside the intentions of the Scheme.

Yes. The guidance states that those who have to look after their children because of coronavirus may be furloughed. It also makes clear that employers can furlough people who need to stay at home with someone who is shielding because they are extremely vulnerable to the virus (where they would otherwise be made redundant).

The updated guidance states: "If contractually allowed, your employees are permitted to work for another employer whilst you have placed them on furlough." This is an interesting clarification as it suggests that an employee can in some circumstances increase their take home pay by taking on alternative work during furlough. Commentators have suggested that this is to provide flexibility for employees with no work to assist in areas of the economy urgently requiring labour.

The employment contract may provide that an employee is not allowed to work for others during contracted hours. However, employers and employees could agree to vary such a contractual term on a temporary basis during the furlough period.

Employers taking on new starters should ensure that the starter checklist for PAYE is completed. New starters who are furloughed from another job should tick Statement C on the checklist form.

The changes to the guidance clarify that employees must be notified in writing if you are furloughing them. A record of this written notification must be kept for five years and will be required if HMRC retrospectively audit the claim.

As we have previously highlighted, employers should seek the agreement of employees to being furloughed and this agreement should ideally be in writing and a record kept on file.

Enrol for PAYE online

The updated guidance makes clear that employers will only be able to make a claim if they have enrolled for PAYE online. Employers who intend to furlough staff and have not yet enrolled for PAYE online should do so now. This process can take up to ten days.

More detail of what can be claimed

Employers can claim for any regular payments they are obliged to pay employees. This includes wages, past overtime, fees and compulsory commission payments.

Discretionary payments such as bonuses, tips, commission payments and non-cash payments cannot be included.

The value of any salary sacrifice amount or benefit in kind cannot be claimed for. Benefits in kind, such as accommodation, private health insurance or company car should not be included in the calculation.

There continue to be uncertainties on how the Scheme will work. For example, we have seen opposing views from commentators on whether employees will be able to take annual leave during furlough without breaking the minimum three week furlough period. It is also unclear whether annual leave during furlough will need to be paid at the full rate of pay. We consider it likely that at least the first four weeks of annual leave ("Euro-leave" under Regulation 13 of the Working Time Regulations) will need to be paid at the rate of normal (pre-furlough) remuneration if it is taken during furlough.

There continues to be no clarity on the question of whether employers can claim under the Scheme for staff who have TUPE transferred to them after 28 February 2020. Such employees will not have been on the payroll of the transferee employer at the key date and so there are likely to be (at least) technical issues with such a claim.