UK Government Response to COVID-19

This alert is up-to-date as at 18:00 (GMT) on Monday 30 March 2020. This update serves as a follow up to the memorandum dated 23 March 2020. This does not constitute an exhaustive list of measures proposed by the UK Government. The public guidance is being continually updated by the UK Government, HM Treasury and the Bank of England which is being closely monitored.

On 27 March 2020, HMRC published additional details in respect of how the Coronavirus Job Retention Scheme (known as the Furlough Scheme) (“CJRS”) will work in practice. For more information on what the CJRS is, please see our memorandum published on 23 March 2020 here.

The following is a short summary of the key points the HMRC update addressed:

Scope

• the CJRS is open to all UK employers including charities, recruitment agencies and public authorities, as long as they have had a PAYE payroll scheme in place on or before 28 February 2020 and have a UK bank account;
• the scheme will be in place for at least three months from 1 March 2020;
• HMRC will establish an online portal through which employers will be able to reclaim up to 80% of wage costs up to a cap of £2,500 per month plus the employer’s NI contributions and the employer minimum auto enrolment pension contribution.

Eligibility

• to be eligible, the employee must have been on the payroll on 28 February 2020 on any type of contract: including full-time and part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts;
• if employees were hired after 28 February 2020, they are not eligible but anybody who was on the payroll on 28 February and has since been made redundant can be furloughed if they are re-hired;
• furlough leave must be taken in minimum blocks of three weeks to be eligible for funding;
• nothing in the guidance prohibits rotating furlough leave amongst employees, as long as each employee is off for a period of at least three weeks;
• employees must not be working for the employer at all: the scheme does not cover the wages of employees whose hours are reduced (though employee may undertake training and do volunteer work, provided they do not provide services to or make any money for their employer).

Other Key Points to Consider

• when agreeing changes in hours (and acceptance of 80% pay) normal employment law applies and the employer should discuss furloughing with their employees and make any changes to the employment contract by agreement, then write to their employees confirming that they have been furloughed, and keep a record of this communication.
• during the furlough period, the employer should pay the employee at least the lower of 80% of salary or £2,500 per calendar month;
• the employer may choose to top up wages to 100% but is not obliged to do so;
• for full-time and part-time salaried employees, the employee’s actual salary, before tax, as at 28 February 2020 should be used to calculate the 80%. No fees, commission or bonuses should be included for the salary calculation;
• for employees whose pay varies, in the case of employees who have been employed for at least a year, the employer will be able to claim for the higher of the employee’s earnings in the same month the previous year or the employee’s average monthly earnings in the 2019/20 tax year;
• for an employee employed for less than a year, the employer will be able to claim for an average of the employee’s monthly earnings since they started work;
• for an employee who started in February 2020, the employer will be required to pro-rate the employee’s earnings so far;
• employees on sick pay or self-isolating cannot be furloughed, but can be furloughed afterwards;
• employees on maternity (or similar) leave can continue to draw SMP (or similar) payments and women on maternity leave are not prevented from agreeing to return to work early and then to be furloughed;
• employees are only entitled to the national minimum wage (“NMW”) for the hours they work, or for training undertaken for employer, so 80% of furloughed employees normal wage can be below the NMW;
• employers can only claim once every three weeks, i.e. not weekly reimbursement although claims can be backdated to 1 March 2020.

The government has stated that it will issue further guidance on the mechanics of claiming the payment in due course. It is unclear whether HMRC intends to rely on this guidance, or whether there will be legislation but HMRC expects the scheme will be up and running by the end of April.

Separately, the government has published amendment regulations with immediate effect, which amend the Working Time Regulations to allow workers to carry over EU holiday into the next two leave years, where it is not reasonably practicable for them to take some, or all, of the holiday they are entitled to due to coronavirus.

Note this only deals with the EU four weeks' leave. The balance of 1.6 weeks' statutory leave will not be affected (although it can be carried over for up to a year by agreement under existing law).

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If you have any questions, or for further information please reach out to Nicola Kerr, Mark Dorff, Charlotte Møller or Max Binney.

The views expressed herein are solely the views of the authors and do not represent the views of Brown Rudnick LLP, those parties represented by the authors, or those parties represented by Brown Rudnick LLP. Specific legal advice depends on the facts of each situation and may vary from situation to situation. Information contained in this article may be incomplete and is not intended to constitute legal advice by the authors or the lawyers at Brown Rudnick LLP, and it does not establish a lawyer-client relationship.