Coronavirus Job Retention Scheme (CJRS): Update and Hot Topics
The CJRS will cease on 31 October 2020. However, it will close to new members on 30 June 2020, so the last date employers can furlough employees is 10 June 2020.
After 10 June 2020, employers will only be able to furlough employees who have already been furloughed previously for the minimum period of three weeks.
Employers can flexibly furlough their employees from 1 July 2020. Employers may agree that employees work any amount of time and any shift pattern, while still being able to claim CJRS grant for their normal hours not worked.
The employer must pay employees in full for hours worked, but furlough pay will be available for hours not worked.
When claiming the CJRS grant for furloughed hours; employers will need to report and claim for a minimum period of a week. This is a minimum period and those making claims for longer periods such as those on monthly or two weekly cycles will be able to do so. To be eligible for the grant, employers must agree with their employee any new flexible furloughing arrangement and confirm that agreement in writing.
For the duration of the CJRS, it appears but is not currently certain, that furloughed employees will be entitled to 80% pay for hours not worked, subject to a monthly cap of £2,500.
The government contribution to furlough pay will gradually taper as follows:
• Until 31 July 2020, the Scheme will remain unchanged, with the government paying 80% of wages up to £2,500 a month, together with National Insurance contributions (NICs) and employer pension contributions.
• From 1 August 2020, the government will pay 80% of wages up to £2,500 a month. Employers must pay employer National Insurance contributions (NICs) and employer pension contributions.
• From 1 September 2020, the government will pay 70% of wages up to £2,187.50 a month. To make up the 80% total (subject to the £2,500 cap), employers must pay 10% of wages plus employer NICs and employer pension contributions.
• From 1 October 2020, the government will pay 60% of wages up to £1,875 a month. To make up the 80% total (subject to the £2,500 cap), employers must pay 20% of wages plus employer NICs and employer pension contribution.
Employers must make these contributions from 1 August 2020 for Furlough Leave, they are not optional.
Further guidance by the Government has been promised to be published on 12 June 2020.
Calculating Furlough Pay
The Government has also released a second Direction to the Treasury which sets out the terms of the Coronavirus Job Retention Scheme (CJRS).
The Direction is complicated and wordy. Therefore this guidance seeks to give a ‘very’ quick overview. You should take further advice as relevant.
There is a calculator which can be found here.
How to Calculate It
To calculate an employee’s furlough pay, you must determine the following:
• Is the Employee a Fixed Rate or Non Fixed Rate Employee?
• What is the Employee’s reference salary?
• What is included in the Employee’s regular salary or wages for the purposes of calculating their furlough pay?
What Is “Regular”?
The second Treasury direction gives further guidance and provides that “regular” in relation to salary or wages means that part of the wages or salary that cannot vary according to a relevant matter except where the variation in the amount arises from a non-discretionary payment or arises from a legally enforceable agreement, understanding, scheme, transaction or series of transactions.
Variations in the amount of salary or wages arising from a non-discretionary payment which varies can be included in the calculation of an employee’s regular salary or wages only if the payment:
• is in respect of overtime, fees, commissions or a piece rate;
• is made in recognition of the employee undertaking additional or exceptional responsibilities;
• is made in recognition of the circumstances in which the employee undertakes the employee’s duties or time when they are undertaken; or
• Is paid as a result of a legally enforceable agreement, understanding, scheme, transaction or series of transactions to prescribe the method of calculating the amount of wages or salary.
Overtime is payable where the employer is contractually obliged to pay for overtime worked, rather than whether the overtime itself is compulsory or guaranteed. This has changed from the previous understanding of the definition.
Track and Trace and Claiming Back SSP
Those employees who have been told to self-isolate by a government ‘test and trace’ service, because they’ve been in close contact with someone who tested positive will be eligible for SSP Payments. The Welsh Government has also confirmed that their Test Trace Protect equivalent will also be covered by SSP.
The Government have published Guidance on the Coronavirus Statutory Sick Pay Rebate Scheme which allows employers to claim back the Statutory Sick Pay they have paid employees’ for their Coronavirus-related absences. Full information and links on how to claim can be found here.
Training Furloughed Staff
Employees are allowed to engage in study or training if its purpose is to improve an employee’s effectiveness in the employer’s business. However the training cannot:
• Directly provide a service to the employer or the business activities of the employer
• Contribute to its business activities or anything that generates it an income or profit
• Contribute to any significant degree in the production of goods
Redundancy and Furlough
A question that we are frequently having to consider is ‘will it be an unfair dismissal if an employer makes someone redundant rather than placing them on furlough?’
This is an entirely new situation with no case law or direction to be taken from employment tribunal decisions. It is therefore extremely difficult to determine whether an employment tribunal would find such a dismissal to be unfair at this stage.
There is a general test for reasonableness in respect of making an employee with over two years’ service redundant under section 98(4) of the Employment Rights Act 1996. However it is not a one answer fits all. It will depend on the particular circumstances of the case, including the size and resources of the employer.
For example, the government has stated that it will expect employers to make a financial contribution towards furloughed employees’ furlough pay from 1 August 2020. At present furloughing employees is close to cost neutral in most cases. However, furloughing employees beyond that date will come at a cost to employers which increases in September 2020 and October 2020. Therefore it could be a fair reason for employers to make furloughed employees redundant, if they can demonstrate that it was justified due to the financial impact. It will depend on the individual employer’s circumstances whether this can be justified in August, September or October or indeed justified at all.
Therefore if there is a genuine redundancy situation the option to furlough employees in itself will not definitely mean that an employee’s dismissal will be unfair.
For example some jobs have genuinely been eliminated (e.g. due to the loss of a major customer or workplaces closed), or employers have decided, unconnected directly to Coronavirus, to implement a restructure. In this case, it may be that a redundancy during the furlough period can be justified.
The employee guidance says that “your employer can still make you redundant while you’re on furlough or afterwards”. However, the normal rules of employment law will apply in respect of whether that redundancy is fair.
The guidance is clear that the furlough grant cannot be used for redundancy pay.
At the end of furlough, if trading conditions have not improved sufficiently for a business to take all the furloughed employees back then an employer will be able to make them redundant, subject to the usual rules on redundancy. This is significant because other European countries that have similar schemes in place are imposing restrictions on employers making redundancies. No such conditions are being imposed in the UK.
As a minimum, employers should be able to show that they have considered furloughing as an alternative to redundancy for each type of role they consider redundant, and document their reasons why it would not be suitable in the particular circumstances of the case. Those reasons need to be reasonable and convincing enough to lead an employment tribunal to consider that a redundancy dismissal is fair.
This is where we think that employers may face some difficulty as on the face of it furlough may constitute a reasonable alternative to the end of the scheme. It is likely that a Tribunal would be able to consider the reasons placed forward by the Employer for not using the furlough scheme to the end of its inception and determine if they were reasonable or not.
One danger an employer may face is for a Tribunal to determine that it was not reasonable for the redundancy to occur prior to the end of the furlough scheme; but it would be fair at the end of the furlough scheme if they consider the furlough scheme a reasonable alternative to redundancy. In that scenario an employer may be left with a compensation bill to the end of the furlough scheme with the appropriate payments being made to the employee to the end of the scheme. In that scenario the Employer would not be entitled to retrospectively claim for those payments via the CJRS scheme and would be paying the furlough pay itself.
Can I Make Staff Who Are Furloughed or Working Take Annual Leave During This Crisis?
There has been considerable uncertainty around this but on balance we would advise yes, as long as you give the correct notice. However, we are of the opinion that this will have to be proportionate to the amount of time they have been off and you would need to ensure that they have enough annual leave for the rest of the year. In other words, if an employee is furloughed for 3 months, you should not compel them to take any more than a quarter of their annual leave entitlement.
Our advice would be to ask employees in the first instance if they have a preference in terms of when they take their leave rather than forcing it on them at a time determined by the Employer.
Can I Cancel My Employee’s Pre-Booked Annual Leave for Later in The Year and Insist That They Take It Now?
The Working Time Regulations allow for this however we consider that there is a risk that doing so would give rise to constructive dismissal claim should the Employee have booked those days for a specific reason. In addition the new regulations state that employers can only exercise this right where there is “good reason to do so”.
An Employee Has Requested That Their Pre-Booked Annual Leave Is Cancelled. Do I Have to Allow It?
Again, an Employee can cancel pre-booked annual leave by mutual agreement, however given the current climate it may be best to come to some sort of compromise whereby the Employee is allowed to cancel some of the pre planned leave but has to take the rest.
Do I Have to Allow My Employees to Carry Over Their Untaken Holidays into The Next 2 Holiday Years?
Where it is not reasonably practicable for a worker to take some, or all, of the holiday to which they are entitled due to the Coronavirus, employers are required to allow employees to roll over up to 20 days from the current holiday year into the next 2 holiday years.
ACAS provides the following examples, as when this should be allowed by an employer:
• An employee is self-isolating or too sick to take holiday before the end of their leave year
• An employee had to continue working and could not take paid holiday
It seemingly does not necessarily cover the situation where an employee chooses not to take holiday because they can’t travel abroad.
Is There Anything Else I Need to Be Aware Of?
There is some thinking that given the current situation, it is impossible for employees to engage in leisure or relaxation given the “lockdown” restrictions. Therefore, it remains a possibility that the Government or a court will revisit this issue in the future and could determine that Employers should not have compelled staff to take annual leave during this period of time. This is just speculation at this time, however and as things stand there is nothing that specifically rules out making staff take annual leave during this period.
If you would like to discuss further, please contact us by emailing firstname.lastname@example.org or by phoning 01392 247436.
Last updated 2nd June 2020