09/04/20 Employment Law Update – Here at Employee Management Limited we have been fielding many questions regarding the Government’s recently announced Job Retention Scheme. The temporary scheme has been created to assist organisations that are unable maintain their current workforce because operations have been severely affected by coronavirus. It allows employers to furlough employees and apply for a grant that covers 80% of their usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
Rather than our scheduled Employment Law Update we thought we would share with you a few of the most commonly asked questions and our advice in relation to the scheme.
Q – Not all of our employees work regular shifts or hours per week. How do we calculate the 80% for those with varied hours / pay?
A – To calculate the payment for employees or variable hours / pay the employer will need to look firstly at their earnings in the same pay period in the previous year and secondly at their average earning in the whole previous 12 months. The grant is applied to the higher of those two figures. Where an employee has worked for less than 12 months then the employer should calculate their average earnings since commencement of their employment even of this is only a part month calculation where the employee was taken on in February.
Q – Will furloughed employees continue to accrue annual leave?
A – As staff remain employed whilst furloughed, annual leave will continue to accrue.
Q – What if by paying the 80% this drops the employee below the National Minimum Wage (NMW) or National Living Wage (NLW)? Do I need to top it up?
A – Furloughed workers are to receive the lower of 80% of an employee’s regular wage or £2,500 per month even if this falls below NLW/NMW as those apply for hours they are working. This does not however apply where the employee is required to carry out training by the employer. For those completing training such as online courses, whilst furloughed, they must be paid at least NLW/NMW for the time spent training even if more than 80% of their wage.
Q – An employee was advised to self-isolate for 14 days but is now asking to be furloughed before that period has expired. What should we do?
Employees on sick leave or self-isolating should get Statutory Sick Pay for the duration of their fit note or period of self-isolation. Once this period has expired they can be furloughed but the decision to furlough or not is the employer’s to make.
Q – What about the Employer’s tax, national insurance and pension obligations?
A – Employers can claim National Insurance contributions and Employer pension contributions up to 3% of qualifying earnings in addition to the 80% wages grant. This only applies to the 80% wages payment and any National Insurance or Employer pension contributions payable on any additional top-up salary will not be funded through the scheme. Voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings will not be funded through this scheme.
Q – Does it apply to short time working?
A – No, if an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme.
Q – What’s included in the calculation of ‘normal wages’?
A – ‘Normal wages’ covered under the scheme includes wages, past overtime, fees and compulsory commission payments. Discretionary bonuses, including tips, and commission payments and non-cash payments are not covered under the scheme. When calculating the 80% the reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind and benefits provided through salary sacrifice schemes (including pension contributions).
Q – Can we furlough employees who left voluntarily or just those made redundant?
A – Employees who have been made redundant or stopped working for the organisation since 28th February 2020 can be furloughed if they are rehired by their employer. It is not mandatory to rehire employees just because they can be furloughed under the scheme, this remains the choice of the Employer.
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