Furlough updates about Directors, former employees, commission payments and furlough periods

Since the government introduced the Coronavirus Job Retention Scheme (JRS) a number of questions have been put to us which until now there has not been any guidance provided. On the 4th April the government released further guidance which answers some of the more common questions that we have been asked, as follows;

Can I reinstate and furlough an employee that left our employment?
The new guidance confirms that employees who were on the payroll on or before the 28 February but have since left that job for whatever reason (ie not just redundancy) can be re-employed by their old employer and placed on furlough. This means that it covers people who voluntarily resigned to start another job, were dismissed or those that have resigned and are working out their notice can now withdraw their resignation and be furloughed.
It is important to note that there is no obligation on the employer to reinstate and furlough the former employee.
Furthermore, there is no guidance as to what happens at the end of the furlough period and whether there is a continuation of service or if you can release the employee if they have no other employment to go to. To prevent allegations that decisions not to reinstate have been made for potentially discriminatory reasons, you should keep a record of the reasons why anyone was not re-employed.

Can furloughed employees take on another job while being furloughed?
Yes, but this depend on the contract with the employer and their consent. If their contract requires the employee to obtain the employers consent then they will have to do so. The employees must also be able to return to their original job should their employer end their period of furlough.

Are commissions included when calculating pay?
The government have changed their stance on this after pressure was brought to bear by some industry groups. Prior to the 4th April, the guidance stated that fees, commission and bonuses should not be included in the calculation of wages.
This has now been amended and the position is:
 The following can now be included: regular payments employers are obliged to pay, such as wages, past overtime, fees and compulsory commission payments. The cap still remains subject to the 80 per cent or £2,500 cap. The following should be excluded, discretionary bonuses, tips, discretionary commission payments, and non-cash payments (such as the value of benefits in kind).
Where employees have fluctuating pay we advise that the employer follows “employees whose pay varies” guidance to calculate what can be claimed (ie using earnings from the same month last year, or average earnings over 12 months).
Benefits provided through salary sacrifice schemes should not be included in calculating the reference salary. However, where an employer provides benefits to furloughed employees, these should be continued in addition to the wages paid under the JRS unless something different is agreed with the employee.
The guidance confirms that Coronavirus counts as a “life event” for the purposes of salary sacrifice schemes. This can allow employees to make changes to their salary sacrifice arrangements.

Can employees be furloughed and then un-furloughed at different times?
An employee must be furloughed for a minimum of 3 weeks but can then work for a week and then be furloughed again, this can occur on multiple times. This allows you to bring someone back once a month to deal with issues including payroll. Alternatively, you can rotate the staff needed to be fair to everyone. It is advisable that when someone is furloughed again that you go through the correct process and issue a new letter each time.

Can Directors be furloughed ?
Yes, company directors and officers can be furloughed, but they cannot do any work or promote the company but they can do what is reasonably necessary to fulfil the statutory obligations they owe to their company. These are not clarified but will include things like submitting tax returns, updating companies house etc.

Can I furlough Employees who are shielding?
Yes, anyone who is shielding in line with NHS advice can be furloughed. Although the guidance says that employers can only claim for these employees “if they are unable to work from home and you would otherwise have to make them redundant” we consider this to be an oversight and may be clarified at a later date.

Can I furlough and employee who is caring for their children or other dependents?
Yes, if they are unable to work because they are looking after children or have other caring responsibilities can be furloughed.

Who else can be furloughed?

  1. Apprentices, who can continue to train while furloughed.
  2. Domestic staff  such as nannies or cleaners, can access the JRS. Provided these staff are paid via PAYE and were on payroll on 28 February.
  3. Employees on fixed term can be furloughed, and it has now been confirmed that their contracts can be renewed or extended during that period without affecting eligibility.
  4. The guidance also confirms that agency workers, “limb (b)” workers, and salaried members of LLPs will be eligible to be furloughed.

How does a company make a claim
The government state that the online claim service should be up and running by the end of April. In addition to the previous requirements the new guidance adds that employers must:

a.have enrolled for PAYE online,
b. confirm the decision to furlough in writing (we have provided this to clients in a previous email but it is available on request). A record of that communication needs to be kept for five years

What happens about holidays?
This position is unclear.
Acas updated its Coronavirus Advice on 2 April. This states that if an employee is furloughed, they can still request and take their holiday in the usual way. It also states that employees may be required to use a day’s paid holiday for bank holidays “including when they’re furloughed”. This seems to mean that employers still have the right to require employees to take holiday when furloughed. But this has not been confirmed in the government guidelines and, this opens up a number of other as yet unanswered questions such as whether taking holiday ends that period of furlough, or the rate of  holiday pay should be given for holidays taken during furlough.
We are awaiting guidance on these points and we have been asked by clients what they should do regarding holidays. Our view is that in the absence of any guidance from the government employers might be best to not say anything in their furlough letter but defer the question pending clarification.

We appreciate that this is a stressful and worrying time for us all, and we hope that you find the guidance contained in this blog useful. If you require specific advice and would like to know more about the services we offer, please contact Iain Lock on 01920 463777 or ilock@qandalaw.co.uk.

This blog and is a summary of the law and the latest government guidelines. It should not replace legal advice tailored to your specific circumstances.

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