Written by Brabners LLP
Coronavirus Job Retention Scheme: updated Government guidance for employers and recruiters
On 21 March, the Chancellor, Rishi Sunak, unveiled the Government’s Coronavirus Job Retention Scheme, enabling employees to be paid by their employers whilst retaining their jobs. However, the guidance remained short on detail and left umbrella companies with more questions than answers. Since our last article two weeks ago, the Government has updated its guidance which goes some way to addressing those questions. In this article, we look at those areas that have been clarified, and identify those which require further detail.
Who is eligible for the scheme?
The new guidance clarifies that the scheme is open for all employers (including umbrella companies) if they cannot maintain their current workforce because their operations have been severely affected by Coronavirus. This marks a shift from the Government’s initial guidance on the scheme which suggested that the grant may only be available in respect of employees who would otherwise have been made redundant.
Remember that in order to access the grant, you must have created and started a PAYE payroll scheme on or before 28 February, the employee should have been on PAYE by the same date and you must have enrolled for PAYE online (which can take up to ten days).
Agency workers (including those employed by umbrella companies)
There was some clarification relating to agency workers (including those employed by umbrella companies). The updated guidance confirms that furloughed agency workers must not perform any work through or on behalf of “the agency that has furloughed them”. Presumably where they are employed by an umbrella company, this means that they must not do any work through the umbrella company which has furloughed them. This does not prevent the worker performing work for a client through another agency (or umbrella). Interestingly, this means a worker could be working via one agency/umbrella and simultaneously be furloughed by another, which theoretically would allow the worker to take home a full monthly salary, as well as 80% whilst furloughed by another agency/umbrella. This perhaps reflects the Government’s desire to fill shortages in the food production industry or healthcare sector.
The rules allowing workers with multiple jobs to be furloughed from each job also applies to those registered at multiple agencies/umbrellas, though further clarification is required from HMRC as to how they intend to deal with those individuals who may use their furloughed status with multiple agencies/umbrellas to access a sum considerably in excess of a usual monthly wage.
The position in relation to PSCs
A considerable number of questions were left unanswered in relation to personal service companies after the initial guidance. This update goes some way to resolving those issues. If an individual is employed by his or her own PSC, the PSC will be entitled to furlough the individual and claim back 80% of their monthly salary up to the maximum £2,500. The downside, however, is that many such individuals pay themselves a small salary whilst taking most of their income from dividends (which cannot be included in furlough pay).
Helpfully, it was confirmed that PSC directors can be furloughed without breaching their directors’ duties. A furloughed director must not undertake any work for the company other than any statutory obligations owed to the company. The guidance isn’t specific on what those obligations might entail, but states that a director should “do no more than would reasonably be judged necessary for that purpose” and no commercial revenue should be generated from any actions taken. This raises a question as to whether furloughed PSC directors can even chase up debts or arrange future work for after the Coronavirus restrictions have ended.
It is worth highlighting that any decision made to furlough a director should be formally decided by way of a resolution made by the board of directors, communicated in writing to the director(s) involved and noted in the company records. This also applies to personal service companies.
What else did the guidance clarify?
• Furloughed workers can volunteer or undertake training for their employer as long as no value is created.
• Employees can be furloughed multiple times. Workers can be rotated in and out of furlough status, as long as each period lasts for at least 3 weeks.
• Alongside basic salary, the employer can also claim past overtime, fees and compulsory commission.
• The cost of non-monetary benefits such as health cover cannot be reclaimed under the scheme. Employers must continue those payments throughout furlough.
• Furloughed employees must be notified in writing and a record of the communication kept for 5 years. This is essential for future audits.
• Employees on sick leave cannot be furloughed, but they can be furloughed after their sick leave period.
• Employers are entitled to furlough apprentices.
This bulletin is for general guidance purposes only and should not be used for any other purpose. Brabners is a Limited Liability Partnership