What do we know?

Below is a summary of the key points, some of which had not previously been announced. If you get the chance, please read the guidance in full.

• The scheme is open to "all UK employers" (but see comments below in relation to health and social care providers) that had a PAYE scheme in place on 28 February 2020.
• Any organisation with employees can apply, including charities, recruitment agencies and public authorities.
• Employers can reclaim up to 80% of wage costs up to a cap of £2,500 per month, plus the associated employer NICs and minimum auto enrolment pension contributions on that wage. Fees, commissions and bonuses are not included.
• An employer can choose to top up to 100%, but does not have to.
• For employees whose pay varies, the employer can claim for the higher of (i) the same month's earning from the previous year (e.g. earnings from March 2019); or (ii) average monthly earnings in the 2019-20 tax year.
• Individuals are only entitled to the minimum wage for the hours they work. So if they are furloughed and do not work, and 80% of their normal earnings would take them below the minimum wage based on their normal working hours, they still only receive 80% as they are not working. However, they are entitled to be paid NMW for any time spent training.
• To be eligible, the employee must have been on the payroll on 28 February 2020. If they were hired later, they are not eligible. Anybody who was on the payroll on 28 February and has since been made redundant can be rehired and put on the scheme.
• Furlough leave must be taken in minimum blocks of three weeks to be eligible for funding.
• There is nothing in the guidance which prohibits rotating furlough leave amongst employees, provided each employee is off for a period of at least three weeks.
• The employee must not be working at all for you. If they work for even an hour (presumably during their entire three week furlough period), they are not eligible. However, they are able to undertake training and do volunteer work, provided they do not provide services to or make any money for their employer.
• When agreeing changes in hours (and acceptance of 80% pay), assuming the contract does not already allow for that, normal employment law applies. The employer must be careful not to discriminate in deciding who to offer furlough to.
• Employees on sick pay or self-isolating cannot be furloughed, but can be furloughed afterwards. Employees who are shielding for 12 weeks in line with Pubic Health England guidance can be placed on furlough.
• Employees on maternity (or similar) leave can continue to draw SMP (or similar) payments. The guidance does not prohibit women on maternity leave agreeing to return to work early and then being furloughed, or electing to change to shared parental leave and then being furloughed.
• Employers can only claim once every three weeks, i.e. they cannot get weekly reimbursement. Claims can be backdated to 1 March 2020.

Unanswered questions

Unfortunately the guidance leaves a number of key questions unanswered:

Are health and social care providers eligible under the CJRS?

The Guidance creates uncertainty about health and social care providers in receipt of public funding are eligible under the CJRS.

The Guidance states, "Where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them. This also applies to non-public sector employers who receive public funding for staff costs."

This appears to contradict earlier guidance that all businesses and charities could participate in the Scheme.

The Government's position appears to be that providers who are privately funded are eligible under the Scheme and those who only receive public funding are not. It is unclear what the position would be for providers who have a mix of private and public funding and it would be difficult for HMRC to determine the source of funding for staff costs in this scenario.

The Guidance also states, "In a small number of cases, for example where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the coronavirus response, the scheme may be appropriate for some staff." This suggests that even if providers are potentially eligible they have to make efforts to redeploy staff in the sector before being able to utilise the Scheme, but no further details of the requirements have been provided.

We cannot see any reasonable justification for the disparity of treatment between privately and publicly funded providers. All organisations are facing unprecedented challenges and need flexibility and financial support to meet the changing requirements of their workforce. Examples we have seen include:

• A care provider implementing full lockdown of a care home with a number of staff volunteering to live-in to support residents. This created a reduced requirement for other staff who could be furloughed.
• A care provider with reduced occupancy due to Covid-19 seeking to furlough care staff and office staff until occupancy and revenue increased.

Given the significant operational challenges faced by the sector due to the coronavirus pandemic, we hope that the government will confirm that all health and social care providers can benefit from the Scheme.

Can you furlough staff who are shielding?

The Guidance states that employers can furlough staff falling within the "extremely vulnerable" group, i.e. those who are shielding for 12 weeks in accordance with government guidance. This is welcomed if it enables you to pay staff 80% of pay funded by the Scheme, rather than the employee only being given unpaid leave or Statutory Sick Pay (depending on the circumstances).

However, it is unclear from the Guidance whether a redundancy/layoff situation is required before an employee who has been told to shield can be furloughed and to what extent HMRC will test this when reviewing or auditing applications for grants.

The original aim of the Scheme was to avoid redundancies, but the new guidance does not contain an explicit requirement for you to show that redundancy is an alternative.

This lack of certainty is already causing difficulties with providers having to make difficult commercial decisions about whether they can afford to furlough staff in the extremely vulnerable group on 80% pay (which would be their preference) where there is a risk that they will not be able to reclaim their wages under the Scheme. This problem is particularly acute given that for most roles you will need to fund the wages and agency fees of someone to fill the role.

What can you do now?

Whilst we are awaiting more detailed guidance, you should give careful thought to your approach to furloughing staff based on your business need, appetite for risk, and available cash flow. If you need help please do get in touch.

We will update you further as soon as possible.