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Not only was the sun shining for most of the country this weekend, but we also received more eagerly awaited guidance about how HMRC expect the new Furlough Scheme to work.
This updated guidance can be seen by clicking here but for quick reference and to supplement our previous guidance (click here), we have summarised the answers that we now have to some frequently asked questions (and we have commented on one question we are regularly being asked to which we have not yet received a definitive answer) below.
What has been confirmed:
Do we have to confirm to an employee, in writing, that they are being placed on furlough leave?
Yes. As anticipated, employees need to be notified in writing about the organisation’s decision to furlough them. This notice should specify the date their furlough leave starts and must be kept on file for at least 5 years.
Can we furlough employees who are shielding or who need to stay at home with someone who is shielding?
Yes. The guidance clarifies that it is not just employees who would otherwise face the risk of redundancy who can be furloughed. Instead, those who are shielding as a result of government guidance, or those who need to care for those who are shielding can be furloughed. This could be open to abuse though and so we recommend that you ask affected employees for evidence of the government advising them / the person they are caring for about the need to shield.
Can we furlough employees who need to be at home to look after their children?
Yes, the guidance specifically confirms that such employees can also be furloughed and a grant claimed towards their wage costs.
Can employees be furloughed more than once or placed on a furlough rota?
Yes. The only caveat to this is that the minimum amount of time that an employee can be furloughed is 3 weeks and so this will need to be factored into your rota.
Can employees be furloughed from our employment but then obtain paid employment elsewhere?
Surprisingly yes, subject to your agreement to them working elsewhere at the same time. The result is that furloughed employees could potentially end up with a windfall, receiving earnings from two employers for the same time period. This was not expected but we presume that it is to help deal with the current fruit picking and NHS staffing crisis.
Can our furloughed employees do voluntary work or training?
Yes provided that in doing so they are not providing services to, or generating revenue for or on behalf of your organisation.
Can Directors be furloughed?
As we anticipated, the guidance confirms that yes, provided they do not do any work for, or generate any revenue for the organisation, statutory Directors can be furloughed. However whilst the guidance says that they can still fulfil their statutory duties, it does not go into any detail about what HMRC will regard as a statutory duty for this purpose.
We anticipate that HMRC will expect to see a record of a formal board resolution having been made confirming the decision to furlough specific directors if your organisation was ever questioned. Minutes from any relevant board meeting should therefore be made and retained.
We understand we can claim 80% of an employee’s wage, can we include commission owed in our calculation of cost?
Yes, provided the employee has a contractual entitlement to it. Discretionary commission, tips and bonuses cannot be included.
Can we include amounts that are subjected to salary sacrifice, car allowance or other non-monetary benefits in kind in our calculation of overall wage costs?
No. Car allowances and any payments that are made that reduce an employee’s taxable salary should not be included in the cost claimed (e.g pension salary sacrifice), nor should the cost of non-monetary benefits like medical insurance, or company cars. You can however include the cost of national insurance contributions and pension contributions provided that the latter do not exceed the mandatory minimum employer’s contribution under the NEST scheme (click here).
Are we obliged to “top up” the amount of grant we receive under the scheme if it falls below the national minimum wage (NMW) when taking into account the employee’s normal working hours?
No. As furloughed employees will not actually be doing work, paying them a salary equivalent to the grant received will not fall foul of the NMW. That said, organisations do need to be careful about asking employees to do training, in which case, any hours spent doing that training will need to be counted and will need to be paid at no less than the NMW. If reduced salaries are to be paid, employees’ agreement should also be obtained.
From what date can we claim the grant towards wage costs?
You can claim the grant towards wage costs from the first day that employees are furloughed (and not, if earlier, from the date that they were informed that they were going to be furloughed).
What hasn’t been confirmed:
Can employees take annual leave?
Whilst we have not yet had any specific guidance about whether employees can take annual leave whilst they are furloughed, and what their pay for such leave would be, in light of the change in annual leave rules to enable employees to carry over unused holiday for up to 2 years, we think it unlikely that HMRC will expect or indeed allow employees to take annual leave during any periods of furlough leave. We therefore recommend that if an employee wants to take holiday, their furlough leave be terminated after no less than 3 weeks, they take their holiday and then if necessary, be placed back on furlough leave again for at least another 3 weeks (if this does not take them beyond the end of the Furlough Scheme, currently due to end on 31 May 2020).
We understand that this is a troubling and uncertain time for you. Our team are on hand if you have any immediate questions so please do not hesitate to get in touch by calling 0113 849 4000 or email firstname.lastname@example.org.