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Q&A with our Payroll guru_ Your furlough & SSP questions answered

Q&A with our Payroll guru: Your furlough & SSP questions answered

The Coronavirus Job Retention scheme (CJRS) is a lifeline for many UK businesses. But the scheme is evolving rapidly, with new updates every week. There’s a lot of misinformation out there, but we’re here to help.

Helping you to debunk the myths is SD Worx’s Payroll guru, Simon Parsons - Director of Payments, Benefits and Compliance Strategies. We asked Simon some of the most common questions about furlough to provide you with the facts. 

    Q: Can employees take annual leave whilst being furloughed? Does annual leave accrue during furlough?

    A: While there are no definitive government rules about annual leave and furlough, guidance by the ACAS states that furloughed workers can still request and take their annual leave in the usual way and they should be paid in full for any holiday days that they take. Annual leave entitlement still builds as normal in accordance with the Working Time Regulations as the employment contract is continuing. Remember, employees being furloughed should retain all their employment rights.

    However, the government has introduced a temporary law giving employees and workers the right to carry over up to four weeks’ paid holiday into their next two annual leave years. This law applies for any holiday the employee or worker does not take because of COVID-19, for example if:

    • They’re self-isolating or too sick to take holiday before the end of their leave year
    •  They’ve had to continue working and could not take paid holiday
    • They may also be able to carry over holiday if they’ve been 'furloughed' and cannot reasonably use it in their holiday year.

      Q: What happens if an employee is on maternity leave is furloughed? Or anyone due to go on maternity after furloughed?

      A: If your employee is on statutory leave, which includes maternity leave, adoption leave, paternity leave or shared parental leave, then the normal rules of pay still apply. Employers can claim through the Coronavirus Job retention Scheme (CJRS) scheme for enhanced (earnings related) contractual pay for employees who qualify. 

      If an employee is returning from statutory leave, then claims for full or part-time employees returning from statutory leave after 28 February 2020 should be calculated against their salary, before tax, not the pay they received whilst on statutory leave.

      Claims for those on variable pay returning from statutory leave should be calculated using either the:

      • Same month’s earnings from the previous year
      • Average monthly earnings for the 2019-2020 tax year

        Q: Is the £2500 cap based on gross or net pay?

        A: The £2,500 cap applies to earnings that were due to be paid in cash excluding any benefits, flex arrangement or salary sacrifice. So, in effect it relates to the earnings being declared to the government as income, not notional pay which may be used to operate flexible benefit provision.

          Q: Do employers pay 100% of the wages or 80% in order to claim?

          A: You can choose to pay employees 100% of their wage but you don’t have to. Those who choose to top up can still only claim the 80% back. Whatever amount claimed under the scheme must be paid to the employee as cash wages.

            Q: How do I select employees for furlough leave?

            A: In some cases, it will be all your employees, in others it will only be certain departments. Where selection does need to take place, it may be appropriate to implement a similar selection period as would be used in a redundancy situation so that the most effective employees remain in work.

              Q: Do employers calculate furlough payments on basic pay, or do they need to look at average earnings? For example, employees who earn regular overtime, bonuses and commissions.

              A: Government guidance on this is constantly evolving, but new guidance suggests you can now include regular payments that you are obliged to pay including past overtime, fees and compulsory commission payments. But discretionary bonuses including tips, commission payments and non-cash payments (such as the value of benefits in kind) must still be excluded from the calculation of wages.

              Benefits provided through salary sacrifice arrangements (including pension contributions) that reduce an employee’s taxable pay should also be excluded from the calculation. Where employers provide benefits to furloughed employees, these should be continued unless a different arrangement is agreed with the employee. HMRC has confirmed that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.

                Q: If an employee must self-isolate more than once, are you limited to one 14-day claim or can you continue to claim Statutory Sick Pay (SSP)?

                A: If an employee has been instructed to self-isolate on separate occasions, then they are unfit for work on both occasions and entitled to SSP. So, assuming a four-day Period of Incapacity for Work (PIW) has been formed and the earnings conditions have been met, they are entitled to SSP from day one. An employer with under 250 employees can reclaim SSP for 2 weeks only. The entitlement to SSP by the employer can be up to 28 weeks.

                  Q: Is the 250 employees UK based or can it be global organisations too? Is this count for employees in UK office only or total employees for company as a whole?

                  A: I would suggest the basis of the count of 250 employees relates to the organisation’s employees with PAYE records within the UK.

                    Q: Can the furlough scheme apply to employees that are due to start, however can’t now due to the business closing?

                    A: The government has extended The Coronavirus Job Retention Scheme eligibility to the 19th March. This means employers can claim for furloughed employees that were employed and on their PAYE payroll on or before 19 March 2020.

                    However, the caveat to this is that the employee must have been notified to HMRC through an RTI submission notifying payment in respect of that employee on or before 19 March 2020, essentially, they must have been paid during that time to be applicable.

                      Q: If you reduce your employees working hours can you furlough them later?

                      A: You can potentially agree different furlough arrangements with difference groups of employees. However, for the grant application and reimbursement from government, the furlough (or associated absence from work) needs to be for a continuous period of 21 calendar days.

                        Q: What happens to employees who have been transferred under Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)?

                        Government guidance published on 15 April 2020 confirms that employees who were subject to a TUPE transfer after 19 March 2020 can still be furloughed and the new employer can claim for their wages, to the prescribed amount, via the Scheme. Previous guidance had stated that any employee transferred on or after 28 February could be furloughed, however, key dates for eligibility have since been amended.

                        Watch our on-demand webinar with Simon Parsons for an update on the Coronavirus Job Retention Scheme and other government proposals here.

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