CORONAVIRUS JOB RETENTION SCHEME
BRIEFING FOR USDAW OFFCIALS
The Government has announced a Coronavirus Job Retention Scheme which will fund 80% of ‘furloughed workers’ wage costs up to a maximum of £2,500 per month. The scheme is intended to minimise the number of workers who suffer a financial detriment as a result of the Coronavirus outbreak. The scheme is currently scheduled to run for three months from 1 March.
What is a furloughed worker?
Employees who are currently not working, but were on their employees PAYE payroll on 28 February 2020 can become furloughed workers. Employees can be on any type of contract including:
- full-time employees
- part-time employees
- employees on agency contracts
- employees on flexible or zero-hour contracts
The scheme also covers those who have been made redundant since 28 February, if they are re-hired by their employer.
To be eligible for the subsidy, an employee cannot work for, or on behalf of, the organisation and the employee’s wages will be subject to usual income tax and other deductions.
If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and the employer will have to continue paying the employee as outlined by the employment contract.
In relation to agency workers, the Government guidance states that, “This scheme is only for employees on agency contracts who are not working.” This will cover agency workers who are employed on a ‘Pay Between Assignments’ contracts, also known as ‘Swedish Derogation’ contracts, with the agency expected to apply for the subsidy.
It is not yet clear whether agency workers engaged on a ‘worker’ basis will be covered by the scheme. The Swedish Derogation provision is due to end on 6 April and many Usdaw members may have already been moved onto a ‘worker’ contract, or such a move may be due to take place by 6 April. Usdaw is seeking urgent clarification on whether these workers will be eligible for the scheme.
What is meant by ‘wages’?
Furloughed workers’ wages will be backdated up to 1 March where individuals have either been furloughed or made redundant and re-hired to be furloughed.
In terms of the make-up of wages, Government guidance currently states that:
Full time and part time employees
For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.
Employees whose pay varies
If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, the employer can claim back 80% of a furloughed worker’s regular wage based on the higher of either:
- the same month’s earning from the previous year
- average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work. If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
Where Usdaw members are paid a salaried wage, any regular bonus or commission is unlikely to be included in the subsidy paid by Government. However, we would still call upon employers to make up these payments.
Most Usdaw members are hourly paid and, under current guidance, will fall under “Employees whose pay varies”. Therefore, employers will be able to access a subsidy based on the higher of a furloughed employee’s average monthly earnings over the past 12 month or their earnings from the same month last year. This calculation will include any additional hours worked.
The guidance around bonus payments, especially those linked to hourly rate which are common across in warehouses and food manufacturing sites, remains unclear. The Government guidance for employers states that fees, commission and bonus payments should not be included for salaries employees however for workers who’s pay varies, i.e. hourly paid, that employers can claim based on average earnings. Separately, under the guidance for employees, the Government guidance states that bonuses, commissions and fees are not included for all workers. Usdaw is writing to the Chancellor to seek clarification on bonus payments for workers whose pay varies.
What is the process to furlough a worker?
Government guidance states that, “Employers should discuss with their staff and make any changes to the employment contract by agreement.” Unless there is a specific clause in the contract, typically known as a ‘lay-off’ clause, an employer cannot reduce a worker’s earnings without individual agreement.
The Guidance states employers should have “collective consultation processes to procure agreement to changes to terms of employment”. In the current situation, whatever collective negotiations take place it would be advisable for employers to get individual agreements once “collective consultation to procure agreement” is completed.
Where there is not a lay-off clause in the contract, an employer should only be able to transfer a worker onto furlough status if:
- The employer agrees to top up the individual’s wages to 100% or;
- The individual agrees for their wages to be reduced whilst on furlough status.
Once agreement is reached, or normal wages guaranteed, the employer should write to relevant employees confirming that they have been furloughed. An employer does not need to place all workers into furlough status, however equality and discrimination law will apply to any selection process
Who can be furloughed?
The Government guidance states that the scheme has been, “designed to support employers whose operations have been severely affected by coronavirus.” There is nothing in the guidance to state that this must be in relation to reduced customer demand or business turnover. Therefore, some people whose ability to work has been affected due to Coronavirus are also likely to be eligible.
In companies where Usdaw is recognised, we expect employers to engage with Usdaw over any plans to utilise the Job Retention Scheme. These discussions should be held with the Official who has overall responsibility for collective bargaining. As such, National Officers will have responsibility for discussions over National Agreements and discussions over local agreements should be held within the Division.
The Government guidance on the scheme states that those who are shielding in line with public health guidance can be placed on furlough. Current Government advice is that individuals on the extremely vulnerable list must practice shielding for 12 weeks from the date they received the letter advising them they are on the extremely vulnerable list. Whilst these workers can be placed on furlough, it is likely that the medical conditions which have placed them on the list will mean that they satisfy the definition a disabled worker as outlined in the Equality Act (Disability Discrimination Act in Northern Ireland). This means that they must not be treated less favourably than non-disabled colleagues on furlough.
Some Usdaw members are currently taking unpaid leave to look after individuals who are on the extremely vulnerable list. For those on unpaid leave, the Government guidance states, “Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.” Therefore, workers who have started unpaid leave since the extremely vulnerable list was published can also be furloughed. The protection of the Equality Act/DDA in Northern Ireland, is unlikely to apply for these workers and therefore there is no additional protection for these workers to be guaranteed 100% of pay. Usdaw would encourage employers to make-up the difference between the 80% subsidy and 100% of pay, however if the individual agrees to it, the pay can be reduced by up to 20%.
Those individuals currently on the vulnerable list due to underlying medical conditions and are not attending work due to the risk of Coronavirus, can also be placed onto furlough status. Again, if the medical condition is deemed a disability under the Equality Act/DDA in Northern Ireland, these workers must not be treated less favourably than their non-disabled colleagues whilst furloughed.
Finally, parents who are currently taking unpaid leave to look after children following the closure of the schools may be placed on furlough provided the period of unpaid leave commenced after 28 February. There is no additional protection for these workers to be guaranteed 100% of pay. Usdaw would encourage employers to make-up the difference between the 80% subsidy and 100% of pay, however if the individual agrees to it, the pay can be reduced by up to 20%.
Currently on sick leave or self-isolating
Employees who are currently on sick leave or self-isolating, will continue to be eligible for Statutory Sick Pay and therefore cannot be furloughed. Once these individuals return to work, they will be eligible for the furlough scheme.
How long can a worker be furloughed?
The furlough scheme will be backdated to 1 March and is initially open for 3 months. If an individual is placed on furlough, they will need to retain that status for at least three weeks. An individual can be furloughed more than once, and one period can follow straight after another as long as the scheme remains open.
Women on Maternity Pay will continue to be eligible for Statutory Maternity Pay or Maternity Allowance depending on earnings. If an employer offers enhanced contractual Maternity Pay, these wage costs may be claimed through the scheme. An employer can only claim for these wages if the employee has agreed to take furlough status and all actions comply with normal equality and discrimination provisions.
The same principles apply to enhanced adoption, paternity or shared parental pay.
If a member has more than one job
If a member has more than one employer, they can be furloughed for each job. Each job is separate and the cap applies to each employer. There is nothing in the current guidance to state that an individual cannot get a second job while furloughed, although many contracts state that an individual must have the agreement of their current employer before getting a second job. This appears to be a significant loophole in the scheme and may be closed in the near future.
If a member does not want to be placed on furlough
If an individual refuses to go on furlough, they may be at risk of redundancy or termination of employment, depending on the circumstances of their employer. However, this must be in line with normal redundancy rules and protections.
Annual leave provisions
The guidance does not mention annual leave provisions which would imply that workers, even in furlough status, would still accrue annual leave. For this not to happen, the Government would need to amend the Working Time Directive and, as far as we are aware, there are no current plans to do this.
Under the scheme, the Government will subsidise an employer’s basic auto-enrolment contributions on 80% of an employee’s wages while a worker if furloughed. Where an employer tops up the 80% payment, the employer will have to also top-up the minimum auto-enrolment contribution.
National Minimum Wage/Living Wage
As a furloughed worker will not be working, they will not be entitled to the National Minimum/Living Wage for their normal hours.
Universal Credit/Other benefits
Individuals who are on the Job Retention Scheme will remain eligible for Universal Credit and other benefit payments, subject to standard qualification criteria. For those members already in receipt of Universal Credit, according to Government guidance on UC, moving onto furlough status, even if a member accepts a significant reduction in pay, will not require a new claim to be made. Where member’s earnings reduce as a result of furlough status, their Universal Credit payments may change. Usdaw is unable to offer benefits advice and we should refer concerned members to organisations such as the Citizens Advice Bureau or Turn2Us.org.uk
However, for those members who remain on the legacy benefits system, i.e. working tax credits, childcare tax credits, etc, it is possible that both a change in employment status, and/or a change in employment status, could end their current benefits claim and require a new claim on Universal Credit. The Government has not published any guidance on this area and Usdaw has written to the Chancellor seeking urgent clarification.