Briefing Note

Coronavirus – Issues for Employers

4 June 2020

Please note that this Briefing Note is not maintained, and reflects the law as at the date of publication or update


This briefing note has been prepared in response to an unprecedented level of enquiries we have received about the employment law issues facing employers arising from the current Coronavirus (COVID-19) pandemic.  This briefing note may be accompanied by our briefing note on Ending Furlough leave and Recalling Staff 

This briefing note is based on the latest advice from HM Government and the National Health Service and we will endeavour to keep it as up-to-date as possible for the duration of the crisis.  Inevitably, the advice is generic in nature and specific and up-to-date advice should be sought on your specific circumstances.

1. Who is entitled to Statutory Sick Pay?

Statutory sick pay (SSP) entitles qualifying employees who are absent from work due to incapacity to receive a weekly payment (currently £94.25 per week) for up to 28 weeks in any period of incapacity for work. SSP is taxable and subject to national insurance contributions. SSP is available to employees who are incapable or are deemed incapable by the Regulations from doing work that they could reasonably be expected to perform under their employment contract.

SSP is not payable to the self-employed, mere workers or employees who have yet to commence work or who earn, on average, less than the Lower Earnings Limit for NIC purposes, based on the previous 8 weeks’ earnings.

Until recently, employees have no right to be paid SSP for the first 3 days of sickness absence, referred to as waiting days.

In response to the Coronavirus pandemic, the Government have confirmed that SSP will be payable for people who have COVID-19 or have to self-isolate in accordance with Government guidelines. This expressly covers:-

• Individuals who are unable to work because they have been advised to self-isolate in accordance with guidance published by Public Health England, NHS Scotland or Public Health Wales.
• Those caring for those within the same household who display COVID-19 symptoms and have been told to self-isolate.

Claimants in receipt of Contributory Employment and Support Allowance, directly affected by COVID-19 or self-isolating in accordance with Government advice, will also be able to claim SSP from day one.

The Government has also confirmed that the three day waiting period will be suspended for the duration of the Coronavirus crisis. There is currently a lack of clarity as to whether the lifting of the three waiting days only applies to people who have COVID-19 or who self-isolate or for all individuals who are absent with illness. Such a distinction is likely to prove impossible to police, however.

2. Can I recover Statutory Sick Pay?

Until the onset of the Coronavirus, SSP was paid by the employer and not recoverable from the State. In the March 2020 budget, the Chancellor announced that the Government will reimburse small employers (that is those with fewer than 250 employees) any SSP paid for the first 14 days of sickness in relation to COVID-19 but not for any other type of sickness absence. Employee’s will be required to provide their employer with an isolation note from NHS 111 after seven consecutive days absence.

3. Is the situation different for Contractual Sick Pay?

An employee’s entitlement to contractual sick pay will invariably be set out in express terms in a statement of terms of employment, a contract of employment or a sickness absence policy. Contractual or company sick pay is usually set off against any SSP that the employee receives.

Occasionally, there will be an implied right to sick pay where the employer has an unwritten policy of continuing to pay employees when they are off sick and this could give rise to such an implied term through custom and practice.

It is important to realise that the new SSP Regulations (Statutory Sick Pay General (Coronavirus Amendment) Regulations 2002 which came into force on 13 March 2020 will not apply to such contractual provisions. Where sickness absence is defined in a contractual sick pay clause, it is in most cases unlikely to extend to periods of self-isolation when the employee themselves is not, in fact, ill, let alone a situation where the employee is caring for someone else who is ill.

4. Can I require staff to work from home?

Generally speaking, an employer has to have an express mobility clause in the employment contract to be able to require an employee to work somewhere other than their usual place of employment. However, given that Government guidance states that homeworking should take place wherever possible it will, in the vast majority of cases be a reasonable instruction for an employer to give to an employee. In considering whether or not to give such an instruction, an employer should consider any particular health and safety issues that are likely to arise from homeworking, the provision of suitable equipment, such as a computer, printer and mobile phone and any data security issues that might arise. The employer should at least consider reimbursing the employee for the additional utility costs but, in many cases, this may be offset by savings to the employee on the cost of a commute. It is anticipated that the vast majority of employees will understand the need for homeworking and positively embrace it.

It is unlikely that an employee will be able to unilaterally decide for themselves to work from home without the prior agreement of their employer. Conceivably, if there is evidence of a serious and imminent threat to the employee’s health by going into the workplace, this could justify the employee’s decision but it is unlikely that any reasonable employer would require an employee to come into work in such circumstances, as such a decision would fly in the face of the Government guidance.

5. Absence due to School Closures?

The Government has taken steps to close all schools in the UK to help stop the spread of the coronavirus, other than for children of certain categories of key worker and for some vulnerable children, whom social services will be unable to monitor. As matters stand, those who take time off for childcare reasons, whether that is to care for a sick child or because of the wider school shut down, will not be entitled to be paid or to receive SSP. In the absence of an express contractual entitlement to leave for childcare reasons (which is extremely rare), an employee would have to consider taking either paid or unpaid leave or asking the employer to facilitate homeworking. Parents have a statutory right to unpaid time off to care for children or other dependents and any detriment or dismissal arising from an exercise of that right will be actionable in an employment tribunal.

6. Do I need to take steps in respect of the staff who are pregnant?

All employers are under an obligation to undertake an assessment of any work place risks presented to employees or workers who have notified the employer that they are pregnant. Government guidance suggests that pregnant women may be at higher risk from COVID-19 than others in the population, and should consider self-isolating for 14 days.

Unless the risk can be eradicated, the employer is obliged to move a pregnant woman to a suitable alternative role, which is likely to mean working from home. If no such alternative work is available, then the employer is obliged to suspend the pregnant woman on full pay (as opposed to SSP) until such time as the risk is ameliorated. In these circumstances, the pregnant employee will find their maternity leave commences automatically at the start of the fourth week before the expected week of confinement.

7. What about disabled employees?

An employer is under an obligation to take reasonable steps to remove or alter any provision, criterion or practice which places a disabled employee at a substantial disadvantage compared to able-bodied employees. Whilst the Coronavirus, of itself, will not amount to a disability, underlying health conditions such as COPD, diabetes, heart disease and cancer are likely to be. COVID-19 is, therefore, likely to place such disabled employees at a substantial disadvantage as they run a much greater risk of a serious infection than their able-bodied colleagues. In such circumstances, it would potentially be a reasonable adjustment to ensure that such disabled employees do not have contact with other employees or members of the public. Home working should be considered, if reasonably practicable, failing that the individual may need to be sent home or in some other way isolated in furtherance of the employer’s duty of care and obligations under the Equality Act 2010.

It is unlikely that payment of contractual sick pay (as opposed to SSP) would be regarded as a reasonable adjustment other than in the most exceptional of circumstances. If a disabled employee is sent home against their will, the employer will need to ensure that it can objectively justify its decision and that there are no less draconian steps that it could take that would give the employee a similar degree of protection.

8. Can I force my staff to take paid holiday during the crisis?

Yes, regulation 15(2)(a) the Working Time Regulations 1998 empowers an employer to compel workers to take holiday. This is commonly the case where businesses shut down over Christmas or in the Summer, for example. The employer is obliged to give the requisite period of notice under the Regulations which is at least twice the length of the period of leave that the workers are being compelled to take. In other words, if there was to be a 2 week shut down, the employer would be obliged to give 4 weeks’ advance notice. However, if the worker is actually sick (rather than self-isolating) they cannot be compelled to take holiday at the time that they are off sick.

Clearly, this is a power that should be used sparingly but in the extraordinary circumstances presented by the Coronavirus, many employees are likely to be more understanding of an employer’s decision to exercise such a power than would usually be the case.

The Government announced on 27 March an intention to bring forward an amendment to the Working Time Regulations 1998 enabling employees to carry forward up to 4 weeks (20 days) annual leave for the next two holiday years, where it has not been reasonably practicable for the employee to take that leave due to the coronavirus crisis. This does not apply to the additional 1.6 weeks (8 days) under UK law, which can already been carried forward in such circumstances but not by as much as two years.

9. Can I force my staff to take unpaid leave?

Generally speaking, the answer is no. Unpaid leave can only occur with the agreement of both the employer and the employee. Where an employee is ready, willing and able to work, it is an implied term of the employment contract that they will be paid.

Some (but not many) employment contracts contain a layoff or short-time working clause. Historically, such clauses were largely confined to the manufacturing sector but, following the 2008 crash, some professional and financial services firms also included such clauses in their employment contracts.

There is no limit to how long an employee may be laid off for, without pay, but there is a statutory scheme which overlays the contractual provisions and which entitles an employee with more than 2 years’ continuous service, to serve notice on the employer of their intention to claim a redundancy payment. Notice cannot be given until the employee has been laid off or kept on short-time working for at least 4 or more consecutive weeks or a total of 6 weeks in any 13 week period. The employer then has the right to serve a counter notice contesting liability to pay a redundancy payment and the effect of this can be to extend the period of lay-off for some considerable time beyond the period referred to above.

Short-time working applies where an employee is required to work less than 50% of their full-time contracted hours. An employee is entitled to a guaranteed payment from the employer during any period of lay-off or short-time working but this is limited to £29 per day and a maximum of 5 days in total, over the entire period.
The vast majority of employers will not have a lay-off or short-time working clause in their contracts. In such circumstance, the employer can either seek the employee’s consent to lay–off or short-time working (and can agree different levels of pay) or can simply try and impose a period of lay-off or short-time working. The risk is that the employee will resign and pursue a claim in the Employment Tribunal for constructive dismissal or, alternatively, to remain in employment and pursue a claim for unlawful deductions of wages.

In either case, such a claim is unlikely to be determined in the next 6-12 months which could buy the employer valuable time to get through the worst of the crisis. Further, it is quite conceivable that an employee who resigns and pursues a claim for constructive dismissal, will not receive any more than they would have received had they been made redundant at the outset, which may very well serve to reduce the number of claims brought against the employer. Furthermore, the employee could find it extremely difficult to find another job, at least until the worst of the crisis is over.

10. Are there any other alternatives to making my staff redundant?

Where lay-off and short-time working or widespread home working is simply not an option, the employer may be faced with the unenviable decision of having to make a number of employees redundant. Given the potentially devastating impact this has, both on the business (given how long it takes to recruit a skilled workforce) and upon the individual employees, this will usually be regarded as a last resort.

Voluntary and Compulsory Redundancy

Where 20 or more employees are to be made redundant from the same establishment, collective consultation provisions will need to be applied. They are beyond the scope of this briefing note but it is important to remember that those employees with less than 2 years’ service also have the right to be collectively consulted. Where less than 20 employees are to be made redundant from one establishment individual, rather than collective, consultation must take place. Collective or individual consultation can only be avoided in special circumstances and it is certainly conceivable that the Coronavirus outbreak would be regarded as an exceptional circumstance which may change the length and nature of the consultation period but it is unlikely to avoid the need for it altogether, although much will depend upon the facts of any individual case.

Employees with less than 2 years’ service do not have a right to be individually consulted and employers will often select such employees for redundancy because they have no unfair dismissal protection, they usually have relatively short notice periods and they have no entitlement to a redundancy payment. Such employees can, therefore, be removed from the work force relatively quickly and cheaply (although care must be taken to avoid discrimination and whistleblowing claims). Similarly, zero hour, casual and agency workers can usually have their contractual arrangements terminated with little or no notice or cost to the business and will usually be the first to fall within scope.

In some situations, employers may seek volunteers for voluntary redundancy to reduce staff costs. In such circumstances it is often desirable to retain the right to turn down any requests for voluntary redundancy in order to meet the needs of the business.

Pay cuts and other contractual variations

Whilst employees, and their representatives, are usually unlikely to agree to a temporary reduction in pay and benefits, they are sometimes willing to do so where the alternative is closure of the business and compulsory redundancies. It is essential that there is extensive collective and/or individual (as the case may be) consultation with trade unions, representative bodies or the employees themselves, in order to seek their agreement to such changes. Essentially, the employers’ task is to win “hearts and minds” and it is more likely to be successful in this task if both the employer and the employees share the pain of the changes and they are expressed to be of temporary duration so there is “light at the end of the tunnel”.

One effective way of securing agreement to a contractual variation is to offer the reduced pay or benefits back in the event that the employee and/or the business achieve certain turnover or profitability targets for the month or quarter in question. This will necessitate a degree of transparency in the way the employer discloses the results to its work force.

On rare occasions, an employment contract may have a general flexibility clause within it, such as to enable an employer to reduce pay and benefits. This was the scenario in the leading case of Bateman and Others v Asda Stores, where it was held Asda was entitled to rely upon a general statement in its employee handbook reserving the right to vary contractual terms in order to introduce new pay terms, without the need to obtain the express consent of all affected employees. It was, however, significant, that Asda had undertaken an extensive consultation with its employees prior to introducing the change and in only one of 6 cases (out of 700) was it alleged that employees were significantly financially worse off.

Where the vast majority of the work force is prepared to agree a variation in pay or benefits, it may be open to the employer to terminate on notice the contracts of the remaining objecting employees and to offer to re-engage them on fresh terms. In some cases, such a dismissal has been found to be fair on grounds of “some other substantial reason”. Such a process should not be undertaken without expert legal advice.

11. What is frustration and might it apply to my situation?

Where the closure of the work place is beyond the employer’s control, for example because of an enforced Government closure, it is possible that in some circumstances the employer might be able to argue that the contracts of employment (and any other contracts for that matter) have been frustrated. Frustration applies where a contract is treated as discharged by operation of law where an event has occurred which renders further performance impossible, illegal or radically different from that contemplated by the parties when they entered into the contract.

Historically, frustration in the employment context most commonly arose in situations of long-term illness, death or imprisonment (the case law suggesting that a sentence of a year or more is likely to frustrate an employment contract). Generally speaking the courts are reluctant to conclude that a contract has been frustrated because of the impact such a finding has on the employee’s rights.

By definition, a frustrating event is not something which can be expressly provided for in the contract because it has to fall outside of the contemplation of the parties. When an employment contract is frustrated, both parties are freed from their future contractual obligations without fault, although rights accrued before the contract was frustrated (such as in relation to pay), remain. An employee whose employment contract is terminated by frustration will not have been dismissed for unfair dismissal purposes (and, therefore, not entitled to compensation). Neither will the employee be entitled to statutory or contractual notice.

Where the shut-down of a business is temporary, it might be argued by the employee that the contract has not been frustrated because performance will be resumed in due course. Ultimately, much will depend upon the length of any shut down. However, it is at least arguable in some cases that the Corona pandemic, which was completely unforeseeable, renders performance of the employment contract impossible. Take, for example, an employee on a fixed term contract which will come to an end before a Government shut down of the business is lifted. This might typically arise in the entertainment and sports sectors.

12. Government Assistance for Employers including the Furlough Scheme

In the Spring budget of 2020, the Government announced a series of measures to assist hard-pressed employers and others through the Coronavirus pandemic. Most of these changes were extremely modest with the exception of the changes to SSP.

On 17 March 2020, the Chancellor unveiled a substantial package of measures aimed at bailing out the UK economy. These largely related to access to Government-backed bank loans at attractive rates and business rate exemptions for certain sectors. It was also announced that the long-awaited changes to IR35 (relating to self-employed contractors providing their services through a personal service company) will be postponed for at least a year, which will be welcome news to all those affected by the change.

On 22 March the Chancellor announced a comprehensive programme of support to protect workers which is “unprecedented in the history of the British State”. This included the Coronavirus Job Retention Scheme (CJRS), under which all employers can apply to HMRC for a grant to pay 80% of the pay of retained staff who are not working (known as furlough”) up to a maximum of £2500 per worker per month. There is no obligation upon the employer to top up the 80% of salary.

The CJRS will be backdated to 1st March 2020 and will remain in place until at least the end of May 2020. On 17 April the Government announced that the CJRS would be extended to the end of June 2020 and on 21 May the Government extended the existing scheme to 31 July and introduced a revised scheme which will operate from 1 August to 31 October 2020, of which please see below..

Initial Government guidance stated:-

“You will need to:
• designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
• submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)”

Other announcements included:-

• Universal credit and working time basic credit is to be increased by £1000 per year
• Self-employed workers will be able to access universal credit at a rate equivalent to SSP for employees
• The self-assessment payments due this coming July will be deferred (but not waived) Until January 2021
• The next quarter of VAT payments will be deferred (but not waived) until the end of June.
• The Government backed loans announced on 17 March will now remain interest free for 12 months rather than 6..

13. The Furlough Scheme (CJRS):the main points

There have now been six iterations of the Government’s Guidance on the operation of the CJRS, the latest coming on 21 May 2020. However, this Guidance is accompanied by a Second Direction from the Treasury to HMRC, dated 20 May 2020, which sets out the legal framework of the CJRS. This Direction has legislative effect under s76 Coronavirus Act 2020. It is highly unlikely that the terms of the scheme will be changed in the foreseeable future (even though some of them are inconsistent with not just past Guidance but also the Guidance published at the same time as the Directive. However, where there is inconsistency the First Directive will apply to all claims made before 22 May 2020 and the Second will apply to claims made after that date.

These are the main points flowing from the Directive and the latest guidance. Some of these had not been made clear before:-

• The scheme is open to all employers that had created and started a PAYE scheme registered on HMRC’s real time information (RTI) system by 19 March. The change of the reference date from 28 February to 19 March 2020, the day before the scheme was announced, appears to have arisen from criticism that the previous Guidance penalised employees that had changed jobs and started with their new employer after 28 February but before the CJRS was announced, but who could nevertheless not be furloughed. This change allows new joiners to be eligible for furlough while continuing to prevent potential fraudulent claims.

• The Directive (but not the Guidance) clarifies that being on an employer’s payroll for these purposes means that an RTI submission notifying payment in respect of the employee concerned must have been made to HMRC on or before 19 March 2020. This is still not ideal. For example, there may well have been no RTI submission for employees put onto payroll in late February 2020 if their pay was not processed for the first time until the March payroll. This moving of the goalposts may mean that some employees who were entitled to be furloughed under the previous Guidance (because they were employed by 28 February) are now not eligible (if their RTI was not submitted by 19 March). Any employers who find themselves in this position may wish to challenge any refusal by HMRC to include these employees under the CJRS, on the basis that HMRC should be estopped from denying claims based upon guidance that the employer relied upon to alter their position to their detriment.

• The Guidance, clarifies that employers of newly TUPE’d employees can put them on furlough: “A new employer is eligible to claim under the CJRS in respect of the employees of a previous business transferred after 28 February 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership”. This applies not just to transferring employees but also those who were dismissed during the furlough scheme for a reason related to the transfer.

• Any organisation with employees, apprentices and some workers can apply, including charities, recruitment agencies, umbrella companies and public authorities; however, the Government does not expect public sector employers to use it as long as central government continues funding wage costs. Note however that whilst this remains in the Guidance it has not been replicated in the Directive, which is completely silent about it. The position would seem to be therefore that whilst the Government does not expect public bodies to use the furlough scheme, they are not in fact precluded from making such a claim, the Guidance not being legally binding.

• Administrators can furlough staff provided there is a possibility of re-hiring the staff at some later stage. Salaried members of an LLP can also be furloughed. With agency employees, the scheme is only available for agency employees who are not working. The latest guidance confirms that individuals can claim under the CJRS for their pay-rolled staff such as cleaners and nannies.

• The guidance makes it clear that Company Directors can be furloughed but they can only recover the PAYE element of their income – not any part related to dividends. Although they cannot do any work for their company they are still permitted to perform their duties or obligations arising from an Act of Parliament relating to the filing of the company’s accounts or provision of other information relating to the administration of the director’s company or payment of salaries or making a claim under the CJRS.

• The CJRS is not limited to those employees who would otherwise have been made redundant. Instead it applies to anyone who are furloughed if the furlough occurs “by reason of coronavirus or coronavirus disease”.

• Employers can reclaim up to 80% of wage costs up to a cap of £2,500 per month, plus (not including) the associated employer NICs and minimum auto-enrolment pension contributions on that wage. Recovery of NIC and pensions contributions is on the furlough rate rather than the original salary.

• We now have greater clarification on the definition of wage costs. It can include wages, past overtime (either which has been accrued from earlier months or which is otherwise compulsory and guaranteed, fees (which we take to mean directors fees) and compulsory commission payments. Undoubtedly good news for car salesmen and estate agents.

• Dividends, discretionary bonuses and discretionary commission and tips continue to be excluded from the definition of wages.

• An employer can choose to top up to 100%, but does not have to (subject to employment law and renegotiating any contractual entitlements)

• Other contractual benefits such as a company car, private medical insurance, death in service and salary sacrifice schemes, continue to apply (unless negotiated separately with the employee) and cannot be recovered under the CJRS. Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly. No part of the reclaimed grant can be siphoned off to fund benefits; the entire grant must be paid to the employee (with no deductions for fees, administration charges etc).

• Importantly the furlough cap of £2,500 applies for each employer. Conceivably therefore a part time employee could earn up to £5,000 if furloughed from both of their employers at the same time.

• Employees can start a new job when on furlough (which could mean they might end up earning 80% of the old furloughed salary and 100% of a new one). This is expressly provided for in the new guidance. As if to anticipate a raft of business restructures to take advantage of this change, the Government have confirmed that the new employer that the employee goes to work for during furlough leave cannot be connected with (as defined under Tax Legislation) the former employer. The guidance does say that the new employment has to be allowed under the old employment contract, but there is no reason why the old furloughing employer can waive any such stipulation.

• Employers can renew fixed term contracts that expire during the term of any furlough leave, without undermining the claim for furlough payments.

• The salary reference date for employees with a fixed salary, is the salary from the last pay period immediately before 19 March 2020, unless the employer had already calculated salary from 28 February based upon the earlier Guidance. In any event, it is clear that there is no scope for recovering pay increases on behalf of a furloughed employer even if it was agreed before the cut off date.

• For employees whose pay varies, the employer can claim for the higher of (i) the same month’s earnings from the previous year (eg 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.

• Anybody who was on the payroll on 28 February 2020 and has since been made redundant or whose employment has otherwise ended (for example by resignation) before 19 March can be rehired and put on the CJRS whether this occurs before or after 19 March 2020.

• 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. Indeed the guidance confirms that employees can be furloughed multiple times, provided it is in three week blocks.

• The employee must not be working at all. 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 or study and do volunteer work, provided they do not provide services to or achieve commercial revenue for their employer. Whilst on furlough, employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers, for example to accompany employees to a redundancy meeting.

• The earliest Guidance stated that an employer merely needs to write to the employee notifying them that they have been furloughed. The second, third and fourth iterations repeated this, and added that the employer needed to keep a copy of the written notification for five years. However, the first Direction provided that an employee is furloughed “if the employer and employee have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work in relation to their employment”. This caused a flurry of concern amongst employers and their advisers, as such wording required more than notification by the employer; it required actual written agreement that the employee will cease all work. Fortunately the discrepancy has been rectified in the Second Directive which states that the original agreement between employer and employee need not to be in written form (ie it could be oral), provided that it is then ‘confirmed in writing by the employer (such agreement or confirmation may be in an electronic form such as an email); ie now only the employer’s confirmation need be in writing

• 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. However, prioritising vulnerable workers is unlikely to be discrimination and prioritising the over 70s which could be discriminatory against those under 70 is almost certainly capable of justification.

• The updated Guidance advises that it is up to employers to decide whether to move employees who are or who become sick prior to commencement or during furlough onto SSP or whether to put them on or keep them on furlough, at their furloughed rate. Employees who are shielding can be placed on furlough, rather than being placed on sick pay.. Employers are free to switch employees from sick pay to furlough and vice versa, although this should not be abused by using furlough to ‘top up’ small amounts of SSP for short term absences.

• 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.

• The Guidance has been amended so that employees who started a period of unpaid leave before 28 February 2020 can now be furloughed, but not until the date on which it was originally agreed that the employee would return from unpaid leave.

• Those employees with work visas will not be regarded as breaching their visa conditions if they receive funds under the furlough scheme. Guidance states “Grants under the scheme are not counted as ‘access to public funds’, and employers can furlough employees on all categories of visa.”

• Employers can only claim once every three weeks, ie they cannot get weekly reimbursement. Claims can be backdated to 1 March 2020 for those already laid off or made redundant
• At the Parliamentary Select Committee on 8 April, Jim Harra the Chief Executive of HMRC stated that employers can claim up to 14 days in advance of the due date for payment of wages and that there is no need for an employer to have already made the payment before receiving the grant. Payment should be received in the employers bank account within 4 to 6 days of the claim. However, whilst the employer can claim for earnings which it “reasonably expects to be paid” to the employee (which would include deferred earnings until the CJRS pays out), they must not be conditional upon the CJRS paying out. Deferral is acceptable – conditionality is not.

• Payments under the CJRS will be treated as income in the businesses calculation of its taxable profits for income and corporation tax purposes.

The guidance talks about placing the employee on furlough leave as being a negotiation. What if the employee refuses to take furlough leave? In our view, given the extraordinary circumstances of the crisis, provided the selection for furlough is not obviously unfair or discriminatory, the employer would be within its rights to terminate employment probably for some other substantial reason.

If an employee is made redundant when it would have been open for an employer to have placed them on furlough leave, it may be a factor to be taken into account when considering the fairness of the dismissal. An employer must have a good reason for not considering the alternative of furlough leave – such as impact upon cash flow.

14. Annual Leave During Furlough

The Government have confirmed in their COVID-19 Holiday Guidance of 13 May and as we had advised previously that annual leave does accrue during furlough leave. As anticipated in section 8 above, the Government has now passed emergency legislation relaxing the restriction on carrying over the four weeks’ leave where it was not reasonably practicable to take it in the leave year “as a result of the effects of the coronavirus (including on the worker, the employer or the wider economy or society)”. However, we believe that such occasions will be very rare.

The same Guidance also confirms that workers can take annual leave during furlough and that this will not break the three week block needed to be eligible to make a claim under the CJRS. It is likely that if leave is taken during furlough, that the level of holiday pay (where the employee has normal working hours and regular pay) will be 100% of holiday pay rather than the 80% that some employers are paying under furlough. Where pay varies holiday pay is now calculated by reference to the preceding 12 months. Although there are two schools of thought, the safest course is to calculate holiday pay by reference to the 12 month period immediately before the employee was placed onto furlough.

Employers not only have the power to decline holiday requests during any period of lockdown but also retain the right to dictate to their staff when holiday can be taken and in what proportion. If the employment contract is silent about this, the default position is that the employer has the power under the Working Time Regulations 1998, provided they give the requisite period of notice which is twice as long as the amount of holiday in question. We believe that the circumstances in which an employee could legitimately object to having his holiday dates dictated to him by his employer during furlough will be fairly rare.

15. The Furlough Scheme from 1 July 2020

On 29 May 2020, the Chancellor announced that from 1 July 2020 and completely new scheme will be implemented under which furloughed employees will be able to return to work on a part-time basis. Employers will pay in full for days worked and can claim under the CJRS for days not worked, subject to the relevant caps.

Crucially, only employees who started furlough on or before 30 June 2020 and who have been furloughed for at least 3 weeks will be eligible for the new scheme. In practical terms if an employer wants to take advantage of the new flexible furlough scheme in respect of an employee who has never been furloughed before they must place that employee on furlough by 10 June 2020 at the latest. The detailed guidance has not yet been issued (and is expected on 12 June 2020) but the CJRS Factsheet suggests that:

• there will be no limit or restriction on the working arrangements of furloughed employees, for example in terms of the work they do and how often they are required to do it..

• the agreed new working arrangement is confirmed in writing.

• there will be no minimum three week furlough period, as now.. However, any furlough arrangement agreed between employer and employee reported in a claim to HMRC must still cover a period of at least a week and will not be able to overlap months.

• employers will need to report both hours worked and the usual hours an employee would be expected to work in a claim period.

• the number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim.

• employers will not be required to contribute to employees 80% (capped at £2,500) furlough pay until 1 August 2020.

• from 1 August 2020 onwards employers will be required to pay the employer national insurance contributions and employer pension contributions on the furlough pay.

• from 1 September 2020 employers will also be required to pay 10% of employees’ pay, capped at £312.50. The government will pay 70% of employees’ pay, capped at £2,187.50.

• from 1 October 2020 employers will be required to pay 20% of employees’ pay, capped at £625. The government will pay 60% of employees’ pay, capped at £1,875.

It follows that as furloughed employees can return to work on a part-time basis from 1 July, the new caps will be proportional to the hours not worked.

Do you have what you need to make a claim? To claim, you will need:

  • your employer PAYE reference number
  • the number of employees being furloughed
  • National Insurance Numbers for the furloughed employees
  • Names of the furloughed employees
  • Payroll/employee number for the furloughed employees (optional)
  • your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
  • the claim period (start and end date)
  • amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
  • your bank account number and sort code
  • your contact name
  • your phone number

You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.

If you have fewer than 100 furloughed staff you will be asked to enter details of each employee you are claiming for directly into the system – this will include their name, National Insurance number, claim period and claim amount, and payroll/employee number (optional).

If you have 100 or more furloughed staff you will be asked to upload a file with the information rather than input it directly into the system. We will accept the following file types: .xls .xlsx .csv .ods

The file should include the following information for each furloughed employee: name, National Insurance number, claim period and claim amount, payroll/employee number (optional).

You should retain all records and calculations in respect of your claims.

HMRC cannot provide your employees with details of claims you make on their behalf. Please help them by keeping your employees informed.

16. Help for the Self-Employed (SEISS)

The Chancellor, announced outline details of the rescue package for self-employed individuals on 26 March known as the SEISS. The main points of the SEISS are as follows:-

o a new self-employed income support scheme will pay self-employed people a taxable grant worth 80% of average monthly income, capped at £2,500pm

o income will be calculated by taking the average of income over the last three years. No credit has to be given for any actual earnings received by the individual.

o self-employed people can claim these grants and continue to do business (so it’s not the same as furlough leave, where employees have to remain at home) but a claim can only be made in relation to a trade, the business of which has been adversely affected by coronavirus or coronavirus disease

o the scheme is only open to anyone with trading profits of up to £50k (this covers 95% of self-employed people). Self-employed people who earn more will not qualify at all – there is no taper.

o the scheme is only open to those who make the majority of their income from self-employment; if you are employed but have a ‘side job’ which is self-employed, you will not be eligible

o the claimant only needs to have completed a tax return in one of three relevant years (it is no longer confined to completing a tax return for 2018/19), albeit they need to have traded in 2018/19, 2019/20 and intend to trade in 2020/21

o there are no steps to take. HMRC will contact eligible self-employed people directly and pay the grant straight into their bank account after inviting them to fill out an online form

o the self-employed income support scheme will be open to people across UK for at least 3 months. However, the scheme is unlikely to be up and running before the end of June, so it will not help with immediate cash flow issues but it is envisaged that a lump sum will be paid in June.

The Government recently announced that individuals can continue to apply for the first SEISS grant until 13 July. It follows from the above that, eligible individuals can claim a taxable grant worth 80% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £7,500 in total. However, the SEISS is now extended to allow applications for a second, and final, grant in August 2020.

The following points should be noted:-

• applications for the second grant will open in August. Individuals will be able to claim a second taxable grant worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total

• the eligibility criteria for the second grant will be the same as they are for the first

• an individual does not need to have claimed the first grant to receive the second grant

• further guidance on the second SEISS grant will be published on Friday 12 June 2020

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