How do I determine whether the business is entitled to be classed as “unable to pay” and therefore qualifies for the Government support under the Scheme?

We are awaiting further guidance on this point, but it seems likely that a business forced to close entirely should be eligible whereas a highly profitable business with cash in the bank that continues to trade at a reasonable level may not qualify.  As a general point, you should determine what you need to do as a business in order to survive during this period, separate to any consideration of the Scheme.  If staff lay-offs or redundancies are financially unavoidable, we would expect you to be covered given the aims of the Scheme.

Do I need to agree on this with my employee(s) or can I simply tell them it is happening?

You are likely to be in breach of their employment contract if you simply impose this on them.  It needs to be agreed – and ideally signed – so you reduce the risks of a claim from the employee later.  Where you have multiple employees and only some are to be furloughed, you need to demonstrate that decisions have been taken on a fair, logical and non-discriminatory basis (see below).

The scheme is not up and running yet – what should I do in the meantime?

You should take the action that is necessary for your business, bearing in mind that the Job Retention scheme is available and can apply retroactively.  So consult with your staff and seek the agreements you need to implement the lay-offs, indicating where appropriate that you are seeking to ‘furlough’ them under the government scheme.  If you were considering full redundancies rather than lay-offs, consider using the furlough option instead.

Can I pay some furloughed employees more favourably than others?

You should be consistent to ensure that you are not at risk of behaving in a discriminatory way.  If you plan to top up the earnings of some employees to 100%, then we recommend you do this evenly across your employees.  You are not required to top up to receive the grant.

Can I decide which employees are to be furloughed and which will continue working?

Yes; this will depend on the circumstances so you for can, for example, retain the staff whose roles or skills are required for the remaining work while furloughing those whose jobs or skills are not needed due to the downturn in work.  If you need to furlough just a few out of a group that all do the same work, you should consult with the staff and approach it in a similar way to a redundancy decision.  You may find that they provide a solution e.g. because some may prefer to be furloughed because they will have difficulty working remotely, whereas others may wish to remain working.

What can I do if I am in the process of making employees redundant – can I change my mind and opt for the job-retention scheme instead?

The job retention scheme is intended to cover the situation where an employee would lose their job because of the Coronavirus.  The purpose of the scheme is to ensure the business can resume activities immediately the issues are overcome.  We await the actual legislation, but it is not expected that the job retention scheme will be available in circumstances where the employee was going to be dismissed anyway and there is no intention to retain them in the business moving forwards.  However, if the intention is to retain the employee within the business once the crisis has been overcome then it may be possible to switch to the job retention scheme.  This would also, therefore, include a situation in which you have already laid off – or are contemplating laying off – your employees.

What can I do if I have just made employees redundant – can I change my mind and opt for the job-retention scheme instead?

If the intention is to retain the employee within the business once the crisis has been overcome then we hope it will be possible to switch to the job retention scheme providing the employee was made redundant on or after 1 March 2020. Any termination prior to that will not be included in the scheme.

Can I recoup salary paid since 1 March (for example if I sent my employees home on full pay for a period), or is the scheme only retroactive to compensate employees that have been unpaid since then?

Our working assumption is that if you can demonstrate that workers were laid off or made redundant any time from 1 March 2020, you will have an opportunity to obtain the grant to support continued salary payments to them.  A condition of the scheme is that it is for staff who would otherwise be laid off and whose employers cannot cover staff costs. However, we don’t yet know if you will be able to reclaim salaries paid to workers who were sent home.   It may be difficult to demonstrate an inability to pay if you have already paid in full.  We will need to await the final guidance before we can provide a categorical answer.    

Can directors be furloughed?

In theory, directors can be furloughed in the same way as other employees.  However, a condition of furloughing is that the individual must not undertake work of any kind for the company during this time.  This is harder for a director to justify, particularly if they are the sole director.  It may be necessary for the director to notify all suppliers, customers and other business contacts that the business has been suspended pending the end of the Coronavirus crisis.  In many cases, this is impractical and undesirable because the director may wish to use this time working on improving the business so that when trading recommences the business performs well quickly.  In these circumstances, furloughing is not permitted.  Remember also that this only relates to PAYE income, not dividends.

Will the Government pay 80% of the salary for an employee’s reduced hours?

No, under the current information a furloughed worker is not permitted to work at all in the business, you cannot furlough some of the employee’s hours.  (See the next question)

What are my options where I have four employees but only enough work for two?

Reducing the hours of all the affected employees is not possible for the purposes of the job retention scheme.  The job retention scheme could, however, be used to furlough two of the employees while retaining the other two in the business. Please follow our advice for consulting and selecting fairly any employees to either furlough or continue working.

Should I continue to pay 100% of salary even though the Government are only subsidising 80%?

You need to consider the circumstances as well as the ability of the business to continue to pay the salary.  For example, if you have two employees and only furlough one, the remaining employee may be disgruntled if they are working full time for the same pay as the one having time off.  The situation may be different if all employees are being furloughed.

Is it possible to alternate the staff members furloughed so they do one month on and one month off?

We do not have the precise details of the scheme yet, but it appears unlikely that this will be permitted because the furloughed employee must not undertake any work in the business.  Therefore an agreement signed at the start to say you will work this week, but not that week appears ineffective.  It is possible that this will require a separate monthly application though and, in these circumstances, it may be possible to be more flexible.   A pre-agreed rota does not appear within the scope of the scheme though.

How is payment assessed for zero-hours workers or those on variable hours contracts?

Their average pay is expected to be based on earnings over a period.  The period of averaging has not yet been announced but a 12-week period seems likely.

When will the money arrive and how do I manage cash flow until then?

It appears that a new online portal will be set up to apply for relief.  alternatively, some kind of ‘reverse payroll’, could be established.  HMRC are working on this, but early indications are that this will not be available until late April.  The claims will then need to be reviewed and approved before payments can be made.  It is therefore likely to be several weeks before the funds are provided. In the meantime, you could assess the potential of other government initiatives to ease your cashflow.

Can I start by paying full pay to furloughed workers and then reduce this later as funds decline?

The furlough must be agreed between the employer and employee and must not be imposed.  This agreement will set out the terms and these must be satisfied.  If you agree on a furlough based on full pay then you will need to revisit the agreement to vary the payment entitlement later.  Word your agreement carefully from the outset if you think this is going to be likely.  At the very least the variation would need to be agreed with the employee.

There are several different grants and loans being provided in support of Coronavirus problems.  Are these all available or are some mutually exclusive?

Each of the measures needs to be considered and applied based on the conditions attaching to the measure.  There do not appear to be any restrictions saying that a measure is only available if another is not applied, but the conditions of availability do mean that you may not qualify for some.  In principle, though multiple methods of assistance can be secured by the same employer at the same time.

I have an employee on gardening leave while serving notice, can I switch them to the job retention scheme for the remainder of their contract?

This does not appear to be within the spirit of the scheme.  The scheme is designed to protect jobs that would otherwise be lost.  If there is no intention to retain the services of the employee then the scheme should not be available.  Clearly the timing of the paper trail and who instigated the decision to end the employment could be very important.

Are furloughed employees allowed to work for others while not working for me?

There appear to be no restrictions preventing furloughed employees from working for others during this period unless you build such restrictions into the agreement.  For example, you will not want them working for competitors, but also you may wish to ensure they do not put themselves at risk.  You will, however, require them to be able to return to work immediately when you need them.

 Are furloughed employees allowed to work for good causes while not working for me?

There appear to be no restrictions preventing furloughed employees from undertaking charitable work during this period unless you build such restrictions into the agreement.  For example, you will not want them putting themselves at risk.  You will, however, require them to be able to return to work immediately when you need them.

Can my employees go home – overseas – and still qualify for the payments?

It appears that the only restriction on employees is that they may not work for the employer during the period of furlough.  However, they do need to be available when the business requires them to come back and the prospect of being unable to travel at the moment is quite high.  We await further information on this one, but you should consider as an employer whether you are happy with them being so remote at this time.

Is the £2500 cap gross or net?

The £2,500 is the maximum amount that the Government will physically pay.  Therefore, for employees earning below £37500 p.a. the employer will receive 80% of the normal salary.  For those earning above £37500 p.a., the employer will receive £2,500 per month.  Therefore from the employee’s perspective, this is the gross amount.

Are the payments to furloughed workers still liable to employers NIC, auto-enrolment, apprenticeship levy, etc?

No guidance has been issued yet regarding this.  The conclusion is that the furloughed payment will be subjected to these in the same way as normal pay.

Is the £2500 cap prorated for part-time employees?

No, it appears the amount is based on the salary, not the number of hours worked.

Will holidays continue to accrue during the period of furlough?

No guidance has been issued yet regarding this, but the government have said that employment contracts continue to apply so our working assumption is that holiday and other benefits continue to accrue.  We will provide further advice on this in due course. 

Can I provide support to contractors during this period?

Contractors are an independent business and care should be taken before favourable support is provided to them.  The main concern is that this could be indicative of employment thus making PAYE or IR35 applicable.  The other issue is that contractors have usually been paid at a higher rate to reflect the independent business to business relationship.   There is pressure on the government to provide income support to self-employed workers and this may be announced shortly.

Can I increase salaries now to secure a higher level of support from the Government?

Increasing salaries to secure higher relief from HMRC is not advisable.  Salary increases that were already in the pipeline before the effects of the Coronavirus were known may be appropriate, but we have not yet seen the detail of how the scheme will work and you may find that the 80% is applicable to the salary at the time the measure was announced and future increases do not qualify.

How do I apply for the support?

It appears there will be a new online portal for claiming the funds.  This does not yet exist and it may not be available for some weeks.  Clearly claims will be reviewed by HMRC and care is required to ensure that these claims reflect historical PAYE and other submissions to HMRC.

Is it possible to furlough more employees if work dries up more than expected?

Yes, it is likely that this may be a multi-stage process given future workloads are unknown and it may be necessary to add to the number of employees furloughed or reintroducing employees to the workforce as demand increases


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