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Furloughed Workers

I'm not happy with the advice that is going around

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The guidance at gov.uk (such as it is) says that the grant will be 80% of the wage cost of furloughed workers. I take that as 80% of any wages that are paid to staff whilst they are furloughed (plus Er's NIC & pension contributions) - i.e. the employer stands 20% of the cost.
If normal employment law applies, any temporarily laid off staff are entitled to their normal wages unless otherwise agreed or contractual. I do not think that the 20% is voluntary but compulsory. 
I'm advising clients to pay normal wages until further Government guidance is available but to tell staff that an adjustment may be made later. Any thoughts please?

Replies (30)

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By SWAccountant
26th Mar 2020 10:45

I'm with you. But there is no guidance and the speech doesn't match the guidance.

Disclaimer: there's been too much here in the past week and I've thus red none of it, so this has probably been answered elsewhere.

Thanks (1)
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By mbee1
26th Mar 2020 10:49

I understand that changing of the status to "furloughed" remains subject to existing employment law and may depend what the contract of employment states. For example, if the contract states that pay is not given in full if, for example, they have to be laid off for whatever reason, then the employer does not have to top up the 80%.
However, I stand to be corrected and not sure what happens if there is no mention of this in the contract.

Thanks (4)
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By leicsred
26th Mar 2020 11:02

The guidance I have seen is normally this has to be negotiated with employees, I have advised anyone who decides to pay the 80% to get it in writing and signed by the employee. I don't know if that makes the difference but it can't hurt (I have also told the client this).

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By ireallyshouldknowthisbut
26th Mar 2020 11:27

I agree.

If you are an employee on £60k per annum on a 3 month notice period and your employer pays you £2k in April, how are you going to react?

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Replying to ireallyshouldknowthisbut:
Psycho
By Wilson Philips
26th Mar 2020 11:33

I guess, as an employee, you have the choice of taking a hit on your pay for (hopefully no more than) a few months or being made permanently redundant. And if your employer can’t afford to pay you PILON you’re going to have to sue him.

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Replying to Wilson Philips:
By ireallyshouldknowthisbut
26th Mar 2020 11:54

The thing is, some will sue, if not now, when its all over. Especially if they did not receive independent legal advice as is normally the case for redundancy and I think a legal obligation (??) Don't know, I am not a lawyer.

It seems a risky game to be telling clients to do this with so much unknown, and I have been responding to clients along the lines of "you need to speak to an employment law specialist and do it properly"

Thanks (1)
Replying to ireallyshouldknowthisbut:
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By rockallj
26th Mar 2020 13:33

It has be remembered that employment law still applies. So yes, checking with an employment lawyer/HR provider is the advisable.

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Replying to ireallyshouldknowthisbut:
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By rockallj
26th Mar 2020 13:33

It has be remembered that employment law still applies. So yes, checking with an employment lawyer/HR provider is the advisable.

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Replying to ireallyshouldknowthisbut:
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By andrew1211
26th Mar 2020 14:26

You will probably be annoyed (polite). If you do not agree to be furloughed as it is not in your contract, you can hold out for 100%. Whether you get it straight away or ever is another matter. If you sue you might be waiting some time and you might need funds now. This might also be a sly way of getting redundancy if you would be due a big pay-out but again how long will that take if the employer refuses to pay it straight away. So it will depend on your attitude and day to day living costs i.e. is the reduction in wage so great as to affect your ability to pay mortgage and similar. If so you can get some help there in the short term. Yes it will be painful but you are ultimately being paid for doing nothing.

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By mumpin
26th Mar 2020 11:41

Peninsula have done a template letter that you can give to employees that might help prevent future legal consequences.

Example text:

We are therefore unable to offer *work to any of our employees for the time being/work of the kind that you are employed to perform for the time being, and we have been unable to identify any other role in the business which you would be in a position to undertake.

In order to help avoid significant large scale redundancies across the country from those businesses directly affected by this measure, on Friday 20th March 2020 the Government announced that it was setting up a new Coronavirus Job Retention Scheme (the Scheme) to help businesses.

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By rockallj
26th Mar 2020 13:29

There are two things going on here which are being conflated.

Firstly, the employment contract stands, so the employer is obliged to pay the employee their full contractual pay and at the time agreed in the contract.

By furloughing, and it has to be with the employees’ consent, they are temporarily waiving their employment right to the 20% from the employer which the govt are not giving via the refund mechanism.

If an employer does so without employee consent (and I would have it in writing) and pays less than contractual pay, it is an illegal deduction.

If an employee refuses, which they have a right to do, then the contractual obligations for laying off/redundancy come into pay.

Again all procedure will need to be followed carefully as the employer could otherwise face an Employment Tribunal later.

I’m not a lawyer, but we accountants deal with the obligations of employment law regularly. It still applies. It states this specifically on HMRC website which is about the only clarity we have.

I’ve asked before in another post for lawyers to come forward and give us a bit of a hand here.

Thanks (3)
Replying to rockallj:
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By Learningvfast
26th Mar 2020 12:06

But if the employment contract includes a lay-off provision then would the employer not just be able to furlough the employees as no agreement would be required from the employees?

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Replying to Learningvfast:
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By rockallj
26th Mar 2020 13:27

The lay-off provisions will apply. But the whole point of furloughing is to maintain staff on 80% to avoid laying them off. But explicit consent from each individual is required and they can refuse.

Thanks (1)
Lisa Thomas
By Insolvency Practitioner
26th Mar 2020 11:49

the 20% top up is voluntary.

Options to consider are:
furlough
reduce hours
reduce pay
take paid leave
take unpaid leave or sabbatical
redundancy

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Replying to Insolvency Practitioner:
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By tdavey&co
26th Mar 2020 12:10

"HMRC will reimburse 80% of their wages, up to £2,500 per month." (gov.uk)
Does that mean 80% of any wages paid to them whilst they are furloughed or 80% of their normal wages before they were furloughed?

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Replying to tdavey&co:
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By rmcouk
26th Mar 2020 12:34

The latter, I believe

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Replying to Insolvency Practitioner:
RLI
By lionofludesch
26th Mar 2020 12:23

Insolvency Practitioner wrote:

the 20% top up is voluntary.

From the point of view of getting the cash from HMG, yes.

What about from the employee's contract point of view ?

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Replying to lionofludesch:
Lisa Thomas
By Insolvency Practitioner
26th Mar 2020 13:39

I'm assuming if the employees don't accept it the alternative is redundancy...

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By rmcouk
26th Mar 2020 12:29

This article may help:
https://www.icaew.com/insights/viewpoints-on-the-news/2020/mar-2020/coro...

The other main lack of information is what paperwork/wording is required from an HR point of view.

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Lisa Thomas
By Insolvency Practitioner
26th Mar 2020 13:47

I have just received this which might be useful to employers:

https://client.mail-away.co.uk/t/ViewEmail/r/0FDAEE3B1A83CA4C2540EF23F30...

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By NYB
26th Mar 2020 15:47

I am with you. The advice that is going around has no substance and is all personal presumption.
As yet there is no meat on the bones of this proposal.
The Gov.Uk advice is quite simple at this point in time re Furloughed workers.
"This will allow your employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month."
The vital word are (IMO) "to claim a grant" . Suggests it may be completely
separate to the payroll.
And this:
"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)"

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By 0098087
27th Mar 2020 09:26

FROM HMRC:

How your monthly earnings are calculated

If you’ve been employed (or engaged by an employment business in the case of agency workers) for a full year, employers will claim for the higher of either:

the amount you earned in the same month last year
an average of your monthly earnings from the last year

If you’ve been employed for less than a year, employers will claim for an average of your monthly earnings since you started work. The same arrangements apply if your monthly pay varies such as if you are on a zero-hour contract.

If you started work in February 2020, your employer will pro-rata your earnings from that month.

Bonuses, commissions and fees are not included as part of your monthly earnings.

Thanks (0)
Replying to 0098087:
RLI
By lionofludesch
27th Mar 2020 09:53

0098087 wrote:

FROM HMRC:

How your monthly earnings are calculated

If you’ve been employed (or engaged by an employment business in the case of agency workers) for a full year, employers will claim for the higher of either:

the amount you earned in the same month last year
an average of your monthly earnings from the last year

If you’ve been employed for less than a year, employers will claim for an average of your monthly earnings since you started work. The same arrangements apply if your monthly pay varies such as if you are on a zero-hour contract.

If you started work in February 2020, your employer will pro-rata your earnings from that month.

Bonuses, commissions and fees are not included as part of your monthly earnings.

Where's this from, 009 ?

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Replying to lionofludesch:
By 0098087
27th Mar 2020 10:10
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Replying to 0098087:
RedFive
By RedFive
27th Mar 2020 11:34

Already changed. You can just use Feb 2020 wage if full time employee.

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus...

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, you can claim for 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.

Thanks (0)
Replying to RedFive:
RLI
By lionofludesch
27th Mar 2020 11:50

RedFive wrote:

Already changed.

Jaysus !!

It's like aiming at a moving target.

Some folk need paying today.

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Replying to lionofludesch:
By 0098087
27th Mar 2020 12:01
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Replying to 0098087:
RLI
By lionofludesch
27th Mar 2020 12:15

0098087 wrote:

https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronav...

No it hasn't

Great.

The advice depends on which webpage you look at.

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Replying to 0098087:
RedFive
By RedFive
27th Mar 2020 12:25

0098087 wrote:

https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronav...

No it hasn't

With respect, you are looking at the advice for Employees. As an agent I would rather take the guidance for Employers.

Though I admit it is a complete balls up to have two diferent sets of guidance notes on the same subject.

It's not like they had a playbook for this though.

Thanks (1)
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By Charlotte J White
27th Mar 2020 10:50

A question that is flying around between accountants is the matter of directors (small company)
A director can be an officer,
A director can also be an officer and employee (not just the duties of a director.
Quote of HMRC what a director is
"Company directors run limited companies on behalf of shareholders.
Directors have different rights and responsibilities from employees, and are classed as office holders for tax and National Insurance contribution purposes.
If a person does other work that’s not related to being a director, they may have an employment contract and get employment rights."
Some of us accountants believe the last paragraph is the part a furloughed claim can be put in. Assuming, the company is basically shut and no work can be done of course.

Martin Lewis sort of brushed on it last night that the dividends could not be part of the claim, but wasn't specific about the PAYE side.

Your opinions are welcome here as this effects a lot of small businesses

Thank you

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