Coronavirus - Job Retention Scheme for HE Sector

Job Retention Scheme

HMRC issued details of the Coronavirus Job Retention Scheme (JRS) last Friday and BUFDG, together with UCEA, have been seeking further clarification on the eligibility of the HE Sector.  This article summarises key aspects of the scheme and provides thoughts on the JRS. This note should be read in conjunction with the FAQs issued by UCEA on Monday 30^th March, which was sent to HR Directors and Heads of Institutions who are members of UCEA.

If you are a member of UCEA and have not yet seen the FAQ, please contact Nicola Carter at UCEA (N.Carter@ucea.ac.uk) for further information.  If you are not a member of UCEA, they will not be able to share the FAQ with you and we recommend you contact A.Fryer@ucea.ac.uk to discuss membership.

How the scheme will work?

There will be an online service available at the end of April, where a claim can be made for employers who operations have been severely affected by coronavirus and who had a PAYE payroll scheme in place on 28 February 2020.

The claim relates to the pay of furloughed employees, calculated as up to 80% the usual monthly wage cost, capped at £2,500, plus the additional employer NIC (at 13.8%) and minimum employer pension contributions on that wage in line with auto-enrolment rates, currently 3%.  Employers can limit the pay to furloughed employees to the 80% (or £2,500) claim or top up to the employee’s normal salary, but they are not obliged to.  The minimum period an employee can be furloughed is 3 weeks.

The scheme itself is to last 3 months, although this will be reviewed.

Further information regarding the eligibility of the scheme to the HE sector and which staff may, ultimately, qualify can be found below.

Can Higher Education Institutions apply?

All UK employers can apply, however, the Government considers that where public funding is already being provided to an employer for staff costs, the scheme would not be applicable as they would expect employers to continue to pay staff as usual.  BUFDG approached the HE Sector head at HMRC regarding whether Universities are precluded from the scheme on the basis that they receive public funding.  HMRC are yet to confirm the position, however they did note that there was “no line specifically prohibiting the sector using JRS”.  Further updates to follow.  In the meantime, Universities should think carefully about the roles they may wish to furlough and how those roles are funded before discussing with staff.

The JRS is an emergency measure, introduced for an initial 3 month period, available for those businesses who have been severely impacted by coronavirus and who would, but for this measure, have made staff redundant as they had no work to do.  Whilst financial difficulties in paying staff members is not included within the details of the JRS, it is understood that this could also be a factor when making a claim. 

For public sector organisations, it is reasonable for the Government to ensure that the JRS only assists employers who have not already received public funding for staff wages, thus avoiding a ‘double dip’ of state assistance.

Two key areas need to be addressed when considering whether JRS would be appropriate:

1. Redundancy situation - would the University have made those individuals redundant if it wasn’t for the JRS; can you collate evidence to support this position?  As a result of coronavirus, has their work completely stopped or could they do something else?
2. Public funding - has funding already been secured and budgeted for teaching/research positions; has this come from public funds?  If from grants and tuition fees, to what extent is this funding attributable to specific staff wages?

HEIs should consider carefully whether the JRS would be appropriate for academic staff, asking:

1. Is there still work for academics, whether that is delivery of alternative methods of teaching/lectures or carrying out research?
2. Has funding already been secured to pay the salaries of these staff?

The scheme may be more appropriate for staff carrying out non-academic roles where no work can be undertaken at present due to coronavirus, such as in leisure and hospitality centres.  However, Universities must be clear on whether significant funding has already been secured for the payment of wages for these individuals.  

In this regard, the public sector organisations section within the JRS details provides a small opening:

“In a small number of cases, for example, where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the coronavirus response, the scheme may be appropriate for some staff.”

If Universities can demonstrate that certain (non-academic) roles are not primarily funded by the public, and there is no work available to carry out due to coronavirus measures, JRS may be in point.  However, legal advice may need to be gained to identify the extent of any public funding.  It will be important to carry out due diligence on this aspect before making an application as HMRC will have the right to audit all aspects of your claim.

What is a furloughed employee?

Universities may identify appropriate employees who can be furloughed (see above), i.e. those in leisure/hospitality centres, catering/cleaning staff, etc.  Furloughed employees can be on any type of contract if they were employed at 28 February 2020 (this also includes any employees who have been made redundant since this date if they are rehired by their employer).  Legal advice may be required on the process, particularly if sufficient numbers of staff are involved, as a consultation process may be necessary.

The furloughed employee cannot undertake any work, provide services nor generate revenue whilst on furlough.  However, they can take part in volunteering or training (where it doesn’t provide services or generate revenue for the employer) and if the employer requires the furloughed employees to undertake training, they must be paid NLW/NMW for this time.

Changes to the contract must be retained for the employer’s records.

Re-furlough?

It is unclear whether employees can be furloughed, brought back to work and then re-furloughed.  Universities would have to demonstrate how coronavirus has impacted that role, taking into consideration whether there would have been a genuine redundancy situation for the original furlough as well as the public funding point above.

What to claim?

Three areas need to be taken into account when calculating the claim; salary, employer NIC and employer pension.

Salary

Calculate 80% of the employee’s monthly salary before tax but after any salary sacrifice for pension, childcare or cycle to work schemes, at 28^th February, limited to £2,500.  Do not include fees, commission or bonuses. 

If an employee’s pay varies because, for example, they are on a zero hours contract or only paid during term time, then the method of calculation differs depending on how long they have been employed.  If they have been employed for 12 months, you can claim the higher of:

• The same month’s earnings in the previous year; or
• Average monthly earnings during the 2019-20 tax year.

If they have been employed for less than 12 months, use their average monthly earnings since they started work.

If they only started in February 2020, use a pro-rata for their earnings so far.

NB: NMW/NLW only applies to working hours.  As furloughed employees are not working, they will not be liable to receive NMW/NLW. If you require these employees to undertake training whilst they are furloughed, this element will be subject to NMW/NLW and should be paid appropriately.

Employer NIC

Calculate the employer NIC due on the salary element calculated above, (i.e. 80% of pay up to £2,500).  The claim must not include employer NIC on any additional pay that you make to your employees.

Employer Pension

Calculate the minimum employer contribution under auto-enrolment, of 3% on the salary element calculated above (i.e. 80% of pay up to £2,500).  Whilst most Universities are likely to pay more than 3% into employee’s pensions, this is the allowable figure that can be claimed through JRS. 

Further information

For further information, please contact Julia Ascott.  A PDF version of this article is available to download here, please do distribute to your colleagues.