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Readers’ forum: Coronavirus confusion

06 May 2020
Issue: 4742 / Categories: Forum & Feedback
Payments for furloughed employees.

My client owns a small convenience store and newsagents. He has several full-time and part-time employees. One employee has recently come into contact with a family member who is showing symptoms of coronavirus. As a consequence, the employee has decided that she should self-isolate for two weeks. My client and, I must admit, myself are confused regarding her entitlement to pay. Should she now be paid statutory sick pay or should she be put on furlough with the client paying her salary as normal?

Presumably, in the latter case, the client will be able to recover 80% of the salary at some point?

Also, can Taxation readers advise on the options of the employer paying salary or a reduced salary to any furloughed employees. From a financial viewpoint, I suppose it would be advantageous (for the client at least) that they pay only 80%, but should they be aware of any general legal or employment law issues in paying a reduced salary in these circumstances?

Another employee receives the National Insurance retirement pension and I was wondering whether this makes any difference to the amount that she should be paid or that would be recoverable by the employer if she is furloughed.

The shop also employs six paper boys and girls. Some of their parents have expressed concern that, when making the deliveries, they are coming into contact with doors and gates that may harbour the infection. These parents are now not allowing their children to make deliveries. I understand that the children are 16 years old and I am wondering whether they have left employment voluntarily or should they be treated as self-isolating or as furloughed? If one of the latter two options applies, are they eligible for statutory sick pay? Alternatively, if the shop owner decides to furlough them, can he claim reimbursement under the coronavirus job retention scheme?

I hope Taxation readers can provide some clarification to these questions.

Query 19,546 – Pasteur.


Reply by Peter Rayney, PRTC

Furloughing is a change in the employee’s conditions of employment.

Pasteur raises a number of interesting questions regarding the application of the coronavirus job retention scheme (CJRS) in the context of a small convenience store and newsagents. Each employee or group of employees has different issues.

The ‘first’ employee (let’s call them A) appears to be staying at home as a result of coming into contact with a family member who has symptoms of coronavirus. According to HMRC’s prescriptive guidance, employees who are ‘self-isolating’ are only eligible for statutory sick pay (the first two weeks can be recouped through the rebate scheme).

More recently, it appears that HMRC may accept that A could be furloughed if there is a sound business case for this. Clearly, when A is ‘safe’ to return to work, Pasteur’s client (C) may decide to place him on furlough under the CJRS.

With regard to C’s ‘second’ group of employees it is assumed that they are all on C’s payroll at 19 March 2020. C would have to decide which employees should be placed on furlough due to the adverse trading conditions as a result of the coronavirus pandemic. Alternatively, C may seek volunteers for furloughing. Furloughing under the CJRS represents a change in the employee’s conditions of employment and hence they must agree to this, which should be evidenced in writing.

Under the CJRS rules, employees chosen for furloughing must receive a written notice from C. The employer must retain a copy of the notice for five years (for HMRC audit inspection purposes and the like).

Under the scheme, C will be able to receive a subsidy of 80% of each furloughed employee’s monthly salary (capped at a monthly amount of £2,500). C will also receive the employer’s National Insurance contributions and the employer’s minimum auto-enrolment contribution (3%) on this amount. C would pass the ‘subsidised’ salary on to the employee. It is possible for C to top this up at his own expense.

All subsidy payments under the CJRS would be taxable as part of C’s trading profits – which would, in effect, contra the corresponding payroll costs.

There is no reason why the employee receiving the state pension cannot be furloughed under the scheme. Although no longer paying employee National Insurance contributions, C will still need to pay secondary (employer’s) contributions for her. The employer’s contributions on the ‘reduced’ furloughed salary would be covered under the scheme as mentioned above.

It is assumed that the paper boys and girls are all genuinely employed and are on the payroll at 19 March 2020. As long as this is the case, if they cannot do their work safely during the coronavirus outbreak (and I think HMRC would accept this), the practical answer would be for C to formally place them on furlough under the CJRS from an agreed date (not earlier than 1 March 2020). The relevant points made above should therefore apply.


Reply by Johnny Carl Morton

An employee’s illness should not be a factor in deciding to furlough.

Employees on sick leave should receive statutory sick pay (SSP). Strictly, the coronavirus job retention scheme (CJRS) was not designed for short-term absences such as this and there is a three-week minimum furlough period. The fact that an employee is ill or ‘shielding’ should not be taken into account in deciding whether to furlough them. On the other hand, if there is a business reason, an employee who is sick could be furloughed. Sick pay would then cease and employers would be able to reclaim part of their pay under the CJRS.

Claims under the CJRS and the SSP rebate scheme could be made for the same employee, but not for the same time.

Regarding the amount payable, the employment contract must allow an employee to be furloughed and an employer cannot unilaterally reduce an employee’s wages. Legal advice may be applicable.

I can see no reason why the above considerations should not apply to an employee who was over the state pension retirement age or to the paper boys and girls.

Issue: 4742 / Categories: Forum & Feedback
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