Government confirms that furlough rules do not leave employers at risk of breaching minimum wage rules

The Government has confirmed in its guidance for the operation of the Coronavirus Job Retention Scheme (CJRS) that employers will not be at risk of breaching minimum wage rules where they opt not to top-up the wages of furloughed employees.

The CJRS was announced by the Chancellor shortly before the Stay at Home rules came into effect and enables employers to apply for a grant in respect of 80 per cent of the normal wages of a ‘furloughed’ worker, plus the cost of Employer National Insurance Contributions (NICs) and employer’s minimum auto-enrolment pension contributions on this amount.

Where a furloughed employee is paid the relevant rate of the National Minimum Wage (NMW) or National Living Wage (NLW) or near to those rates, the Government has confirmed that you may still reduce their pay the 80 per cent rate, without breaching minimum wage rules.

The guidance states:

Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working.

Therefore, furloughed workers, who are not working, must be paid the lower of 80 per cent of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.

However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80 per cent of their wage that will be subsidised.

Complicating matters, the rates of the NLW and NMW change today (1 April 2020).

However, it is unclear whether this means that the value of the grant for workers on either NLW or NMW and who were furloughed in both March and April will vary in line with the increased rates.

The changes are as follows: