The Government announced on Friday 20 March that they would be introducing the Coronavirus Job Retention Scheme (“the Scheme”). Full formal guidance as to how the Scheme will operate has not yet been published and is expected shortly. In the meantime, the information below is intended to assist with any initial queries that you may have:
1. What is the Scheme?
It will enable all UK employers to access support from the Government to continue paying part of their employees’ salary for those employees that would otherwise be laid off or made redundant during the coronavirus crisis.
2. When is the Scheme operating?
The Scheme will be backdated to 1 March 2020 and will be available for the following 3 months. It will be extended if necessary.
3. Which employers are eligible?
All UK businesses are eligible.
4. Which employees are eligible?
The Chancellor’s announcement said that it would apply to anyone paid through PAYE. Note that employees must not undertake work for you whilst they are “furloughed”.
5. What is a “furlough worker”?
This is not an employee status which is currently recognised by UK employment law. However, for employees using the Scheme their status will change to a “furlough worker”. This will mean they are kept on your payroll, rather than being laid off or made redundant.
6. Does an employer need to consult with their employees before designating them as a “furlough worker”?
The current Government guidance states that employers should designate affected employees as “furlough workers” and notify their employees of this change. Changing an employee’s status remains subject to existing employment law. Therefore, if the employment contract provides a right for the employer to remove work it is likely that the employee’s agreement is not required, although it is still best practice to obtain this. If there is no clause to this effect then you will need your employee’s agreement to their status being changed. It seems unlikely that an employee would refuse if the alternative is redundancy or being laid-off. We strongly recommend that any agreement is recorded in writing.
7. Can an employee refuse to be designated as a “furlough worker”?
As above, this will depend on the employment contract in place. If you have no right to remove work (through lay off or short-time working clauses), you will need to obtain agreement from your employees before changing their status. In most cases, it seems unlikely that an employee will refuse if consulted, given the likely alternative is redundancy.
8. What information do I need to provide to HMRC?
You will need to submit information to HMRC about your employees that have been “furloughed” and their earnings through a new online portal (which is still being set up). HMRC will set out further details on the information required.
9. How much will HMRC reimburse?
HMRC will reimburse 80% of “furloughed” workers’ wage costs, up to a cap of £2,500 per month. It is unclear whether the cap of £2,500 is the maximum wage (and workers would get 80% of this), or whether employees earning up to £3,125 will be able to receive 80% of their wages. We hope that this will be clarified when the full guidance is published.
10. Will employers have to top up wages?
You are under no obligation to top up your employees’ wages to their usual salary, but you may opt to do so. If you do choose to withhold 20% of wages, you will need to have either a contractual right to do so or agreement from your employees to do so, otherwise you could risk claims for unlawful deduction from wages.
11. What are some of the practical implications of the Scheme?
One of the issues that we can envisage arising from the Scheme is that it could create dissatisfaction if an organisation has some employees working on either full or reduced hours (and therefore receiving either full or reduced pay) and some employees designated as “furlough workers” who will receive at least 80% pay (and possibly up to 100% if their employer tops up their pay) for doing no work. The Government has not yet confirmed when the Scheme will be up and running but it is expected that it will be at least a few weeks before the grants are available. Some businesses simply do not have the financial means to pay their employees during this period. If you would like to explore what other options may be available to you here is the link to our lay-off and short-time working factsheet which may be of assistance.
For further support and advice relating to the impact of COVID-19, please view our COVID-19 Advisory Service page.