On Friday 20 March 2020, during the early evening TV Government briefing which we have now all become accustomed to, the Chancellor, Rishi Sunak MP, announced the Coronavirus Job Retention Scheme.
The scheme is a ‘life-ring’ to help UK employers through the choppy economic waters of coronavirus by providing them with Government support to pay their employees in the short term to keep them afloat.
Access to the scheme is conditional upon employers keeping employees on payroll by way of ‘furloughing’ employees, thereby avoiding redundancies. The Government is of course wishing to avoid long term damage to the economy by millions of employees being made redundant and in the hope that their emergency aid is just a short term “life-ring” and not a measure which will need to be in place for many months as it will come with extraordinarily high cost funded by borrowing.
The scheme is very good news for UK employers; however the detail of the scheme is very much lacking as at the date of this article (24th March 2020). The only Government Guidance can be found here.
Nevertheless, in this article we take a closer look at the scheme, as far as possible at this early stage, and also look at this new word for UK employment law of ‘furloughing’ and what it means (albeit with no guidance offered whatsoever on how to pronounce it!).
Who can access the scheme?
All UK businesses are eligible to use the scheme, regardless of size or number of employees or payroll total.
How will the scheme operate in practice?
- An employer will designate affected employees as ‘furloughed workers’ and notify them of this change.
- An employer will then submit information to HMRC about the employees that have been furloughed and their earnings through a new online HMRC portal.
- HMRC will then give the employer a grant to reimburse 80% of all furloughed employees’ wage costs, up to a cap of £2500 per month.
What is ‘furlough’?
The word furlough means ‘temporary’ leave of absence from work and where the employee undertakes no work for the employer.
Can employees furloughed for the purposes of claiming under the Government scheme undertake some work?
Employees who are furloughed must not work for the employer during the period of furlough but should return to their job afterwards unless redundancies follow.
How far can an employer claim back in wages under the scheme?
The scheme will cover the cost of wages backdated to 1 March 2020 and will be open initially for at least 3 months unless the Chancellor extends it.
HMRC are working urgently to set up a system to pay the grants to employers who successfully claim under the scheme. At the press conference on 20th March 2020 the Chancellor indicated that he hoped the first grants would be paid before the end of April.
Is an employer required to supplement employees’ salary over the 80%?
No, employers can make up the additional pay, but they are not required to do so. However, employer must be aware that if employees do not receive 100% pay then they may have legal claims for the difference in pay as well as other Employment Tribunal claims. We would therefore advise you seek legal advice on changing their pay.
Do employees have to agree to be furloughed?
Yes, subject to what the employee’s contract of employment says, as with any changes to terms and conditions of employment employees must be consulted and consent obtained otherwise legal claims can arise. We would therefore advise you seek legal advice on furloughing employees.
Employers need to consider:
- A fair approach for selecting employees for being furloughed
- Decide whether to pay 80% of salary or to supplement it
- Receive written consent from employees
- Stop the employees from working if they are now working from home or send them home from the workplace
Will furloughing employees under the scheme work for all businesses?
No. The scheme will not work for those businesses who must remain operational as they are.
Are self-employed covered by the scheme?
No only PAYE employees are covered by the scheme.
The House of Commons Public Bill Committee has proposed an amendment to the Coronavirus Bill, entitled Statutory Self-Employment Pay. If accepted, it compels the government to introduce Regulations providing that “freelancers” (undefined) and “self-employed people” should receive guaranteed earnings of:
(a) 80% of their monthly net earnings, averaged over the last three years; or,
(b) £2,917 per month,
whichever is the lower.
What is the impact on employers from the Government’s guidance statements issued yesterday (23 March 2020)
New guidance was announced by the Government on 23 March 2020 putting in place new measures requiring the public to stay at home subject to limited exceptions and away from others. Further information in regards on staying at home all with the important aim of reducing the transmission of the coronavirus and save lives.
Driving to work is allowed but only on the basis where the work “absolutely cannot” be carried out from home.
The Government have also implemented further guidance on the closure of the retailers and premises considered non-essential including:
- Retail stores – which will include clothing and electronics stores; hair, nail and beauty salons; car showrooms, and outdoor and indoor markets (excluding food markets).
- Non-residential institutions such as Libraries, community centres, and youth centres, places of worship (exceptions for funerals and private prayer)
- Indoor and outdoor leisure facilities such as bowling alleys, bingo halls, spas, skating rinks arcades and soft play facilities.
- Enclosed spaces in outdoor recreation places such as parks, such as playgrounds, sports courts, pitches and outdoor gyms.
- Hotels, hostels, bed and breakfasts, campsites, caravan parks, and boarding houses for commercial use (excluding key workers and permanent residents).
The restrictions will be reviewed in three weeks’ time and further measures may be enforced if no evidence of compliance.
Do we still have to pay our employees if the workplace closes due to the Government Guidance that has been imposed on 23 March 2020?
There will be some businesses that will be able to operate with their employees working from home or remotely but many, particularly in the service and hospitality industry will not be able to continue to run their businesses. Employers may have to consider asking employees to carry out alternative work (not in their usual job description) in the current time. Most employees no doubt will want to help the business to keep running and hence will be flexible in order to keep their job.
However in the situation where an employer is unable to continue to operate its business with employees working from home, the Coronavirus Job retention Scheme has been put in place and will pay employees’ salaries of up to £2,500 per month on the proviso that they are kept on the payroll.
What other Government help is available for businesses other than the scheme?
The below guidance sets up further assistance options: