Further details have still not been published. As of 10 am Saturday, 21st March 2020), the following information is available.
Support for businesses through the Coronavirus Job Retention Scheme
Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.
All UK businesses are eligible.
How to access the scheme
You will need to:
- designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
- submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)
HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.
If your employer cannot cover staff costs due to COVID-19, they may be able to access support to continue paying part of your wage, to avoid redundancies.
If your employer intends to access the Coronavirus Job Retention Scheme, they will discuss with you becoming classified as a furloughed worker. This would mean that you are kept on your employer’s payroll, rather than being laid off.
To qualify for this scheme, you should not undertake work for them while you are furloughed. This will allow your employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month.
You will remain employed while furloughed. Your employer could choose to fund the differences between this payment and your salary, but does not have to.
If your salary is reduced as a result of these changes, you may be eligible for support through the welfare system, including Universal Credit.
We intend for the Coronavirus Job Retention Scheme to run for at least 3 months from 1 March 2020, but will extend if necessary.
Without further guidance, we have to try and interpret the statements in line with current employment law. I have set out below some of my thoughts but please be aware that my assumptions may be incorrect.
What is Furlough?
First and foremost, furlough is a word that most of us are unfamiliar with. It does not yet have a meaning in law.
Many of us suspect that the intention is that furlough is similar to the lay off provisions that we have become more familiar with over the last week. Furloughed workers will need to stay away from the workplace and do no work in order to qualify.
It appears that the chancellor has used the phrase “lay off” to mean redundancy as we understand it. This scheme is being introduced to avoid redundancies.
How do businesses designate workers as furlough workers?
Given that furlough is not a legal phrase it is highly unlikely that any contract of employment will allow it. As such, it will be necessary to obtain agreement from all workers that a business intends to designate as furloughed workers.
There is a suggestion that employers may need to negotiate with workers, although I suspect that the vast majority of workers will be more than happy to agree to being designated as furloughed as an alternative to being laid off (where the current entitlement is £29 per day for up to 5 days in a 3 month period). In the circumstances a response to an email would be sufficient.
Where the entire workforce is not to be designated as furloughed, care must be taken in any selection process. It must not be discriminatory or unfair.
What payments will furloughed workers be entitled to?
There is still some uncertainty about this. HMRC are setting up an online portal that will be used to input details of all furloughed workers.
The statement confirms that HMRC will reimburse 80% of the workers’ wage costs up to a cap of £2,500. There is a lot of information missing from this statement:-
- Is the cap of £2,500 the maximum entitlement under the scheme (meaning that workers receiving a monthly salary of about £3,000 will be entitled to £2,500) or does the £2,500 cap apply to the full salary that workers will be entitled to 80% of (meaning that the maximum entitlement will be £2,000)?
- Will the contribution include elements of national insurance and pension contributions?
- Will the workers wage used to calculate the 80% include elements of commission or guaranteed overtime?
The most recent statement confirms that the employers may top up the additional 20% of salary, but they do not have to.
It appears that payments can be backdated to 1st March 2020.
There are also other questions that remain unanswered: –
- Will an employee who is currently self-isolating (and entitled to Statutory Sick Pay) become entitled to payments under this scheme whilst they remain in self-isolation?
- Will sick employees be entitled to payments under this scheme or will they only be entitled to their usual sick pay?
- Is it possible to alternate between a working week/ month and a furloughed week/ month to ensure that any ongoing work is fairly split between the entire workforce?
- What happens to those employees who have already agreed to take a pay cut of over 20%? It appears that they may be worse of.
Based on information available at 10 am on Saturday 21st March 2020.