The Coronavirus Job Retention Scheme is one of the measures introduced by the Government to assist businesses in this time of difficulty and uncertainty.
The Scheme provides a great opportunity for employers to retain employees that would otherwise be redundant, preventing greater hardship and uncertainty for workers and businesses alike.
Under the scheme, employees temporarily cease work for the employer, but the government provides grants to cover 80% of the employees’ salary. It is intended that the Scheme will be backdated to 1 March 2020 and will be available for at least 3 months.
This guide will give an overview of requirements and best practices for employers and employees.
What is the Coronavirus Job Retention Scheme?
The purpose of the Coronavirus Job Retention Scheme is to incentivise UK employers to retain employees on paid temporary leave rather than making them redundant by accessing financial support to continue paying part of their salary.
This applies to employees who have been asked to stop working, but who are being kept on the payroll, otherwise described in the guidance as ‘furloughed workers’.
To be eligible for the subsidy, when on furlough, an employee can not undertake work on your behalf.
If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.
Who can apply?
Any UK organisation with employees can apply, including: businesses, charities, recruitment agencies (agency workers paid through PAYE), public authorities.
What employees are eligible?
There are a few exceptions to eligibility. Only those who started work before February 28 will be eligible for coverage under the Scheme. Employees on reduced hours or reduced pay are also ineligible.
Employees self-isolating in line with public health guidance, or who are currently on sick leave are entitled to Statutory Sick Pay, but can be furloughed when they return to work, should this be necessary.
How will the Scheme work?
When putting together a claim under the scheme, the first step is identifying those employees at risk or redundancy. These employees will be “furloughed”, meaning that they will cease work for the business but will not be laid-off.
Employers will be able to claim 80% of a furloughed employee’s salary up to a cap of £2,500 per month plus the employer’s National Insurance contributions and minimum auto-enrolment employer pension contributions.
What is furloughing?
This is a term you may have seen many times in connection with the Scheme – it is the government’s term for the status of employees who are not working and are covered by the Scheme. There is no legal definition of furloughing, but it is best understood as a middle ground between a laying-off and a leave of absence.
This means that furloughing is subject to standard employment law restrictions. To furlough an employee, their contract must have a lay-off clause, which is very rare. Otherwise, the decision must be made with the employee’s consent.
Even if it is not required by the employee’s contract, they should be consulted wherever possible. You should advise employees as part of those discussions that a likely alternative is redundancy as they may be reluctant to accept a reduction in pay.
Having consulted and agreed with employees on their furloughing, you will be able to move to paying 80% of their salary from the agreed date without any breach of contract issues.
How do you apply?
Having discussed the upcoming furloughed with the relevant employees, you will be able to submit relevant information to HMRC.
You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
The online service is expected to be available by the end of April 2020. We recommend those who need additional help to check the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime.
The goal of the Coronavirus Job Retention Scheme is to keep people at home while enabling employers to retain employees who will be needed when they get back to normality with their businesses in the future.
Therefore, the expectation is that employees will go back to normal working hours at the end of this period. However, the period could be extended.
We remain available to answer your questions and provide legal support to your business operations.