How does Coronavirus Job Retention Scheme operate?
- Certain workers will become “furloughed workers”.
- Furloughed workers cannot carry out any work for their employer while designated as furloughed, or a linked or associated organisation but they can do voluntary work as long as they are not providing services for or generating revenue for the employer or a linked or associated organisation.
- A furloughed worker can be furloughed part time and work the rest of the time.
- The furlough period begins when the employee stops work, not when agreement is reached.
- If furloughed employees are expected to do online training while furloughed they must receive the National Living Wage/National Minimum Wage for the time spent training.
- Workers must be told of and agree to this change in writing. This written agreement must be kept for five years as part of the scheme. The guidance has confirmed that collective agreement reached between an employer and a trade union on furloughing staff is acceptable for the purposes of making a claim under the scheme.
- However it should also be noted that this is a change in status and pay (if pay is not being topped up) and therefore subject to the usual employment law rules on changing terms and conditions.
- Changes to the contract must be made by agreement with the worker and the government guidance is clear that to be eligible for the subsidy employers must document their communication with the employee on being furloughed.
- You must confirm in writing that an employee has been furloughed, but that the employee does not need to provide a written response. Please note that this is for the purposes of making a claim under the scheme. Any reduction in pay must be agreed in writing under normal employment law principles and failure to do so may result in Employment Tribunal claims. You should not rely on a term in the employment contract to effect this change. We can advise you on how to document this properly.
- Employers must also keep a record of the agreement for at least 5 years.
- If employers have collective bargaining arrangements in place, they must agree this change with the union in the usual way.
- Collective consultation obligations may be triggered if there are 20 or more employees that are proposed to be dismissed and re-engaged in order to effect the change to terms to be furloughed. You should take advice if you think this may apply.
Related FAQs
Borrowers will not have to pay a guarantee fee. Lenders will pay a fee to access the scheme. The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, allowing smaller businesses to benefit from no upfront cost.
British Business Bank has indicated that following earlier discussions with the banking industry, some lenders indicated that they would not charge arrangement fees or early repayment charges to SMEs borrowing under the scheme. Each business should check the terms of the loans being made to ensure this is the case and what the interest rate and prepayment fees will be following the period in which the Government makes payment of these amounts.
The change in the law has the potential to place much greater financial risks on suppliers, making it more difficult to exit a contract with a customer of doubtful solvency. This will place increased emphasis on appropriate financial due diligence and credit checking before entering into supply contracts.
In addition to the obvious issues around financial risk, suppliers will also need to think carefully about how their contracts are drafted. For example, any form of right that is drafted so as to be triggered on customer insolvency will clearly be problematic. These could include:
- Retention of Title provisions, which are commonly drafted so that the right to enter premises and retake possession of the goods is triggered on insolvency;
- Provisions for brand protection, which seek to control how goods are dealt with on termination of the contract.
This is potentially a very significant development for many businesses. We would strongly recommend specialist advice be obtained so that:
- businesses understand the potential increased risks faced; and
- where possible, contracts are updated so that appropriate protections are maintained.
Follow up to date UK Government advice. This can be found at: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/guidance-for-employers-and-businesses-on-coronavirus-covid-19
For best practice and more detailed information; consult the HSE’s website at https://www.hse.gov.uk/news/coronavirus.htm
Failing to follow the guidance is likely to be regarded as failing to take all reasonably practicable steps.
- Do not require them to work
- Continue to communicate with and support them
- Allow them to work from home, is there alternative work for them to do if they can’t do their work from home
- Offer SSP or allow them to take holiday if they want to.
You will be eligible if you are a self-employed individual or a member of a partnership and you:
- have trading profits of up to £50,000
- earn the majority of your income from self-employment
- have submitted a Tax Return for 2019
- have traded in the tax year 2019/20
- are trading when you apply for a grant, or would be except for Covid-19
- intend to continue to trade in the tax year 2020/2021
- have lost trading/partnership profits due to Covid-19