Coronavirus Job Retention Scheme – update
23rd March 2020
Further to our update on Friday, many employers are interested in the Furlough scheme announced by the Government.
Click here to read Friday’s update.
Some of the details are unclear at this stage but this is what we know so far.
In headline terms:
- The scheme is intended to avoid redundancies and protect jobs. All employers in the UK will be eligible to participate in the scheme.
- HMRC will reimburse employers for 80% of wage costs, up to a cap of £2,500 per month.
- The workers covered by the scheme are those who have been “furloughed”. Workers must be told about, and in some circumstances consent to, this change of status (see below).
- Employers will continue to pay the furloughed workers- but at the reduced scheme rate. The Government will reimburse the employer.
- Timing: HMRC is administering the scheme and it is not live yet. The Government expects first grants to be paid within weeks. The Government is making alternative help available for employers to continue to pay employees while the scheme is set up. Please see below.
How it will operate:
- Certain workers will become “furloughed workers”. It is understood that furloughed workers must carry out no work for their employer.
- Workers must be designated as furloughed and told of this change. But first note –
- This is a temporary change in status and therefore subject to the usual employment law rules on changing terms and conditions. It is vital that you understand this and follow the correct procedures to furlough an employee.
- If employers have collective bargaining arrangements in place they must agree this change with the union in the usual way.
- A: employers may be able to vary contracts without worker consent. Some contracts permit certain changes without worker agreement and in those cases employers can notify this change in the usual way. OR
- B: Where employers cannot make this change to contracts without consent, they require the agreement of individual workers.
- In scenario A and B we recommend this is documented by letter or email where practicable. We can advise you on how you do this and properly document it. The scheme is being administered by HMRC. Therefore employers must submit information to HMRC about workers who have been furloughed, together with their earnings. A new online portal is being set up for this. We understand it is not operational yet, but watch this space.
Some further clarification points:
- The scheme is being backdated to 1 March and initially will run for three months.
- It will cover workers who have already been laid off or dismissed. It is not clear whether employers will need to re-engage workers who have been dismissed / laid off to give them the protection of this scheme.
- Workers who are furloughed are not being dismissed or made redundant. This means furloughed employees are not entitled to redundancy payments. However, unless and until changes to the lay-off scheme are made, employees laid off may be entitled to redundancy payments in certain circumstances, therefore it is important to get the status right.
- Some employers may choose to top up the furloughed wage from 80% to 100%. Some may not be able to do so.
- Workers remain employed/engaged during this period. Which means most normal terms and conditions apply.
- Workers who receive a lower income as a result of these changes may be eligible for support through the welfare system, including universal credit.
- Where employers are still considering implementing redundancies please speak with us. We expect there will be a requirement to show why you are making redundancies rather than operating this scheme and retaining employees – please speak to us about your justification if you are considering redundancies.
There are still some variables, including:
- Whether workers on sick leave can be furloughed in the same way as active workers.
- How this affects workers in receipt of SSP (for Coronavirus reasons or otherwise).
- Other entitlements such as pension obligations.
- Holiday accrual and the costs that come with that.
If you need advice on these issues please contact your usual Ward Hadaway Employment contact.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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