The Chancellor announced on 20th March the new Coronavirus Job Retention Scheme which is a grant available to employers to help reduce redundancies or unpaid layoffs during the current crisis. Details on how this will be delivered to employers is sparse at the moment but here are the key facts you need to be aware of.
All businesses within the UK that employ staff.
How to Access the Scheme
The Government guidance sets out 2 steps but let me explain what this means in real terms.
1) 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.
Firstly, the term ‘furloughed workers’ doesn’t exist currently in UK Employment legislation and so it is important to understand the spirit in which it is being used in the Governments statements. The term furloughed is aimed to describe a worker that would either be made redundant or placed on a period of layoff which is unpaid due to the current Covid19 situation.
If your current contracts of employment have a clause for temporary lay offs and short time working, then this is likely to mean you can simply notify an employee that you intent to lay them off on a temporary basis and consider them a furloughed worker.
Where your contracts do not have this provision then you would need to gain the agreement of your employees to insert this in to their terms of employment, we would recommend this is done by a signed variance to their current contractual terms which we will help draft for you.
Of course, adding this is by the agreement of the employee however under the circumstances it is unlikely that an employee would refuse as the alternative is not a better position for them.
- They would either likely be made redundant and (dependant on how this situation is affecting your business) they may risk having no redundancy pay from you as an Employer as the Company cannot afford to make this payment and so they would have to apply to the Government scheme which takes considerable time and is likely to be overwhelmed.
- They may be laid off with no pay (even without the contractual right to do so) and they would then have to pursue a claim for any lost earnings through a tribunal
- They accept the terms and know they can get 80% of their wages covered by the scheme.
It is unlikely that the insertion of this clause would be considered a permanent change to the employee’s terms of employment to be relied upon at a future event as their agreement is likely to be only valid in the current crisis situation. We can advise how terms may be amended on a longer-term basis once we have normality resumed.
2) Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal.
HMRC have not yet set up this portal and guidance states further information will be provided on this, currently there is no mechanism in the current systems to pay employers for such a type of grant.
What can I claim?
The guidance is a little vague as this states currently that you can claim 80% of workers wage costs up to a cap of £2500 per month.
We do not currently know with clarity if this means the £2500 cap is 80% of the monthly wage (In other words a total wage of£3125) or if £2500 is to maximum wage that 80% will be paid off.
This also states 80% of workers wage costs which may include elements such as pension contributions. Further guidance is due to be issued on this.
Can workers that are self-isolating due to being in a vulnerable group or employees with childcare issues ask to be furloughed so they receive 80% of their wage?
The simple answer is no.
It is the Employer that has to determine who is classed as furloughed and this will be based on the decision that would be made on layoffs or redundancies.
An employee has no right to request being furloughed and should be treated as per the guidance issued based on their circumstances such as SSP for isolated employees or unpaid leave for employees taking leave under Emergency Care for Dependent.
What about my employees that are required to continue to work – how do I explain the decision of who has been classed as furloughed?
If you are considering laying off individuals or making redundancies, then you are likely to be selecting those who are the poorer performers in your organisation as we all need to retain talent and experience at this time. This may then mean that the employees whose jobs are safe and remain working to receive 100% of their wage look at their co workers who are sat at home doing nothing for 80% of their wage for being a less effective performer – this may cause issued at a time you need your teams motivated and pulling together.
You are not obliged to use this scheme, it is an avenue available to you but there may be sound decision to make some permanent cuts in your business that this situation has simply forced an earlier decision to be made on and so we are happy to discuss these situations with you to ensure you feel you are making the right choice under the right circumstances.
Can a furloughed employee still work at home if needed or work reduced hours?
Again, the simple answer is no.
To be eligible for this scheme the workers that are furloughed should not complete any work for their employer.
Is this open to abuse? Absolutely and there is no information on how the Government / HMRC can police this although I am sure more information on this will follow.
For more information please feel free to contact us on 0844 8797286 (Local rate) to ensure you are fully aware of the processes and agreements that need to be in place in order to claim these grants.
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