Coronavirus Job Retention Scheme – Welcome Relief for Employers and Employees Alike

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Since the publication of our previous update on Emergency Funding Support During the COVID-19 Crisis on 20 March 2020 and our articles last week on reducing workforce costs and general practical advice for employers, the Government has unveiled a further series of measures to supplement those previously announced to support people, jobs and businesses. These include the introduction of a new Coronavirus Job Retention Scheme, under which the Government will cover the costs of 80% of salary (up to a maximum of £2,500 per person per month) for individuals who are kept on the payroll but not required to work during the Coronavirus outbreak, instead of being laid off. The Chancellor referred to such individuals as “furloughed workers”. These are truly unprecedented measures aimed at keeping people in employment in what are undoubtedly unprecedented times.

At the time of publication, only basic details regarding the scheme have been made available and many questions employers are likely to have remain unanswered. Key details that have been revealed to date include:

  • The scheme will be open to all employers, small or large, who should contact HMRC to apply for a grant.
  • Employers will need to designate affected individuals as “furloughed workers” and notify them of the change. Such change will need to follow normal processes for agreeing contractual variations, unless the contract contains express lay off provisions. This would involve consultation and agreement with individuals regarding their new status as “furloughed workers”, including collective consultation where 20 or more individuals are affected and the proposals include termination and re-engagement (where agreement to be designated as “furloughed workers” is not reached).
  • A “furloughed worker” is not a concept currently recognised in law. However, the clear intention is that such individuals should not do any work for the employer.
  • The announcements made so far seem to use the terms “employee” and “worker” interchangeably. However, given that they refer to individuals being “kept on payroll”, the suggestion is that both employees and workers who are subject to PAYE will be covered, and this has been reflected in comments made by the Chancellor. Self-employed individuals therefore appear to fall outside the ambit of the scheme (separate arrangements may be made in relation to them in the coming days or weeks). As such, genuinely self-employed individuals should not be included (at least for the moment).
  • Employers will need to submit information to HMRC about the individuals that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information that will be required in due course.
  • The scheme will be open for an initial period of 3 months, after which it will be reviewed and extended if necessary, and grants will be backdated to cover wages from 1 March 2020.
  • No limit has been placed on the amount of funding available under the scheme or the number of jobs it will support.
  • HMRC are working urgently to set up a system for reimbursement, and expect to be able to pay out the first grants within a matter of weeks. The aim is for the system to be up and running before the end of April.

The Chancellor did confirm that employers will have the option to top-up salaries beyond the 80% that will be covered by the grant at their own expense. However, they will still need the individual’s agreement to pay them only 80% of their salary if they do not choose to top-up. Further, it is currently unclear what criteria will apply before an individual can be designated a “furloughed worker”, what evidence will need to be submitted of the business need to put them into this category, and what information regarding their salaries will be required.

In terms of the maximum £2,500 that is recoverable per person per month, it is currently unclear whether this refers to net or gross pay, or if only basic salary costs are included, as opposed to costs towards benefits also being recoverable.  Some Government guidance refers to the figure relating to “all employment costs”.

In addition, for the many employers who have already taken the tough decision to put employees onto short-time working on reduced pay as a means of avoiding redundancies, or have already given notice of redundancy (whether or not such notice has yet taken effect), it is not clear whether any assistance will be available retrospectively.

At Walker Morris, we are closely monitoring developments regarding the scheme and are ready to answer clients’ queries on how it could benefit their business and workers. Please get in touch with your usual contact or the members of the Employment Team below.