On 20 March 2020, the Government announced ‘unprecedented measures’ in its fight to protect the financial wellbeing of individuals in the form of the new Coronavirus Job Retention Scheme. We reported on this announcement on 23 March 2020 and have updated our briefing in light of the updates released by the Government on 26 March 2020.
The Government has confirmed that for the first time in our history it will step in and pay people’s wages where their employer has insufficient work for them. This is to try and avoid staff being made redundant by their employer as a result of the Covid-19 crisis.
Grants from HMRC will cover 80% of someone’s salary up to a maximum of £2,500 gross per month plus the associated Employer NI contributions and minimum automatic enrolment employer pension contributions on that wage where staff have been designated as “furloughed”. Being “furloughed” is like a period of temporary lay-off. The employment contract continues during this period but the employee is not working. During this time, the furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for or on behalf of their employer.
In its updated Guidance, the Government confirmed that the new Coronavirus Job Retention Scheme is available to employees who work full time, part time, on flexible or zero hour contracts and through agency contracts. The original guidance indicated that zero hour workers would also be protected under the scheme but the revised guidance refers to employees only. However we think the intention must be that zero hour workers can still qualify. However, the individual must have been on the PAYE payroll on 28 February 2020 to qualify. Therefore, anyone hired after this date will not be covered.
The scheme will be available to all UK employers. However, the Government expects that the scheme will not be used by many public sector organisations, as the majority of their employees are continuing to provide essential public services or contributing to the response to the coronavirus outbreak. The Government also expects that non-public sector employers who receive public funding for staff costs should continue to use that funding to pay their staff and therefore not furlough them. Our Registered Provider clients will need to particularly consider the applicability of this.
The updated Government guidance recognises that it is not necessarily just a simple unilateral employer decision to designate and notify someone that they are being “furloughed”. This could actually be quite a complex arrangement to implement, particularly if the employer wants to reduce/remove its own obligations to pay wages on top of the Government’s contribution. The Government has made clear that employer can choose whether they top up the wages payment or not but since the employment contract continues during the period of “furlough” then the employee’s entitlement to full pay and benefits will continue unless and until varied. Legal advice should therefore be sought on how furlough can lawfully be implemented. There are restrictions around furloughing employees who are on sick leave or unpaid leave, and on rotating employees between bring on and off furlough too frequently (the minimum period of furlough must be 3 weeks).
To apply for the grant, employers will need to submit information to HMRC through a new online portal about their employees that have been furloughed. The details of the new online portal are yet to be confirmed but additional guidance is expected shortly and we will do a separate update when this additional guidance is published.
The first grants will be paid out before the end of April and be backdated to 1 March. The scheme will run for at least 3 months.
Our thoughts
The new Coronavirus Job Retention Scheme on the surface appears to be a gift to both employers and employees alike. Employees will feel relieved by the fact they will remain on the payroll during this difficult time rather than being made redundant, and employers will feel comforted by the security of having funding to cover at least part of their wage bill for the next 3 months, delaying the decision to restructure and make redundancies.
All employers should be aware that there are many legal issues which are created by the scheme and these will need to be worked through by each organisation depending on its own circumstances and what it wants to achieve from the scheme. These include how to successfully implement a lawful contractual variation, how you decide who should be furloughed, and whether you can permit a furlough employee to take a second job during their furlough. For our Registered Provider clients there is also the question about their receipt of public funding and whether it effectively disqualifies them from being able to use the scheme.
As ever, the Devonshires Employment team is able to advise on the options available to clients under this scheme and how to go about introducing it into your organisation. If you’d like any information or advice on how the above may affect you, then please contact a member of our Employment, Human Resources & Pensions Team or call 0207 880 4263.
