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Coronavirus Job Retention Scheme


The Chancellor announced on 20 March 2020 a new Coronavirus Job Retention Scheme that will allow all UK employers to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis. 

Government guidance so far is scarce. This is all we have: 

Eligibility

All UK businesses are eligible. 

How to access the scheme

You will need to:

  • 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
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.

If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.

At the present time we have no more detail than this on the scheme. At this stage, and until further clarification, we take the term “furloughed worker” to mean someone who has, or will be, laid off as a result of a downturn in work. 

Frequently Asked Questions

What happens now if I want to lay off my employees?

In the first instance, you should check their contract for the existence of a lay off clause. If there is one, and it allows you to lay off an employee in these circumstances, then you can send your employees home. That would normally be without pay but in view of the government’s announcement you should apply to HMRC for payment under the scheme. 

If there is no lay off clause in the contract you will need to seek agreement from your employees in order to lay them off on reduced or nil pay. Once the scheme is in place, and workers will be guaranteed 80% of their pay up to £2,500 per month, most employees will probably agree to be laid off in line with the scheme, especially if the alternative was redundancy. 

What if I can’t afford to wait for this scheme to come into effect?

If you cannot wait for this scheme, we would suggest that you lay employees off in any event as an alternative to redundancy or closing your business. Even if you do not have the contractual right to lay off and your employees will not agree, you may decide to act unilaterally. The government scheme is incoming and if you communicate to employees that you will be making an application for assistance as soon as the process is known, they are likely to wait for that to take effect rather than try to resign and claim constructive dismissal which would be the normal response in these circumstances. Payment via the scheme would be much quicker for them than attempting to pursue a tribunal claim. 

Can I still make my employees redundant

If you cannot wait for this scheme, we would suggest that you lay employees off in any event as an alternative to redundancy or closing your business. Even if you do not have the contractual right to lay off and your employees will not agree, you may decide to act unilaterally. The government scheme is incoming and if you communicate to employees that you will be making an application for assistance as soon as the process is known, they are likely to wait for that to take effect rather than try to resign and claim constructive dismissal which would be the normal response in these circumstances. Payment via the scheme would be much quicker for them than attempting to pursue a tribunal claim. 

Does this impact employees currently signed off sick? 

No, they continue to be absent due to illness and will be entitled to either SSP or contractual sick pay if applicable. 

What about employees who are self-isolating? 

Based on the current guidance, our view is that the job retention scheme does not apply to those individuals whilst isolating but can do once they are ready to return to work. If your employee is not sick but has been advised to self-isolate by GP, medical professional, via 111 or is following the advice to self-isolate from a public health authority, they will be entitled to SSP or contractual sick pay if applicable. 

What about high risk employees who are practicing social distancing? 

Based on the current guidance, our view is that the job retention scheme does not apply to those individuals if they are not attending work for this reason.  

Our view is that if an employee decides to self-isolate based on the above advice on social distancing, they can be treated as sick for SSP purposes. Whether they are entitled to contractual sick pay for this time off would depend on the exact wording of their contract so please check that in the first instance. If contractual sick pay requires the employee to be unable to attend work because of sickness or injury, or words to that effect, then the above situation may not fall within the contractual sick pay scheme. However, you may wish to exercise your discretion to pay in those circumstances. 

What about employees taking time off to care for dependents? 

Based on the current guidance, our view is that the job retention scheme does not apply to those individuals for the same reasons as above. They may be able to work from home, take annual leave or, at this stage, agree a period of unpaid leave.  

If an employee has been able to work from home whilst they provide care and they are no longer able to do so due to a lack of work, they would qualify for the job retention scheme. 

What about employees on holiday? 

Our view on holiday is that (similar to ongoing sickness or isolation issues – see above) the employee is not available for work and so can’t be furloughed. It follows that they should be paid holiday pay at their usual rate whilst they are off for this reason. 

Please note that the limited government guidance available at this stage suggests the scheme is only available to employees who have been laid off. However, the actual announcement from the Chancellor suggested a wider range of employees affected by the outbreak may benefit from help. We expect further clarification early next week. 

 

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