By Nic Hart
Last week the UK Government announced that it would be providing support for businesses through the ‘Coronavirus Job Retention Scheme’. Under this scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis. ‘Laid off’ in this context will mean in general rather than in the technical sense.
As at the time of writing (23 March 2020 – 9:30am), the Guidance remains limited on the scheme, particularly in relation to its administration. However, we have tried to best summarise the current position below.
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.
It is not clear at this stage whether this is a cap on £2,500 gross salary or cap on net payment, but indications are from reading current guidance on this is that this will be the net salary cap.
Employees guidance is that they should not undertake work, will remain employed and on the payroll and that the employer can make up the 20% shortfall but this will be at the employers discretion.
The scheme will be backdated to 1 March 2020 and will run for an initial three months from that date. The Government have stated that the scheme will be extended if necessary.
All UK businesses are eligible. The guidance currently does not state any limitation to this, so it will apply to limited companies, LLPs, Partnerships, charities, sole traders etc.
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. There is currently no definition of a ‘furloughed worker’ in UK employment legislation, and the term is used as a means of categorising those workers who will be affected by lack of work.
- 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). As of 23 March 2020 at 9:30am, there remains no portal or information regarding such portal as yet.
Other points to note
- We should make clear that the decision to designate an employee as a furloughed worker must be agreed by both employer and employee to be compliant with legislation. However, it is unlikely an employee will refuse if the alternatives are redundancy or home without pay. Be mindful of the militant worker who may demand that the business supplies work so they receive full pay and not 80%.
- The guidance also states that if your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.
Despite the currently limited guidance on the Coronavirus Job Retention Scheme, we will of course be providing updates as and when further information on this scheme is released. In the meantime, please do not hesitate to contact us. We can provide advice and guidance on furlough agreements and any concerns you may have at this stage.