This information was updated on 27th March 2020 and may become out of date very soon. Please watch out for updates.
The purpose of the new Coronavirus Job Retention Scheme, announced by the Chancellor on Friday 20 March, is to prevent workers who otherwise would have been laid off during this crisis to remain in employment.
- Employers can reclaim up to 80% of an employee’s basic salary up to a cap of £2,500 per month, plus (not including) employer’s national insurance contributions and the minimum auto enrolment pension contributions on that wage. Fees, commissions and bonuses are not included.
- To claim under the Scheme employers will need to designate affected staff as furloughed workers and notify them of their change in employment status. Furlough leave must be taken in a minimum of 3 week blocks.
- Employers can only claim the furlough grant for workers who were on their PAYE payroll on 28th February 2020.
- Employers will need to submit details about the workers who have been furloughed and their earnings to HMRC through a new online portal.
- The Scheme will be backdated to 1 March 2020 and will last for at least 3 months.
Q1 What does “furlough” mean?
It’s an American term but simply means an employer can lay someone off for a time because there is no work for them but without having to make them redundant.
Q2 Which employers can claim the grant?
Any UK employer is eligible to register with the Coronavirus Job Retention Scheme, whether they are a limited liability partnership, a charity, a sole trader or limited company and regardless of their size. The employer will need to make a grant application to HMRC for each worker. Employers can only claim the furlough grant for workers who were on their PAYE payroll on 28 February 2020.
Q3 How much can employers reclaim?
Employers can reclaim up to 80% of an employee’s basic salary up to a cap of £2,500 per month, plus (not including) employer’s national insurance contributions and the minimum auto enrolment pension contributions on that wage. Fees, commissions and bonuses are not included.
Q4 Does the employer need the workers agreement to be ‘furloughed’?
Technically yes – changing the employment status and main terms and conditions of an individual’s contract remains subject to normal employment law and will need their agreement. During these very abnormal times however many workers will be relieved to be furloughed rather than made redundant and will take a pragmatic approach. The stark reality for many is to be furloughed or lose their job all together.
If an individual employee argues against being furloughed then the employer will need to assess whether that individual can continue working. If there simply isn’t enough work to do then the usual employment law rules on selection for redundancy will apply.
Employers who have more than 20 affected employees will also need to consult with either appointed trade unions or consider appointing employee representatives in accordance with employment legislation on collective consultations.
Q5 How long can an employer place their workers on furlough for?
Furlough leave must be taken in a minimum of 3 week blocks.
Q6 How does an employer chose which employees to furlough and which to keep at work?
In many cases it will be straight forward. Some businesses will close down – hopefully on a temporary basis – meaning there will be no work at all for staff to do. All of those workers are eligible to be furloughed.
The situation will be far more complex when an employer retains enough work for some but not all employees. The employer will need to consult with all potentially affected employees to ensure their decisions about who to designate as furloughed are fair and non discriminatory (Also see Q3 and Q5) .
Q7 Can an employee do some work whilst furloughed?
No, absolutely not. The purpose behind the Government’s Job Retention Scheme is to prevent redundancies so businesses are ready to get back to business when the crisis is over. The grant of up to £2,500 is therefore only to cover the wages of people who would lose their jobs all together in normal times.
Looking again at Q4 above, let’s suppose an employer has 10 members of staff and it business shrinks by 90%. It could then decide to keep 1 worker working full time and furlough the other 9 who will do no work at all whilst laid off.
Q8 Can an worker employee declare themselves as ‘furloughed’?
No, the employer must designate which workers are to be furloughed and notify HMRC via the on line portal.
Q9 Can or must the employer top up any shortfall in wages caused by the government’s 80% of £2,500 cap?
An employer can do so if it choses but does not have to. Where an employer is choosing to top up wages of some furloughed employees but not others it is putting itself at risk of unlawful discrimination claims and should take specialist employment law advice.
Q10 What if a furloughed worker then goes off sick?
They will be entitled to either statutory sick pay (SSP) or contractual sick pay depending on their individual terms and conditions. In reality is seems unlikely a furloughed worker who is only entitled to SSP will tell their employer that they are sick and see a drop in their furloughed income to SSP rates. It may also be that some employers who are obliged to pay full contractual sick may pressure the employee not to declare they are unfit for work so the employer can keep claiming the grant from HMRC.(Which would be a breach of contract by the employer). We do not yet know what measures will be in place to stop abuses of the Scheme.
Q11 Now the Coronavirus Job Retention Scheme has been announced could an employer reinstate a worker who has already been dismissed?
Yes. HMRC guidance dated 26 March 2020 says anybody on the payroll on 28 February who has since been made redundant can be rehired and placed on furlough leave.
Q12 When will the new HMRC portal be ready?
We don’t know yet but there is likely to be a lot of work required to get it set up. The government has said it aims to have everything in place by the end of April 2020