We’ve spent our days watching the world fall victim to the Coronavirus pandemic. With businesses in the front line, there’s been an overwhelming sense of stress and worry. On Friday 20th March, the Government announced an extensive package of support for employers who are facing commercial difficulties due to Covid-19. It has been a breath of fresh air for businesses who have been extremely concerned about how to pay their employees wages when being forced to close, or if revenues have dried up.
Employers are now able to claim a grant to cover up to 80% of an employee’s wage cost due to the new Coronavirus Job Retention Scheme. But what exactly do we know about the scheme so far?
Which employees are eligible for the scheme?
This is available for all UK employers. This includes businesses of any size, sectors, and also includes charitable and non-profit organisations. You just have to pay employees via PAYE.
How do you access the scheme?
According to the guidance on Gov.uk, employers are being asked to:
- Designate affected employees as ‘furloughed workers,’ and notify their 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.
The employer will be able to claim a grant of up to 80% of their employee’s wage for all employment costs, up to a cap of £2,500 a month, however, it is unclear at this present moment what financial information an employer would need to provide to HMRC.
This scheme will run for at least 3 months, being backdated to the 1st March, but extended ‘for longer if necessary’. Heavily useful for those employers who have already had to make layoffs.
Due to this being a reimbursement grant, the employer is required to pay their furloughed employee before being reimbursed by HMRC. It has been suggested by the chancellor that the first reimbursement will be at the latest the end of April, however at this stage it is unknown.
What does furloughed mean?
The definition of ‘Furlough’ is to allow or force someone to be absent temporarily from their work, although there is no previous legal term for this new phrase.
A ‘furloughed worker’ would remain on the employer’s payroll without undertaking any work for the employer, rather than being made redundant or laid off.
However, if your employee does not have a lay off clause in their contract, they will need to have a discussion with your employee to seek their permission first. It is then for the employee to decide whether they would like to be made a ‘furlough worker’, or to be made redundant.
Does the employer have to pay more than 80% to Furlough Workers?
No. The employer may choose to pay the differences, but is not required to.
We’re still at the very early stages of this scheme and it is unsure as to whether the 80% will cover all costs; such as National Insurance, Pensions, Health Insurance etc. It may be the case that the finalised amount is less than 80% of their net salary.
Make sure to speak with your employees to inform them their pay will be in accordance with the scheme once clarified.
What are the possible knock-on impacts?
With this being a new scheme, there are many areas that need clarification. However, it is important for employers to now remove some of the stress they were once carrying. We have made a list of areas that need to be clarified by the Government:
- Should employees who are currently off sick or self-isolating on SSP be classed as ‘Furlough Workers’?
- How do you go about an employee who is currently on Maternity? It is likely those currently on maternity will stay on maternity until they choose to return. You will then have to decide whether you have work for them, or if you wish to offer them ‘furlough’.
- If an employer requires some employees to work, how do they choose between those who should work and those who will be classified as ‘furlough’?
- For those good employees you ask to carry on working, how do you deal with the dissatisfaction? When other employees are offered and become ‘furlough’?
- If HMRC delays a payment, can you delay a payment to your employees? This is likely to breach or unlawful deduction of wages. Please speak with HMRC’s dedicated helpline for businesses and individuals in financial distress: 0800 0159 559.