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The Coronavirus Job Retention Scheme - updated 25 March 2020

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The Chancellor announced last week, funding would be made available to cover a portion of wages where employees are laid off during the Coronavirus crisis. This is known as the Coronavirus Job Retention Scheme.

What will the scheme do?

In certain circumstances, the Government will reimburse up to 80% of an employee’s wage costs, up to a maximum of £2,500 per month.

Who is eligible for the scheme?

All UK businesses are eligible, regardless of size and it will apply to workers and employees but not to self-employed contractors. The Chancellor said that there is no cap to the amount of funding available for the scheme so in theory it will cover all employees who are affected.

What do businesses need to do to access the scheme?

Businesses need to designate affected employees as “furloughed workers” and the employees needs to be notified of this change. The employee will remain on the payroll during this time.

The business then needs to submit information to HMRC about employees who have been furloughed through a new online portal. HMRC have not yet set this portal up or identified the information which businesses will be required to provide. The Chancellor says the scheme should be up and running before the end of April but should be in a position to start paying the first grants within “weeks”.

While designated as a “furloughed worker”, the employee must not undertake any work for the business.

Businesses may choose to fund the differences between the individual’s salary and the payment under the scheme but does not have to.

How long will the scheme run for?

When the scheme is up and running, the payments will be backdated to 1 March 2020 (where appropriate) and will run for “at least three months”. The Chancellor has said the scheme may be extended if necessary.

What if we have already made employee’s redundant?

It appears to be possible to reemploy an employee if they have already been made redundant and then designate them as a furloughed worker although no guidance has been released on this so far.

What if we have already put our staff on reduced hours?

The purpose of the scheme is for employers to retain staff who have otherwise been made redundant so it might be that if the employees would not otherwise be made redundant, they would not be covered. Saying that, it is unlikely employers would have to prove to HMRC that redundancies will be made unless employees are placed on furlough leave. Another question which will hopefully be answered shortly.

Can we put an employee who is on sick leave, on furlough leave?

It is the employer’s choice who is designated as furloughed but there may be requirements which have to be satisfied, such as the employee being “available” to work. Again, we will have to see what the guidance is when it is released.

Can an employee request they are put on furlough leave?

Yes, but the employer does not have to agree.

Is it unfair to put some employees on furlough leave and keep other employees working?

Providing the employer has used non-discriminatory criteria to choose who is put on furloughed leave, it is possible to lawfully choose only to furlough part of the workforce.

What happens if we intend to put 20 or more employees on furlough leave?

Where an employer intends to vary the contracts of 20 or more employees, and it intends to dismiss employees who do not consent to the change in terms, the employer will have a duty to inform and consult appropriate employee representatives (as in a normal redundancy situation). It is unclear whether the government expects employers to follow this process, but at the moment the guidance is that the scheme is subject to usual employment law rules, so it is likely.

Will employees continue to accrue holiday during furlough leave?

It is likely that holiday would continue to accrue, although furlough leave being an entirely new concept in UK employment law, it is difficult to say for sure.

What can the employer claim back?

It is unclear whether the £2,500 reimbursement is to be paid gross or net of pension contributions, NICs and tax and whether HMRC will treat the reimbursement is already taxed.

Are employers obliged to top up the remaining 20%?

The guidance states that "your employer could choose to fund the differences between this payment and your salary, but does not have to". Withholding 20% of an employee's salary, will however, amount to breach of contract and unlawful deduction of wages unless the employee gives their consent. It is expected that the majority of employees will consent since furlough leave is a better alternative than unpaid leave, lay-off, or redundancy.

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