Coronavirus Job Retention Scheme & Furlough Leave
On Friday 20th March, Rishi Sunak announced initial details of the support measures which the government was intending to introduce to help assist businesses and employees through the Coronavirus crisis.
The details which have been announced to date are sparse and incomplete however this article sets out the headline points and explains what we currently know about the Job Retention Scheme which will allow employers to claim up to 80% of wages for their employees who have been laid off. We do not have full details of the government’s proposal, but will we keep updating you as soon as additional details are confirmed and legislation put in place.
Coronavirus Job Retention Scheme- What is it?
As we understand it at the moment, this scheme will allow all UK employers to access financial support to continue paying part of an employee’s salary where those employees have been subject to lay off. The government have not yet confirmed what it means by “Lay Off” and whether or not this will include “redundancies”. All businesses are eligible to access the scheme including limited companies, sole traders, LLPs and charities.
How will it work?
At the moment, all we know is that employers will have to “designate affected employees” as Furloughed Workers (a brand new category of worker) and “notify their employees of this change”. The government has stated that changing the employment status of employees is subject to existing employment and depending on the wording of an employee’s contract, subject to negotiation and variation.
Further details will be announced by the government in due course, but as it stands it seems like an employer cannot simply say that an employee is a Furloughed Worker: they will need to consult with affected employees and get their consent to this variation. Although employers will have to consult with employees in this regard it seems entirely likely that employees will agree to this variation as the alternatives will probably either be: redundancy (with no pay, as the employer may have insufficient funds) or, being laid off as a “normal worker” as opposed to a Furloughed Worker without access to the Job Retention Scheme.
Once employees have been designated as Furloughed Workers, the next thing an employer needs to do is submit to HMRC information about those employees who have been Furloughed through new online portal. (The Portal is NOT live yet and it likely to be some time before it is, however we will keep you updated). Upon receipt of this information, “HMRC will reimburse 80% of Furloughed workers’ wage costs. There will be a cap of £2500 per month although it is not yet clear whether this is the maximum wage or the maximum payment. We are also not clear whether employees who earn more than this amount normally will be treated in the same way.
The Employees Guidance about the Job Retention Scheme says that, in order to qualify the scheme, they should NOT undertake any work for their employer whilst on Furlough Leave.
The Employees Guidance also refers to an employer being able to choose to top up their wages to 100% but the Employers Guidance is silent on it. The significance of this appears to be that if the employer chooses to withhold 20% of wages it will need the employees’ agreement to such before designating them as a Furloughed Worker.
Where a claim is made under the Job Retention Scheme it has been said that payments will be backdated to 1 March 2020, it is however unclear whether an employee can be retrospectively treated as a Furloughed Worker given the need for the employees to have agreed to this before being laid off.
There are an awful lot of questions surrounding the Job Retention Scheme which we may get answers to shortly but one thing you might have to start thinking about is how to manage those employees who are still working, when others who have been laid off (perhaps due to reduced competency levels…) are not working at all but still receiving 80% of their wage. It is possible there will be “consequences” or taking Furloughed Leave announced in due course but we don’t know yet.
Other announcements made in Friday’s statement include:
-Coronavirus Business Interruption Loan Scheme- increase in interest free period from six to twelve months. Loans to be available with effect from Monday, 23 March 2020.
-Further cash flow support through the tax system: deferral of next quarter’s VAT payments and other taxes.
-Abolition of business rates for those in hospitality, retail and leisure.
-Increase in the Universal Credit standard allowance, for the next 12 months, by £1,000 a year.
-Increase in the Working Tax Credit basic element by £1,000 a year
-Suspension of the minimum income floor for self-employed workers affected by the economic impacts of coronavirus meaning every self-employed person can now access, in full, Universal Credit at a rate equivalent to Statutory Sick Pay for employees.
-Deferral of self-assessment payments for the self-employed to be deferred until January 2021.
-£1bn of support for renters