News & Updates
Covid-19 Update 26th March, 2002:the Coronavirus Job Retention Scheme
An update to this article can be found here: https://www.wjm.co.uk/news/covid-19-further-update-the-coronavirus-job-retention-scheme-2
At Wright, Johnston & Mackenzie LLP we know that all of you will be keeping a close watch on the announcements being made on a daily basis by HM Government.
So we are confident that you will all be aware of the declaration on Friday 20th March, 2020 of the Coronavirus Job Retention Scheme ("the Scheme").
We thought it would be useful to set out some information which we hope will be of help to Employers. Clarity and guidance are coming through piecemeal, and we still await the full legal regulation. If you can possibly wait for more clarity, we would recommend that you do so.
However, the intention of the Scheme is to allow employers to retain employees they need to retain, rather than to pay them off due to the effect of crisis on available work. Please bear that in mind when considering what you need to do.
1. We are employers, are we eligible to access the Scheme?
All UK Businesses can access the Scheme. We anticipate that will mean businesses operating within the UK, and employing within the UK.
2. What needs to be happening to our employees in order to access the Scheme?
The Scheme is to help employers pay employees who would be "laid off" if not for the intervention of the Scheme.
In our opinion "laid off" will not be restricted to the narrow meaning of lay off, which would require a contractual right to lay off, but means "made redundant" or "dismissed". As of 24/03/20, HM Government has made it clear that the purpose of the scheme is not to top up the wages of those who have had their hours reduced. As further guidance is given, we will let you know.
3. What do we need to do?
First, you need to remember that this Scheme is subject to other employment rights and contractual conditions. Employees need to agree to be furloughed but we think it unlikely in the extreme that they will not agree. Employees cannot insist on being furloughed. It must be offered by the employer so it is you who decides which workers will be given work.
As this isn't a redundancy situation, we think it is highly unlikely that the collective consultation requirements (if you are proposing to make 20 or more employees redundant within 90 days) will be engaged. Having to consult with representatives for 30 days would entirely defeat the purpose of the Scheme, which is an emergency measure.
However, you should be conscious of any contractual requirement to consult or negotiate.
At the very least, you should make sure you speak to your employees. Explain to them that due to the temporary need to cease working, they are being furloughed, but that they will remain employees. Remember the current requirements for social distancing!
It is likely that they will welcome this development, however.
4. 'Furloughed'? What does that mean?
A 'furlough' is a leave of absence. To be 'furloughed' means given a leave of absence. See serial 2, above.
5. Do I have to issue new terms and conditions, or something formal?
What you do will depend on your size, and how you normally communicate. Bear in mind the current requirements in relation to social distancing. We would advise that whatever form the initial discussion takes, you do follow it up with some tangible evidence of what has happened and why, whether by email, or by round circular letter.
Employers will need to send people home for a range of reasons. There may be a downturn in work needing to be done. It may be that social distancing can't be achieved in the workplace. It may be for a variety of reasons. We recommend any physical notification to employees on furlough includes the following:-
- That, having spoken to your employees, certain employees are being furloughed in accordance with the Coronavirus Job Retention Scheme, and are no longer required to attend work until further notice;
- They are still employees during the furlough;
- How long you expect this to last. At present, the Scheme is set to last for 12 weeks until 19 June, and can be backdated to 1st March for employees who were "laid off" during that time;
- The reasons why you are taking this step;
- What payments they will receive and when (see serial 8, below);
- That the situation is subject to any further developments.
You will obviously want to add whatever other messages you think would be helpful at this challenging time. Remember to communicate with employees who are still in the workplace.
WJM have draft documents available to seek agreement to and confirm placement on, furlough if you need them.
6. Is that all I need to do?
It is most important that you provide HMRC with details of the employees on furlough, through the new portal. If you don't, no payments will be made. We understand that this portal, and the payment mechanism, is being worked on urgently, so you should contact HMRC in relation to that, although they are likely to contact you.
7.What if employees I am telling to work are doing so for less than 80% of their normal working hours?
In these circumstances you would be entitled to ask the employee to take a cut in wages. This will be problematic where other employees are being paid more for staying at home and not working. One solution would be to have those employees who are working doing so for their full contractual hours and receiving full pay.
8. What will our employees receive and when?
HMRC will reimburse 80% of furloughed workers wage costs, up to a total cap of £2,500 per month. It is unclear whether the £2,500 is gross pay, but we anticipate that will be the case.
It is not currently thought that employers will be expected to make up the balance.
The Institute of Chartered Accountants in England and Wales have said that they understand that wage costs are the salary, plus pension and employers NIC.
It is unlikely that any payments will be processed before April, as the infrastructure is being created right now.
As we understand it, employers will process payroll as normal and then claim back the grant, with the claim will be made through a portal. The portal is not yet available.
9. Can I bring a furloughed worker out of furlough, especially if staff who are working go on sick leave?
It is understood that this is possible. When furloughing employees, employers should reserve the right to change their status, subject to developments.
10. Is there any other help available?
Yes. VAT and Income tax payments have been suspended, some small and medium sized employers can reclaim SSP payments, and a Coronavirus Business Interruption Loan Scheme, for instance. You should check the www.gov.uk website regularly for new initiatives.
As we have said in our other bulletins, this situation is developing daily, and we will keep you updated.
Please remember that we at WJM are here to help during this exceptionally difficult time, please don't hesitate to get in touch if there is anything you think we can help with.
For any advice in relation to any particular aspects of the above, please contact a member of the Wright, Johnston & Mackenzie Employment team: Liam Entwistle (firstname.lastname@example.org), Martin Stephen (email@example.com), Andrew Wilson (firstname.lastname@example.org) and John Grant (email@example.com)
The information contained in this newsletter is for general guidance only and represents our understanding of relevant law and practice as at March 2020. Wright, Johnston & Mackenzie LLP cannot be held responsible for any action taken or not taken in reliance upon the contents. Specific advice should be taken on any individual matter. Transmissions to or from our email system and calls to or from our offices may be monitored and/or recorded for regulatory purposes. Authorised and regulated by the Financial Conduct Authority. Registered office: 302 St Vincent Street, Glasgow, G2 5RZ. A limited liability partnership registered in Scotland, number SO 300336.