Update – 26th March 2020
COVID-19
Update 26 March 2020
1.Coronavirus Job Retention Scheme – UPDATE
The answers below are adapted from information provided by the ACCA
Under the Coronavirus Job Retention Scheme, all employers in the UK will be able to access support to continue paying part of employees’ salaries who would otherwise have been laid off during the ongoing crisis.
Furloughed workers are employees whose employers cannot cover staff costs due to coronavirus, and as such they have been asked to stop working but have not been made redundant. This isn’t a term we use in UK employment law, and it seems to originate in the USA. It essentially means putting employees on a temporary leave of absence where they do no work and receive no pay, but they are retained on the company’s books to be brought back in when needed
Such employers are now able to access support to continue paying part of their staff’s wages, to avoid redundancies and so they can retain their teams.
FAQ
Who does this apply to?
The scheme is available to all employees.
Do I have to ask my employees, or can I just do it?
The employer needs to get agreement from the worker to do this, unless it’s covered by a ‘lay off’ clause in the employment contract.
What do I tell my staff?
The employer should discuss with affected employees and notify them (preferably in writing) that they have become ‘furloughed workers. See the next section on ‘Furloughing your staff’.
How much can I claim?
If employers want to top up pay levels, they can, but will not be able to claim for more than £2,500 so that’s 80 per cent of £3,125
Do I have to top this up with the remaining 20%?
The employer could choose to fund the differences between this payment and employee’s salary but does not have to.
I need them to just do some work for me is that ok?
No, the furloughed workers should not undertake work for their employer while they are furloughed.
What if my employees are on zero-hour contracts?
Whilst we wait for further clarity on this, the Chancellor has indicated that the intention is to cover as broad a group of people as possible.
For employees on zero-hour contracts, it may be that the employer can use the monthly pay in February 2020 as a benchmark for each person’s pay when furloughed. If any employee did not work in that month, they should claim Universal Credit.
My employee is asking to be furloughed as they need to look after their children- can I do that?
If employees must stay at home to look after young children, the employer is likely to be allowed to claim compensation if they furlough these workers.
My employee is concerned about their reduced income, what can they do?
If an employee’s salary is reduced as a result of these changes, the employee may be eligible for support through the welfare system, including Universal Credit.
How long is the scheme active for?
The Coronavirus Job Retention Scheme will run for at least 3 months from 1 March 2020 but will be extended if necessary.
Do the furloughed employees stay on my payroll?
The employees remain on the payroll deducting tax and national insurance under the pay as you earn (PAYE) system.
What records should I keep?
Employers will be required to make one claim for the entire workforce, record how many workers are covered and will need to keep records.
What checks might the government do of my records?
To avoid fraud, there are expected to be cross-checks between the applications for grants against PAYE records for each employer.
Who do I need to tell to reclaim the 80%?
The employer needs to submit information to HMRC about the employees that have been furloughed and their earnings. The submission will be through a new online portal which is expected before the end April
Chancellor Rishi Sunak has stated that he hopes the first grants will be paid by the end of April 2020 and that they will be backdated to 1 March 2020.
How do I get the money in to my bank account?
HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
I’m struggling to pay wages in the short term before I get the refund- what can I do?
It is expected that employers borrow or self-fund in the short term to provide the wage package.
Banks are offering extended overdrafts in some cases with others offering new facilities without arrangement fees to help individuals and businesses get through this period.
If a business needs short to medium term cash flow support, it may also be eligible for a Coronavirus Business Interruption Loan (CBILS). This is a normal commercial loan and will require a formal application, you need to ensure you can afford the repayments.
2.‘Furloughing’ your staff – additional info
The guidance states that the ability to furlough an employee depends on their contract. It is not likely that employment contracts will include a specific right to use furlough. However, contracts that contain a right to lay off employees on no pay already give employers the right to send employees home and not pay them for a temporary period and so can likely be used to furlough employees.
The difference is that employees on lay-off will get, subject to service criteria, statutory guarantee pay (SGP) whereas furloughed employees will get 80% of their wages.
If contracts do not contain a right to unpaid layoff, employers can ask the employee to agree to furlough. Although 80% of wages may not be an initially attractive option next to full pay, it is likely to be more attractive than redundancy which may be the result if alternative options cannot be found. It may also be useful for employees who are struggling to find childcare.
Adapted from https://www.cronertaxwise.com/community/hr-expert-job-retention-scheme/
Government Link https://www.businesssupport.gov.uk/coronavirus-business-support/
For copies of our previous updates please e-mail either
Previous updates
18 March, 19 March, 21 March, 24 March
This article is written for the general interest of our clients and is not a substitute for consulting the relevant legislation or taking professional advice. The authors and the firm cannot accept any responsibility for loss arising from any person acting or refraining from acting on the basis of the material included herein.
