Coronavirus Job Retention Scheme – Update24 March 2020
As of 12 noon on 24 March 2020, the Government’s Coronavirus Job Retention Scheme (“the Scheme”) is as follows:
- The Government will contribute up to 80% of “wages” or “wage costs” (both terms are used) up to a maximum of £2,500 per month for those employees furloughed.
- “Furlough” is not a term ordinarily used in employment law in England & Wales. However it is likely to mean laid off i.e. placed on paid or unpaid leave (the guidance refers to both employees who have been “laid off” and employees “kept on payroll”) . Each of these terms are being used in a non-technical sense. The detail, when produced, will hopefully provide clarity.
- The scheme allows back-dating to 1 March 2020 provided the employee was “furloughed” at the relevant time. The scheme is currently in place for three months from 1 March 2020. The scheme will allow pro rata from the date of furlough (subject to the rules of the Scheme).
- Currently, under this Scheme, the provisions only relate to employees under PAYE. The scheme does not (yet) apply to “workers” or the genuinely self-employed.
- Clarity is required on what “wages” are or what “wage costs” are. Importantly, does it include basic package (e.g. pension) and/or Employer’s National Insurance Contributions?
- There is no requirement under the Scheme for employers to “fund the differences between this payment and…salary”. However that does not mean a suspension of general contract law or statutory protection. There would still need to be a contractual right to reduce salary and/or consent to the reduction. There would also need to be a contractual right to furlough or consent to being furloughed.
- Presumably the contribution will be against the Employer’s gross payments – so if salaries are reduced to the level provided for under the Scheme, the benefit to the employee will be the net amount after tax and NIC of the 80% or £2,500.
- According to guidance, an employer will need to: (a) designate affected employees as ‘furloughed workers,’ and notify 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; and (b) 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). HMRC are working urgently to set up a system for reimbursement.
- Crucially, furloughed employees must not “work” during the furlough period. There may be some latitude around this to allow for employees to keep a watching brief (only) over their work to ensure problems do not arise but it does seem, even from the scant guidance, that the intention is to prevent employers using (abusing) the Scheme to fund/contribute to the wage costs of “working” employees. Currently, the suggestion is that this will be policed retrospectively when the Scheme is wound up.
- One very unfortunate consequence is that it arguably encourages employers to furlough employees that could otherwise do reduced hours from home. Many employees have work to do, it is just greatly reduced. Whether that is something that will be addressed in the coming days will be seen.
- It is not yet known whether those employees terminated prior to the announcement of the Scheme (20 March 2020) can consent to be reinstated and have their dismissal erased – and then be furloughed under the Scheme. However it would seem that that is certainly in the spirit of the Scheme.
- Employees cannot furlough themselves. It is at the discretion of employers (although in most cases it is likely to require the Employee’s consent).
- Furloughed workers will continue to accrue (at a minimum) statutory holiday entitlement during the furlough.
- An unfortunate consequence of the scheme is that those on SSP are likely to be paid less than those furloughed.
The content is produced for guidance purposes only and does not constitute legal advice. It should also be noted that the guidance is deliberately narrow and to aid understanding of the new Scheme and its administration.