The Government has announced the Coronavirus Job Retention Scheme to financially assist employers to continue paying wages as an alternative to carrying out redundancies.
The scheme applies to all UK employers regardless of size and status. It applies to employees who have been furloughed i.e., those employees who have been put on a period of leave during which they are not required to work. The employer will be able to claim a grant (as opposed to a loan) from HMRC to recover 80% of the wages of the employees who are not working but kept on the payroll up to £2,500 per calendar month per employee. Employers can choose to top up the remaining 20%, however this is not mandatory.
The scheme is with effect from 1 March 2020 and so can be backdated. It is to last 3 months. However, the Chancellor has indicated that he will extend it if necessary.
The Government has yet to issue more guidance on the scheme. Therefore, at the moment, the scheme will be subject to normal employment law rules.
The employer should fairly select which employees are to be designated as furloughed employees.
As this is effectively a variation of the employee’s contractual terms, the employer will also have to seek the agreement of each furloughed employee as most employment contracts will not allow employers to reduce an employee’s wage without agreement. However, as the alternative would most likely be a redundancy situation, unpaid leave or lay off, the majority of employees are likely to agree to the proposed variation.
The employer should notify affected employees of the intended change and also consider whether it needs to consult with employee representatives or trade unions depending on how many employees are to be furloughed.
Agreement to the change should be obtained from employees in writing and the employer should indicate how long it expects the furlough leave to continue. In addition, employers should ensure that furloughed employees do not carry out work (including working for any other organisation as well as on their own account) during the period of leave as this can affect eligibility to the scheme and may result in the employer being liable to repay any grants to the Government.
The problem is that HMRC are currently in the process of setting up a system for the scheme and it is not expected to be available until the end of April. Therefore, it will be crucial for employers to manage their cashflow during the intervening period.
The Government has set out a package of measures to support businesses including the Coronavirus Business Interruption Loan Scheme. Further information of the Government’s business support measures can be accessed via their website at:
If you have any questions on this issue or any other employment law problem that you are currently experiencing as a business, contact Lisa Branker, Employment Law Expert here at Richard Reed on 0191 567 0465 or email her directly at: Lisa.Branker@richardreed.co.uk