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Coronavirus: Support for businesses announced through Job Retention Scheme

23 March 2020
The much anticipated Coronavirus Job Retention Scheme has been unveiled by the Chancellor, Rishi Sunak. With an unprecedented move to save people's jobs, the government has committed to pay 80% of wage cost, up to a cap of £2,500 per month for staff who are kept on by their employer.  

The government has confirmed that they intend for the Scheme to run for at least three months from 1 March 2020, but will extend if necessary. 

The key details of the Scheme have been unveiled in the government guidance COVID-19: Support for Businesses:

  • All UK businesses are eligible.
  • Affected employees must be designated as "furloughed workers". The employees should be notified of the change.  The guidance is clear that changing the status of employees remains subject to existing employment law and, depending on the employment contract may be subject to negotiation. 
  • Information must be submitted to HMRC about the employees that have been furloughed and their earnings through a new online portal (further detail to be provided by HMRC on the information required). 

HMRC "are working urgently to set up a system for reimbursement". 

"Furloughed" is not currently recognised in UK employment law, however the government guidance COVID-19: guidance for employees provides further explanation:

"If your employer cannot cover staff costs due to COVID-19, they may be able to access support to continue paying part of your wage, to avoid redundancies.

If your employer intends to access the Coronavirus Job Retention Scheme, they will discuss with you becoming classified as a furloughed worker. This would mean that you are kept on your employer’s payroll, rather than being laid off."

Employees will remain employed whilst furloughed.  The employer can choose to pay to the employee the difference between the government payment of 80% and the full wage, however there is no obligation on them to do so, as far as we are aware based upon the information to date.  

Employers choosing to furlough employees should do so according to their contracts. If there is a right to lay- off, then it will be easier as the entitlement to stop provision of work and retain employment is already there. In this case formally furloughing employees will be beneficial to the employees as they will be entitled to 80% of pay rather than the much lower statutory guarantee pay.

If there is no employment right to be laid- off then the guidance refers to negotiating the change in status. In this case agreement should be sought although it seems unlikely that any employees would refuse the proposition, as the alternative option is likely to be redundancy or unpaid leave.  Nevertheless, employers should go through a simple process to facilitate the change. 

Conclusion

The measures have been described as a “hugely significant step forward” for employers by Jonathan Geldart, director general of the Institute of Directors.  The support offered has been applauded far and wide, however many, including trade unions, are asking for more help for self-employed individuals. 

Employers should be mindful that there may be a divide in the workforce between those who are required to carry on working to receive 100% of their wage and those who become furloughed employees and receive 80% of their wage for no work. This will be even more stark where remaining employees are put on reduced hours and pay but still have to work. In this case it is unclear if furlough can apply but the guidance does not seem to allow it. 

We expect that there will be more detailed guidance and in this difficult climate, it is hoped that a pragmatic approach will be taken by all. 

We will keep you updated.

If you need any further advice in this area do not hesitate to contact one of our experts.

View more insights on our COVID-19 Global Hub

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