Coronavirus Job Retention Scheme

Coronavirus Job Retention Scheme

 

On Friday the Chancellor announced the Coronavirus Job Retention Scheme (CJRS). Although the Government has yet to announce all the details, there is still some useful information that we already know.

 

What does furlough mean?

To be eligible for the scheme the employee must be furloughed.

Furlough leave has been introduced by the government during the Coronavirus pandemic to mean leave offered which keeps employees on the payroll without them working. As the furloughed staff are kept on the payroll, this is different to being laid off without pay or being made redundant.

Any furloughed staff are NOT allowed to do any work for the employer during the period in which they are furloughed. It is not yet known if employees can be brought out of furlough and then furloughed again in the CJRS.

The CJRS is suitable for businesses that have no work at all for some or all f their staff. This also means that you don’t have to keep furlough indefinitely and if the business circumstances do evolve then you can invoke a different option at any time.

 

Which employers does the Coronavirus Job Retention Scheme apply to and when will it be available?

All UK employers are eligible for the scheme, however, it is intended to apply only to employers who cannot cover staff costs due to COVID-19. These employers can access support to continue paying part of their employee’s wage in order to avoid redundancies. It is not known id a small business owner who pays himself a salary is covered.

Under the CJRS, all UK employers who would have dismisses employees during the crisis can access payments for part of the employee’s salary. This is a grant which you do not have to pay back. The CJRS will run for three months but may be extended if it is necessary. The details we have so far are as follows:

  • HMRC will pay 80% of furloughed workers wages, up to a cap of £2,500 per month
  • HMRC are setting up a new portal for reimbursement
  • The pay will be backdated to wages payable from 1st March 2020
  • Payments should be available by the start of April

To qualify for the scheme, employees MUST NOT work for the employer while furloughed.

The grants do not cover wages of employees working a reduced schedule due to the virus; the employee MUST NOT work for the employer at all during the furloughed period – this is different to short term working and layoff.

 

How to access the scheme?

Employers can access the scheme through an online portal, which is yet to go live. The employer provides details of the furloughed employees online and submits information to HMRC about their earnings and any other information required, which will presumably include the employee’s NI number.

As with any employment matter, fairness and procedure is key. A suggested approach is:

  • Fairly select employees affected for being furloughed (the government have not said this, but it seems sensible)
  • Decide whether to pay just the 80% of the salary or to supplement it.
  • Follow a consultation procedure to gain the employees’ written consent unless there are already contractual provisions to cover lay off
  • If you decide that furlough is your chosen course of action, you must STOP your employees from working if they are now working from home, or send them home from the workplace.

 

Which employees can be furloughed?

The employees that can agree to being furloughed are those working for a business that would otherwise have to lay off all or part of their workforce.

The 80% wage guarantee does not cover zero-hour contracts or casual workers, unless they are on the PAYE system. There is no guidance relating to part-time employees, but it may be that it will be pro-rated, like holidays.

Issues could arise if a part time employee works for two employers. If the employee is furloughed by one employer then they would get 80% of that salary, but if the other employer doesn’t furlough them then they might get the whole of that salary.

 

Do you employees have to agree to be furloughed?

Yes, employees must agree to being furloughed. Depending on the wording of the contract there might by the ability to lay-off workers. Under the current law this is a different legal concept but it may enable some employers to impose a furlough, but we are awaiting further government guidance.

Most employees will agree to the furlough, and the other main option would be to make them redundant, which is a less attractive option for most people.

If employees don’t agree to be furloughed, can you make them redundant?

Yes, if the employee doesn’t agree to furloughing you can dismiss them be reason of redundancy as long as the proper conditions are met and the proper procedures are followed.

 

Do we have to top up the wages beyond 80%?

No, but you may choose to do so if you wish. There is no reason why an employer can’t top up the salary in the first month and then stop topping it up after that if the situation continues, but the employee may be able to withdraw their consent to being furloughed.

Will the furloughed employee receive £2,500?

If an employee’s salary is £3,125 per month then 80% of their salary is £2,500. So employees earning £3,125 or over per month then they will receive £2,500 per month. If they earn less than that then they will receive 80% of their salary. Although, the employer could top-up either of these amounts.

The £2,500 may include employer’s NI and pension contributions, but we are still awaiting the Government’s advice on the matter.

Retail, hospitality and leisure businesses

 

  • A 12 month business rates holiday
  • Grant funding of £10,000 for relevant businesses with property with a rate able value of under £15,000
  • Grant funding of £25,000 for relevant businesses with property with a rate able value of between £15,001 and £51,000.

 

Next Steps

The next steps are to:

  • Review the information above and assess what is the best option for your business
  • Work out if you want to apply it now to some or all of your staff or if you want to wait first
  • Work out if you want to use furloughing alone or in conjunction with other methods
  • Keep checking the government website for updates on the situation

2 Comments

Nick Hookham-Foy

Hi Ilyas, what’s the current stance on self employed has there been any movement towards 80% based on historical accounts?

Ilyas

Based on previous 3 years SA returns. Where the majority of the income is derived from self employment. 80% averaged out.
This is not the same for one man Ltd company owners. They get 80% of salary only and does not include dividends, if “furloughed”

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