The Government have announced a drastic initiative to help businesses and employees who face the threat of redundancy. Employers can now be reimbursed by the Government for an employees salary for 80% of workers wage costs, to a cap of £2,500 per month.
Who does it apply to?
The new grant applies to employees that are no longer required to work as there is insufficient work for them to do and rather than be made redundant they will be “furloughed”. A furloughed worker is someone “ who remains on payroll but are temporarily not working during the coronavirus outbreak” per GOV.UK. The employee is still employed and bound by the terms of the contract. This is similar to placing a person on “Garden Leave” but in this situation there is no dismissal.
The scheme will apply in respect of all employees on PAYE, including those on zero-hours contracts. This means that it will cover many workers as well as employees.
What steps must employers take to put employees on furlough leave?
Decide which employees to designate as furloughed employees.
Notify those employees of the intended change.
Can a business just enforce the salary reduction on their employees?
No. Employers will need to agree the change with the furloughed employees. Most employment contracts will not permit an employer to reduce an employee’s pay, provide them with no work, and change their employment status, without agreement. However, faced with the alternatives, which are likely to be unpaid leave, lay-off, or redundancy, the majority of affected employees are likely to agree to be placed on furlough leave.
Confirm the employees’ new status in writing. Ideally, the employer should advise how long it expects furlough leave to continue, however, this may be difficult in the current climate. Employers may wish to put employees on furlough leave for an initial period, subject to review.
Submit information to HMRC about the employees that have been furloughed and their earnings through the new online portal. The COVID-19: support for businesses guidance states that HMRC will set out further details on the information required.
Ensure that the employees do not carry out any further work while they are furloughed.
Who is eligible for the scheme?
All UK businesses are eligible small or large, charitable or non-profit.
Can an employee request their employer puts them onto furlough leave?
Coronavirus Job Retention Scheme (CRJS) will be administered by HMRC.
Employers will need to:
- Designate affected employees as ‘furloughed workers’
- 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)
As noted above the grant is a reimbursement to the employer therefore the employer will make the wage/ salary payment to the furloughed worker and then be reimbursed by HMRC.
When will the scheme be live?
No set date but the following are indications it will not be immediate:
- “HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.”
- “HMRC are working night and day to get the unprecedented Coronavirus Job Retention Scheme up and running and we expect the first grants to be paid within weeks.”
- “If your business needs short term cash flow support, you may be eligible for the Coronavirus Business Interruption Loan Scheme”
If you have any questions on this or any other employment law related issues concerning the coronavirus emergency, please do not hesitate to contact us on firstname.lastname@example.org