All information in the below article is correct as at the date of publish (24 March 2020). However due to the ongoing nature of the Coronavirus outbreak, the information below may be liable to change at any time.
Part of the Government’s response to the COVID-19 outbreak, in an attempt to ease the economic impact and secure UK jobs, is the introduction of the Coronavirus Job Retention Scheme which allows employers to ‘furlough’ their employees, and receive Government funding to cover 80% of their pay. However given the urgent nature of the Government’s response, guidance for employers has been limited. We are therefore endeavouring to answer your commonly asked questions about this scheme.
What is furloughing?
To furlough simply means to grant a leave of absence to. It has no legal definition and never before has an employer had a ‘right of furlough’. This has been created purely in response to the Coronavirus outbreak.
How does it work?
The Government says this about what you need to do to access the scheme:
You will need to:
-
designate affected employees as ‘furloughed workers,’ and notify your 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
-
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 will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
What does it mean to designate employees as ‘furloughed workers’?
Simply put you will need to grant a leave of absence to employees – but this is key. Employees must be absent. You cannot claim employees are furloughed if they are still working.
How do we give information to HMRC?
There will be a portal which is not current active but expected by the end of April 2020. Please note that the scheme is a reimbursement scheme so you should continue paying your staff in the meantime.
What ‘existing employment rights’ is this subject to?
We have discussed previously the difficulties with putting your staff on leave at this time. Furloughing is not a right for employers to override their employees’ existing rights and therefore, unless you have a right of lay off or short time, in your contract, your employee has a right to work if they are ready willing and able. You should therefore seek to agree, rather than impose, the change on your employees. In our experience, most employees are quite willing to be reasonable right now, but you may have some insist on their right to work, in which case you might consider implementing a redundancy procedure.
Do we have to top up the employees’ pay?
The guidance for businesses does not specify but the guidance for employees states “your employer may choose to top up but does not have to”. Again however this is subject to existing employment rights, including the right to be paid. A failure to top up may be an unlawful deduction from wages unless specifically agreed and if you are not in a position to top up, this should be explained to and agreed by your staff.
Can you pay less than minimum wage?
If you have staff on minimum wage, and did not ‘top up’ they would receive less than minimum wage. Of course their right to receive national minimum wage continues but it is not clear whether the Government would require employers to top up pay in those circumstances and whether a failure to do so may lead to penalties.
What does the scheme cover?
The payments from the Government cover all ‘wage costs’ and it appears that income tax and employee national insurance will be deducted from the 80%.
What about pensions?
Your pension obligations are not suspended and therefore it appears that the employee will pay pension contributions from the amount they are receiving, and you will be required to pay employer pension contributions, albeit on the lower amount if applicable. You may choose to top these up as well.
What happens now we are in lockdown?
Following the Government announcement of a widespread lockdown, you have several considerations to make:-
- Will your business remain open?
- Are your employees key workers?
- Can your staff work from home?
If your staff are not key workers and cannot work from home, it appears that they may still be allowed to travel to work (though this is not advised by the Government) but you may choose to furlough your staff as an alternative. If your staff are working from home, they are not furloughed and you should pay them as normal.
If you have any queries regarding employment issues in light of the Coronavirus measures and how to cope with COVID-19 related absences and business changes, please do hesitate to contact Charlotte Braham in our Employment Department on 01494 893529 or charlotte.braham@allanjanes.com