Updated: Mar 27
On Friday the government announced details of the Coronavirus Job Retention Scheme.
What is it?
Under the Coronavirus Job Retention Scheme, all UK employers will be able to access financial support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.
The information we have been provided by the government is currently incredibly sparse. We believe it is likely to support all businesses who would otherwise have made employees redundant. We do not know if it will provide support to businesses who are looking to undertake short time working (reduce hours/salary) in order to reduce their overheads and we expect further details today.
The guidance issues by the government for employees states that ‘to qualify for the scheme, you must not undertake any work for your employer whilst you are furloughed’ which may suggest that the support will only be available is an employee is fully laid off. We expect further guidance on this point in the coming days.
All UK businesses are eligible, whether limited companies, limited liability partnerships, partnerships or sole traders.
How the scheme works
The government guidance states that 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)
There is currently no guidance as to what evidence may be required to support the decision to ‘furlough’ employees, if any.
Can it be imposed?
Whilst the governments guidance may suggest that the decision to furlough employees is a decision of the company this is unlikely to be the case. The concept of ‘Furloughing’ is not a concept recognised by employment law and has no legal definition.
We expect that employers shall need to negotiate with their staff and seek the employee’s express agreement to be ‘furloughed’.
In a small number of employment contracts, mainly those in the manufacturing and production sectors, there may be a clause allowing an employer to lay off staff or to engage short time working. In these very small number of cases, employers may be able to impose the furlough without requiring the employee’s consent.
How much does the government pay?
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.
We expect that it shall take some time for the systems to be set up. Employers shall need to pay salary payments initially and seek reimbursement at a later date.
Will employers need to top the employee’s pay up to 100%?
The guidance issued by the government to employers is silent on this point and it is likely to form part of any negotiations with employees.
As a matter of employment law, if an employer wants to withhold part of a payment to an employee, they can only do so with the consent of the employee. As such, Greystone Legal shall assist in varying the terms of any employees who are to be furloughed to reflect any agreement reached and to reduce the change of an employer having to pay any shortfall in wages.
Can employee’s insist on being placed on ‘furlough’ leave? We do not expect so as the employee will be required to designate the employee as being on ‘furlough’ leave.