The Coronavirus Job Retention Scheme announced by the Government on 20th March 2020 is intended to provide temporary support to employers whose businesses have been severely affected by Coronavirus. The scheme offers allows all UK employers access to grants covering the period from 1st March 2020 for at least 3 months.
The online service through which employers will make claims is not yet open but should be operational by the end of April. The advice and information issued by the Government is being continually expanded and updated.
In the meantime, we set out below some key facts about the scheme and what we know so far about how it will operate. This is not intended to cover all the details of the scheme but please get in touch if you would like to discuss anything further or have specific questions in relation to your situation:
The Basics of the Coronavirus Job Retention Scheme
This scheme allows employers to claim a grant of 80% of a “furloughed” employee’s usual monthly wage costs or £2,500 per month, whichever is the lower, plus applicable Employer National Insurance Contributions (NICs) and minimum automatic enrolment employer pension contributions on that subsidised wage.
Any UK employer can apply for a grant under the scheme, regardless of size, as long as it has a PAYE payroll scheme that was set up on or before 28th February 2020 and a UK bank account. If a business is in administration, the administrator will be able to apply for the grant.
In order to be eligible for the grant, an employer does not need to close down its operations or prove any financial hardship and does not need to furlough all of its employees.
Employers can only claim for employees who have been furloughed, which means that they are not working for the business in any capacity for a period of time (at least 3 weeks) but have not been dismissed or made redundant and are still being paid. Employees who have been on unpaid leave prior to 28th February cannot be furloughed.
The Government has clarified that furloughed employees can be working under any type of contract, including full-time, part-time or zero-hours. The employee must have been working for the employer since at least 28th February 2020. New hires since that date cannot be furloughed.
If an employer has made an employee redundant after 28th February 2020 but subsequently rehires him/her, the employee can be placed on furlough.
Employees who are working reduced hours cannot be furloughed. They need to be doing no work at all for the business. Employees can, however, continue working for other employers while furloughed if they have multiple jobs.
Maternity and Other Types of Leave
If an employee is on maternity leave during the period from 28th February 2020, she will be eligible for Statutory Maternity Pay or Maternity Allowance in the normal way. If an employer offers a higher contractual pay above the entitlement under SMP, the employer can claim for the additional pay as wage costs through the scheme. This applies also to contractual adoption, paternity or shared parental play where such arrangements are in place.
If an employee is on sick leave or self-isolating due to Coronavirus, he/she should continue to get Statutory Sick Pay while on sick leave (or enhanced sick pay if it is a contractual entitlement). Employers can claim repayment of up to two weeks’ SSP from day 1 for each employee who has been off work due to Coronavirus. On the employee’s return to work, he/she can be furloughed.
Procedure for furloughing an employee
The Government guidance confirms that a decision to furlough an employee should be made by mutual agreement. Unless the contract of employment contains a right to put an employee on short time working, the employee needs to agree to a variation in his/her terms. Any decisions being made need to be made with equality and discrimination laws in mind in the usual way.
Once agreed, the employer should write to its employee confirming the furlough arrangements and keep a record of the correspondence and any changes to the contract of employment. If a number of employees are being furloughed, it may be necessary to procure agreement to changes to their terms of employment through a collective consultation process.
Making a claim
Once the scheme is open to claims, employers will need to make a claim for wage costs. Employers must pay, at a minimum, the lower of 80% of an employee’s wage or £2,500 per month which is the value of the grant.
An employer can choose to top up the employee’s salary but is not obliged to do so. If it chooses to, any employer NICs and automatic enrolment pension contributions due on the top up (as well as the top up itself) are not covered by the grant. Pension contributions that exceed the minimum mandatory rate of 3% of income above the lower limit of qualifying earnings will also not be funded.
For salaried employees, their actual salary before tax as of 28th February should be used to calculate the 80% figure. Bonuses and commission are not factored into the salary.
In the case of an employee whose wages vary, and who has been employed for a full 12 months prior to being furloughed, the calculation is based on the same month’s earning from the previous year or the average monthly earnings from the 2019-20 tax year, whichever are higher. If an employee has been employed less than a year, the 80% figure will be calculated from the average of their monthly earnings since they started work.
Help is at Hand
As an employer, you may need advice in relation to decisions about furloughing employees or, if necessary, making them redundant during the difficult weeks and months ahead. We can help you through this process.
Whether you are an employer or an employee, we are happy to discuss your individual circumstances with you.
Please contact Stephen Morrall on 020 7412 5107 or firstname.lastname@example.org.