On Friday 20 March 2020, the UK government announced a Coronavirus Job Retention Scheme (the Scheme) as part of its package of measures to help support businesses through the current COVID-19 pandemic. Following the announcement, separate guidance for employers and employees was issued but it is very early days in terms of understanding the detail of the Scheme; further guidance is expected in the coming days. What we know at the moment is:
- The aim of the scheme is to protect jobs and avoid redundancies arising as a result of the coronavirus crisis.
- The Scheme is available to any UK business, of any size and in any sector.
- It will be backdated to 1 March 2020 and will run for an initial period of three months, but may be extended.
- The Scheme allows an employer to designate certain individuals who are paid wages via the ‘pay as you earn’ (PAYE) system as ‘furloughed’, keeping them on the payroll as an alternative to terminating their employment.
- It is thought that all workers paid through the PAYE system, and not just employees, could be furloughed and covered under the Scheme but this needs confirming.
- There is no current guidance on how an employer selects individuals to furlough, nor how the scheme interplays with ongoing or upcoming redundancy activity.
- The issue of consent has to be clarified. On the information currently available, workers who are not receiving 100 per cent of wages will need to consent to be furloughed. Where employers are making up the remaining 20 per cent of wages such that the worker is not out of pocket, there is an argument that consent is not needed.
- It is clear that HMRC must be notified of the names of who has been furloughed.
- Employers can seek reimbursement of up to 80 per cent of a furloughed worker’s wages, subject to a cap of £2,500 per month per furloughed employee. There is some ambiguity about how the cap works and what is covered within it, which it is hoped will be clarified in future guidance.
- Payments will be backdated to 1 March 2020 and is thought to also apply to individuals who were employed as at the end of February 2020 even if they were subsequently dismissed, but how this backdating will operate in practice is currently unclear.
- It is not thought that business will be obliged to contribute the remaining 20 per cent of a furloughed worker’s wages, but this needs to be confirmed.
- It appears to be an ‘all or nothing’ scheme (i.e., an individual is 100 per cent furloughed or not at all), so they cannot work for the employer whilst furloughed. Whether they can work for another employer is unclear, as is the extent of any flexibility in moving a worker in and out of furloughed status.
- It looks like the employment relationship will continue during the period workers are furloughed, meaning statutory rights and benefits continue to accrue, although clarification is needed.
- The Scheme is expected to be operating by the end of April 2020, although HMRC will need to set up a new system to administer it.
- For employers with cash flow concerns arising from furlough and the potential delay in reimbursement, the government’s Business Interruption Scheme and/or the Corporate Financial Facility may be of assistance.
For more information please contact one of the authors or the Reed Smith lawyer with whom you normally work.