Coronavirus Job Retention Scheme

02 Apr Coronavirus Job Retention Scheme

On the 26 March 2020, the UK government issued an official guidance for employers to Claim  employee’s wages through the Coronavirus Job Retention Scheme. This claim is for employers to cover wages for employees on temporary leave (“furlough”) due to coronavirus (COVID-19).

There is a separate guidance for employees.

Self-employed individuals will be supported by an alternative scheme which we have considered in a separate blog found here .

Key Facts

• This scheme applies for Any UK organisation with employees of those created and started on a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.

• Not applicable to many public sector organisations and also to Organisations who are receiving public funding specifically to provide services necessary to respond to COVID-19.

• The scheme is available for employees on the payroll at 28 February 2020. Furlough is from 1 March 2020, so is to be backdated. It will last for at least 3 months and will be extended if necessary.

• Furloughed members of staff must not work for the employer during the period of furlough.

• The scheme pays a grant (not a loan) to the employer.

Below we answer to the key questions

1. When and how will the Employees start to make a claim?

The government is expected to have the scheme up and running by the end of April 2020. However, Claims can be backdated to 1 March 2020. Therefore, there is no need for employers to wait until the grant scheme is up and running to put employees on furlough. The grant will be paid to the employer through a new online system which is being built for this purpose. There is no detail about the application process at the moment.

• What is the Amount that employers can claim -?

Employers can claim up to 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to a cap of £2,500 (gross) per worker per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer contributions on that wage.

This will not include Fees, commission and bonuses and Employers  you must use the actual salary before tax, as of 28 February.

For employees whose pay varies

For employees whose pay varies (for example because they work shifts) you can claim for the higher of either:

• the same month’s earning from the previous year
• average monthly earnings from the 2019-20 year

If an employee with variable pay has been employed for less than a year, you can claim for an average of their monthly earnings since they started work. If the worker only started in February 2020, you should use a pro-rata approach.

• How to submit claims

The scheme will be administered by HMRC:
• Relevant employees must be designated as furloughed employees.
• Employers will submit claims to HMRC through a new online portal.
• As the system will take time to build, businesses should look to the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime.

The employer will pay the employee through payroll, and report payments to HMRC using the Real Time Information (RTI) system as usual.

• Will furlough leave affect employment rights?

The government guidance has helpfully confirmed that ‘furloughed employees will have the same rights as before including those for SSP, maternity and other parental rights, rights against unfair dismissal and for redundancy payments. So, this will of course be subject to employment law in the usual way

It is anticipated that employees will have continuous employment throughout the ‘furloughed’ period as this will be treated as a temporary cessation of work.

• How the Employment law matters will arise for employers ?

Employers considering furloughing their employees and employers should seek guidance or advice as appropriate. For instance:

• There should be a criterion for Employers when they are considering  how to select employees for furlough leave (for instance, seeking volunteers in the first instance),
• It is advisable that employers should be able to demonstrate they have used a fair and reasonable process to decide which employees to furlough, documented, employers should write to their employees confirming that they have been furloughed and keep a record.

• Employees should not be selected for furlough leave on discriminatory criteria (for example age) except for where discrimination is justified under employment law. So, it is important to know that Equality and discrimination laws apply in this. However, it is not expected to be discriminatory to offer it to employees considered as ‘vulnerable’ as per government guidance. This is on the basis that offering ‘furlough leave’ to vulnerable individuals in line with the guidance is likely to be acceptable ‘means of achieving a legitimate aim’.
• In general furloughing will require the agreement of the employees as this process amend the contracts of employment, because it involves a reduction in pay and some other benefits where 20 or more employees are to be put on furlough leave and would be dismissed if they do not agree will resulting changes in terms of employment . collective consultation requirements. So may need to take into consideration as well.

Please note: This is an opinion of the writer. You do not need to rely on the information as provided in this blog. You may have to carry out your own research or seek independent advice.