At the Prime Minister’s daily press briefing on 20th March, the Government announced a new scheme to help businesses retain their staff, which has been called the Coronavirus Job Retention Scheme.

This will be in the form of grants to businesses through HMRC. At the time of writing, there is limited information on how this will operate in practice, including for example the information which needs to be supplied to HMRC.

However, what we have been told* is that, under the Scheme, all employers in the United Kingdom will be able to access support to continue paying part of employees’ salaries, where the employees would otherwise have been laid off during this current crisis.

Eligibility

Under other support schemes which the Government has recently introduced to help businesses, there are a considerable number of criteria in place as regard eligibility.

However, under this Scheme, all UK businesses are eligible.

The Chancellor announced that “Any employer in the country, small or large, charitable or non-profit, will be eligible for the Scheme.”

How much will the Government pay?

Guidance we have says that HMRC will reimburse:

• 80% of a “furloughed” worker’s wage costs.

• Up to a cap of £2,500 per month. We believe this is the gross sum.

HMRC we understand are working urgently to set up a system for reimbursement, as existing systems are not yet set up to facilitate payments to employers.

It is however anticipated that payments will start to be made by the end of April.

Will the employer be obliged to top up the wages to 100%?

No. The employer can choose to fund the differences between this payment and the employee’s pay, but does not have to.

What does “furloughed” mean?

There are many definitions and it is not a term used in UK employment law, but in essence a furlough is a temporary lay-off from work.

A furloughed worker, therefore, is someone who has been temporary laid-off from their job.

Under employment practice, the term “lay-off” is used to cover a variety of different situations, ranging from being dismissed for redundancy to having working days reduced.

However, “lay-off” under employment law is, strictly, where an employee is provided with no work or pay for a week, but they remain an employee.

We are still waiting for guidance, but the thinking is that the Scheme will apply where employees are laid-off in this latter, strict legal sense, i.e. where they have no work or pay for a week, or multiples of weeks.

If this is the case, this would then not apply where an employee is on short-time working (used in its broadest sense), where an employee does work during each week, but for less hours and/or days and is paid accordingly.

This view is reinforced by Government’s (albeit very limited and general) guidance available to employees on this subject, which says as follows:

“To qualify for this scheme, you should not undertake work for them while you are furloughed. This will allow your employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month.”**

**https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-guidance-for-employees

We believe that the individual needs to have been “on the books” for PAYE purposes as at 28th February 2020.

We would stress, however, that Guidance is awaited from the Government.

What about employees on “zero hours” contracts?

When asked if the Scheme will cover zero-hour contracts, the Chancellor replied, “It covers everybody who is on the PAYE system through a company.”

He went on to say:

“It may well be you are on a PAYE scheme and have a set of regular earnings and it will be covered depending on your particular circumstances.”

“I can’t generalise for every single person’s employment status, but in general our desire here is to cover as broad a range of people as possible.”

If that is indeed the case, then as zero hours employees would usually be on the employer’s PAYE payroll system, the Scheme would apply to them. As for their pay (which often varies under such contracts), the likelihood is that the employer will need to give details to HMRC of the employees’ average earnings for HMRC to decide how much to pay.

How long will the Scheme last for?

The Scheme will be backdated to 1st March 2020 and open initially for “at least” three months.

It is anticipated that payments will start to be made by the end of April 2020.

How to access the scheme

The Scheme comes in the shape of a grant and will be provided through HMRC.

From the information made available to date, employers will need to do the following:

• Designate affected employees as ‘furloughed workers,’ and notify their employees of this change.

• Submit information to HMRC about the employees that have been “furloughed” and their earnings through a new online portal.

We are told that HMRC will set out further details on the information required.

The limited guidance available makes the point that businesses cannot simply change an employee’s status to be a furloughed worker, as doing so is still subject to employment law principles.

Unless there are specific and clear terms in the employees’ contracts of employment, to lay-off an employee (i.e., to provide them with no work and no pay) requires the employee’s consent.

This means that the employer will need to consult with those employees it wishes to designate as furloughed workers and obtain their agreement to this.

It will be very important to ensure that the agreement reached with the employees makes clear that, by being designated as a furloughed worker, it is agreed that until, say, further notice, the employer will not provide the employee with any work, and that the only pay which the employee will receive will be the sums which the employer itself receives for that employee through this Scheme – unless of course the employer wishes to top up the payment.

Businesses who wish to take advantage of this Scheme are advised strongly to keep an eye out for publication of the Guidance which the Government has promised will follow.

As information to be fed into HMRC’s portal will require details of earnings, it is anticipated that businesses’ payroll providers will be a very important part of this process for those businesses.

Information as at 21st March 2020

*Main source throughout: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

For more information on the items raised in this article please contact our employment team by clicking here.