23rd March 2020

Coronavirus job retention scheme

Coronavirus is a worrying period for employers and their staff with the effects taking their toll on businesses and livelihoods in many different ways.

On Friday 20 March, the Chancellor made a very welcome announcement for employers that there is an unlimited support package on offer for employers to help with staffing costs.  The scheme has been named the “Coronavirus job retention scheme”.

So what does the scheme mean for you?

Finer details about the scheme are eagerly awaited but for the time being, what we do have is some brief guidance produced by the government about the support available for businesses and for employees (click here) which shed some light on the support on offer.

We have summarised as much as we know now about the scheme as at the time of writing (23rd March 2020) but there are still a lot of unanswered questions. As soon as we receive answers to these, we will update this briefing.

What is the job retention scheme and who is eligible?

The Government is offering all employers (whether they be sole traders, limited liability companies, partnerships or charities) across the UK access to a grant which will cover up to 80% (subject to a cap of £2,500 per employee) of the total cost of the wages of their workforce who remain on payroll but are temporarily not working due to the coronavirus outbreak.

The government is hoping that this measure will help avoid employers either making staff redundant or imposing lay-off or short-time working as a result of coronavirus.

Which employees does it apply to and do employers need to do anything?

For a grant to be obtained in relation to a specific employee, that employee needs to be designated (by the employer) as a “furloughed” employee. At present, there is no definition of “furloughed” employee in employment law. However, the government has indicated that that to be “furloughed”, the employee needs to remain employed, but be asked by the employer not to undertake any work for them.

It will be very rare for a contract of employment to allow an employer to withhold work from an employee in this way and so to be able to designate an employee as furloughed, an employer will need the employees’ agreement to this change in employment status. In reality, faced with the alternative of being laid off with no pay or made redundant, employees are likely to agree to this. Consultation, insofar as is possible, with affected employees will be necessary and if their agreement is reached, this should also be confirmed in writing.

How is the 80% / £2,500 cap calculated?

We await more detail about how the 80% grant and cap will be calculated. However current guidance does refer to “overall cost” and so it is anticipated that pension contributions and national insurance payments will be included in the “cost” and that it not be limited to basic salary.

Can an employee insist on being designated a furloughed worker?

No. The guidance is clear that the employer needs to designate employees as furloughed workers and so their agreement to an employee having this status is necessary.

Can an employer designate some employees as furloughed workers and not others?

We are not aware of any guidance saying that employers cannot pick and choose who is to be designated as furloughed and it would make sense for employers to have this right: not all employers would need to lay-off or make their whole workforce redundant as a result of coronavirus if this package was not on offer. However, this will have inevitable morale issues with the risk of those employees who are having to work resenting the fact that their colleagues are not working but are still being paid, though those who can still work and are able to do so, will hopefully realise that they are doing so to keep the business going.

Employers will also need to ensure that they do not discriminate when selecting employees to be designated as furloughed.

Can employees be treated as furloughed for part of their working week and salary costs be claimed for that period?

At present there is no clear guidance on whether employees need to be designed as furloughed for all of their working week but we would be surprised if this was not the case.

Can furloughed employees work from home?

No. The guidance is very clear that furloughed employees must not undertake any work for the employer.

At present it is not clear what the sanctions will be for abuse of the scheme but we are expecting more information about this in due course.

Can employees dip in and out of being designated as a furloughed employee?

The guidance is silent on whether furloughed status can be lifted and then reinstated by employers. We await more guidance on this point.

Can we still make employees redundant instead of designating them as furloughed?

Yes, this will remain an option and will be at the discretion of employers. However, where an employee has over two years’ service, we recommend that advice is taken to help ensure that any resulting dismissal is fair.

Do employers have to pay the remaining wage cost not covered by the grant for employees who are designated as furloughed?

The government guidance for employees says “you will remain employed while furloughed. Your employer could choose to fund the differences between this payment and your salary but does not have to”. The guidance therefore seems to suggest that the grant can be claimed even if the employer is not paying 100% of the usual salary cost for furloughed employees.

However, if an employer only passes on to the employee the amount of grant obtained rather than pay them their usual wage in full, without a contractual right to reduce an employee’s salary, this will be risky and could result in unlawful deduction from wages claims and/or employees resigning and claiming constructive unfair dismissal. Employers will therefore need to obtain agreement from employees to them only receiving a proportion of their pay. Faced with the alternative of being laid-off or made redundant (and potentially receiving nothing), it is likely to be easy to obtain this.  Again, consultation and any agreement confirmed in writing will be essential.

How long will the scheme be in place, when and how can the grant be claimed?

At the moment the scheme is in place for 3 months (but this could be extended depending on how things pan out) and the grant can be obtained for costs incurred from 1 March.

Employers will need to claim the grant from a portal which is currently under construction.

We are expecting more guidance over the next few days about the intricacies of the scheme and we will update this note as we receive it.

We understand that this is a troubling and uncertain time for you. Our team are on hand if you have any immediate questions so please do not hesitate to get in touch by calling 0113 849 4000 or email employment@schofieldsweeney.co.uk.

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