Coronavirus Job Retention Scheme: Q&A for employers

Fri 27th Mar 2020

Coodes Solicitors Employment specialist, Philip Sayers, answers some of the key questions that employers are asking about the Coronavirus Job Retention Scheme.

In the wake of the COVID-19 pandemic, many businesses, and their employees, are facing very difficult times. The Government has introduced measures through the Coronavirus Job Retention Scheme to help secure jobs and keep businesses afloat.

What is the Coronavirus Job Retention Scheme?

The Coronavirus Job Retention Scheme is a temporary Government scheme designed to stave off and minimise large scale job losses as a result of the current crisis.

It is open to all UK employers that started a PAYE payroll scheme before 28 February 2020. It will be backdated to 1 March 2020, although the HM Revenue & Customs (HMRC) scheme will not be up and running until April.

Essentially, the scheme allows an employer to place their employees on furloughed leave and HMRC will then reimburse the employer 80% or their wages, up to £2,500 per month.

Although the HMRC scheme will not be running until April, employers can place employees on furloughed leave now as HMRC will be reimbursing salary rather than paying it directly.

How should I notify employees of our intention to place them on furloughed leave?

HMRC guidance states that employers must notify furloughed employees in writing. We, at Coodes, can help to provide employers with a template letter to send to their employees.

Furlough is not a term previously used in UK employment law. It essentially means that an employee will be placed on a leave of absence (for a minimum of three weeks) and will not be able to perform any work at all for their employer.

Although widely welcomed when announced, the Government’s initial statement did not contain much in the way of detail and left many unanswered questions. Although some questions remain, HMRC have now provided further information.

Is the £2,500 figure gross or net? What about National Insurance and employer pension contributions?

The £2,500 figure is gross. HMRC will additionally meet employer National Insurance contributions and the minimum, currently 3%, employer auto-enrolled pension contributions.

Which employees can an employer claim for?

Furloughed employees must have been on the PAYE payroll since 28 February 2020. The scheme covers full-time employees, part-time employees, employees on agency contracts and employees on variable or zero-hour contracts.

What about employees who are on reduced hours?

Employees on reduced hours are not eligible for the scheme, as employees cannot perform any work at all for their employer. This situation will instead be governed by employment law and consent.

Does an employer have to pay the 20% of wages that will not be reimbursed?

According to the Government, the short answer is no. However, it is impossible to reconcile that position with existing employment law. The Government could, of course, legislate but as matters stand, imposing a pay cut of 20% would give rise to a claim for an unlawful deduction from wages. This would be grounds for resignation and to bring a claim for constructive dismissal.

The potential solution is to seek written agreement to a variation of contract. Given that the alternative would, in many instances, be compulsory redundancies, we suspect most employees will readily agree to a temporary variation.

What if paying 80% of wages takes an employee below the National Minimum Wage?

The National Minimum Wage and the National Living Wage are payable in respect of hours actually worked. As the very nature of furloughed leave means that no work will be performed, it is not relevant that paying 80% may result in a lower figure than the present National Minimum Wage or National Living Wage levels.

What about Statutory Sick Pay?

HMRC state that employees who are on sick leave or self-isolating should get Statutory Sick Pay but can be furloughed after that. Employees who are shielding in line with public health guidance can also be furloughed.

Does the scheme apply to employees who have more than one job?

Provided that both jobs were commenced on or before 28 February 2020, they will be deemed separate employments and the scheme will be applicable to both.

How do I calculate the amount to claim when pay varies (e.g. for an employee on a zero hours contract)?

If an employee has been employed for a full 12 months, an employer can claim the higher of the same month’s earnings from the previous year, or their average monthly earnings in the 2019-2020 tax year. If they have been employed for less than a year, employers can claim an average of their monthly earnings.

Coodes is here to support for your business during these extremely difficult times. We can provide further advice on the Coronavirus Job Retention Scheme, and other employment matters, as well as providing template letters for businesses to send to furloughed employees.

For more information or advice, please contact the Employment team at Coodes Solicitors:

Fri 27th Mar 2020

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