The Chancellor has announced a set of temporary measures aimed at supporting businesses during the current unprecedented situation. One of these measures is the establishment of the Coronavirus Job Retention Scheme, the aim of which is to assist employers in retaining staff who have had their jobs frozen during the pandemic, rather than making them redundant.
Updated information released by the government is that they will pay 80% of the gross ‘wage costs’ for each eligible worker up to a maximum of £2,500 per month. The scheme will be backdated to salaries paid from 1 March and will initially run for three months when it will then be reviewed.
A new online portal will be set up by HMRC through which information on furloughed workers should be submitted and an application for the grant made (available at the end of April). Because of the time it will take to establish, employers should not expect to receive any monies for at least a month, but realistically it could be May before any monies are received.
The grant will apply to all employers of all sizes across all sectors, including the not-for-profit. In order to qualify for the scheme, workers will have to undertake to not work for their employers while furloughed.
The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020 and can be on any type of contract, including: full-time employees; part-time employees; employees on agency contracts* and employees on flexible or zero-hour contracts.
*Following the first announcement there was uncertainty as to whether recruitment agencies were included in respect of their employment of agency workers paid through PAYE. The government has confirmed that they are included in the Scheme.
More employee considerations
- The position of employees made redundant since 28 February 2020 are covered providing the employer rehires them, however employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with the Job Retention Scheme
- Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February 2020
- If an employee has more than one employer, they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually
- The importance of consultation with employees prior to the decision to furlough is emphasised as is the need to obtain an employee’s written agreement to being furloughed.
Steps to take now
We will continue to publish further information as it is announced. As an employer there are some steps you should be taking now, these include:
- Preparing details of which employees may need to be furloughed and your reasoning behind this decision.
- Reviewing your cash flow situation.
- If an employee needs to be furloughed, their terms and conditions of employment will need to be varied. Furlough will only pay 80% of monthly wage costs (up to £2,500), plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions. To reflect these changes a contract amendment will be required. Fees, commission and bonuses should not be included in the calculation.
- The grant can only start once the employee ceases to work – therefore prompt action will need to be taken to obtain the workers agreement.
Keep channels of communication as open as possible with your employees during this unsettling time, as the health and wellbeing of your employees will be your first concern.
More details are available here,
This article was last updated on 27 March 2020.