On Friday 20 March 2020 the Chancellor Rishi Sunak announced an "unprecedented" package of measures to protect millions of people's jobs and incomes as part of the national effort in response to coronavirus (COVID-19).
Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees' salary (up to 80% of their workers' wages up to a limit of £2,500 a month) for those employees that would otherwise have been laid off during this crisis. In other words employees remain 'employed'.
1. What is the Job Retention scheme?
Employees of eligible employers that are still employed but do not currently have work, the plan is that they will get up to 80% of their gross wages. These employees are referred to as 'furloughed workers'. The current Government guidance, COVID-19: support for businesses, states employers "will need to:
- designate affected employees as 'furloughed workers,' and notify [their] employees of this change - changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
- submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)."
In other words, instead of making employees for whom the employer has no work at the moment redundant, they can instead place on furloughed leave with the Government reimbursing employees 80% of furloughed workers wage costs, up to a cap of £2,500 per month.
2. What period will the Job Retention scheme cover?
Eligible employers will be able to access grants by the end of April from HMRC. Payment of wages under the Job Retention Scheme will be backdated to 1st March 2020 and will be initially open for 3 months (from 1 March), to be extended if necessary.
3. Who are eligible employers?
Under the Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees' salary for those employees that would otherwise have been laid off during the crisis.
This will include limited companies, sole traders, LLPs, partnerships and charities.
4. 'Employees' v 'Workers'
The Job Retention Scheme appears to be based around PAYE, so anyone registered as self-employed for tax purposes will not be covered by the scheme. The Government appears to be using the term 'employees' by reference to PAYE not under the complexities of employment law which distinguishes between 'employees' and 'workers'.
5. Who are Furloughed workers?
The phrase 'laid-off' or 'furloughed' appears to be being used in a general sense, rather than the technical sense as applies in relation to statutory guarantee payments. It will cover those employees 'laid-off' (sent home) who do not undertake any work for the employer.
It is not simply the case that employers can designate affected employees as 'furloughed workers' without agreement of the individual employee completely risk free in every case due to the caveat that "changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation".
Some employment contracts (relatively few) will contain an express right for the employer to lay off an employee or put the employee on short-time working. Where there is no express contractual clause on lay off, the contract of employment will need to be varied to avoid potential claims for breach of contract and unlawful deduction of wages. See our earlier alert, How employers can deal with the special circumstances created by the coronavirus (COVID-19) for more on these risks.
What the Job Retention Scheme does is provides up to 80% of gross wages (up to £2,500 a month cap). This makes employee agreement to a contractual variation more likely as preferable to the alternative of redundancy or simply not being paid.
The Government guidance states "an employer could choose to fund the differences between this payment and [normal] salary, but does not have to". If an employer chooses to top up the 20%, they should consider the employee relations implications if it is requiring some employees to continue to work for their normal remuneration while furloughed colleagues doing no work also get their full normal pay.
6. What does the 80% include?
The guidance for business simply states "HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month." The guidance for employees adds employers can claim a grant of up to 80% of the employee's "wage for all employment costs", up to a cap of £2,500 per month, indicating that it includes pensions contributions, NI contributions etc.
7. Can a furloughed worker do some work?
No. The current Government guidance,COVID-19: guidance for employees, states to qualify for the Job Retention Scheme, the furloughed worker should not undertake work for the employer while furloughed. Otherwise the employer will not be able to claim the 80% of wages grant.
8. What if employees are working from home?
The Government advice is that everyone who can work from home should do so, and staff should receive their normal pay.
However, this puts various responsibilities on an employer - for example, they are responsible for equipment they supply and the requirements of the health and safety legislation apply to homeworkers too. For more see our earlier alert, How can employers discharge their duty to protect the health, safety and welfare of employees who are working from home?
9. What if employees are working reduced hours?
If employees are working reduced hours, either at home or at their usual workplace, they cannot be furloughed workers. As stated above, to qualify for the Job Retention Scheme, the furloughed worker should not undertake work for the employer while furloughed.
If employers have put employed on reduced hours, they will need to have obtained the agreement of the employees to vary their contract in the usual way or face possible later claims for breach of contract and unlawful deduction of wages (see our earlier alert, How employers can deal with the special circumstances created by the coronavirus (COVID-19)).
Employers will continue to be responsible to pay the agreed reduced hours wages without recourse for reimbursement under the Job Retention Scheme.
One issue the Job Retention Scheme may inadvertently create is an incentive for no work to be done rather than reduced work.
10. Can employees insist they are put on furlough leave?
No. The employer must designate the employee as a 'furloughed worker'.
11. What if the employee needs to look after their children in light of the school closures?
Again, an employee can only be designated a furloughed worker if the employer agrees to designate them as such.
Many employers are allowing parents to work flexibly, to try to manage both work and childcare particularly where employees are able to work from home.
12. What about those having to self-isolate?
The Government advice remains that if an employee has symptoms of coronavirus infection (COVID-19), however mild, they should stay at home and do not leave their house for 7 days from when your symptoms started.
If the employee is well but lives with someone who has symptoms of coronavirus, then they must stay at home and not leave the house for 14 days. The 14-day period starts from the day when the first person in the house became ill.
Under new emergency regulations, employees who are self-isolating in accordance with the Government's advice on coronavirus disease, or because you've been told to do so by a doctor or NHS 111, should be treated as on sick leave and so may be entitled to sick pay.
It is currently unclear whether employers can designate employees currently on sick leave as 'furloughed workers' or whether they may only do so once the employee's period of sick leave has ended. If an employee on sick leave would not otherwise be sent home for lack of work, can they be eligible to be furloughed under the Job Retention Scheme? Government guidance is needed on this.
Employers will need to proceed with caution where contractual sick pay schemes provide more than 80% of wages (up to the £2,500 per moth cap). Equally, some employees may prefer to become furloughed workers where they are only entitled to statutory sick pay which is likely to be less than 80% of their monthly pay.
In light of the latest guidance that some vulnerable individuals are being instructed to self isolate for 12 weeks, the potential for sex discrimination claims is a potential risk.
13. Remember, don't forget
- Clear communication is key in these uncertain times. The employer and employees should discuss how the situation will be dealt. Keep employees updated.
- Revisit measures already put in place. In light of the changing situation, employers and employees should consider whether alternative arrangements to alternative working arrangements already put in place will now be needed. Homeworking may have been a good option in many cases, but does the closure of schools change that for some employees making the new furloughed worker status preferable or can home working still work subject to some adjustments?