The Coronavirus Job Retention Scheme- for employers and employees
Coronavirus has impacted most aspects of our lives, and indeed on businesses. To safeguard from redundancies, under a temporary scheme available since 1 March 2020, employees can be furloughed (granted leave of absence), and HMRC will reimburse eligible employers 80% of the wage cost for each employee, capped at £2,500 per month.
The Scheme is available to employers with existing PAYE schemes on 28 February 2020, who are enrolled for Payroll On-Line, and have had a UK bank account between 1 March 2020 and 31 May 2020 (with possible extensions if needed). Self-employed people who have lost income because of coronavirus will also be entitled to claim a taxable grant worth 80% of their trading profits and will be contacted by HMRC directly. It is available to employees on the payroll on 28 February 2020. Employees can be full-time, part-time, agency, flexible workers, or on zero-hour contracts. When on furlough, employees cannot undertake any work for the employer and should be advised of a decision to furlough in writing.
Employees made redundant on or after 28 February 2020 can be reemployed and furloughed. Wages will remain subject to income tax and other deductions, including student loans and the apprenticeship levy. Reduced hours employees will not be eligible, and those on sick leave or self-isolating can claim statutory sick pay (but may later be furloughed).
The Job Retention Scheme can be used for employees who have more than one job, and as well for company directors, where, any decision made to furlough should be adopted as a decision by a company and noted in the company records. As to an employee taking on a second job to supplement income, traditionally, contracts of employment do not provide for this. The government have however allowed this currently but employees should seek consent from their existing employer.
Employers will not need to top up the 80% grant received to 100%, although some may wish to. They will still need to pay 13.8% NIC, and may make pension contributions, but may agree on pension breaks with employees so that no contributions are made by either party for a period. Minimum auto-enrolment contributions of 3% can be claimed back. If an employee has sacrificed salary for a benefit, this agreement should be reversed temporarily so the employee’s true salary is used to calculate the relevant 80%. No problem is caused if the 80% brings the employee’s salary below the National Minimum Wage. But if the employee is receiving online training they must receive a Minimum Wage.
Employment contracts may have a ‘lay off’ clause, and, if so, no consent from the employee is needed. Consent will otherwise be needed as furloughing an employee might be a variation to the employment contract. Most employees faced with redundancy or guaranteed payment to 31 May 2020 are however likely to consent. Collective consultation will be required for variation to contracts for more than 20 employees.
Furlough can be used multiple times, as long as each furlough period lasts a minimum of 3 weeks. Employers can ask employees to take holiday during furlough with twice as much notice given, but employees must receive their normal pay during leave. Selection for furlough should be objective, furloughing agreements should be prepared, and an online portal is expected to be operational by the end of April. This note will be updated in line with any updated government announcements or guidance.
This article does not provide exhaustive guidance. Please contact either Hugh Storry Deans or our Disputes department to discuss further.
