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Coronavirus - All You Need to Know About the Job Retention Scheme

on Friday, 27 March 2020.

In an effort to tackle the economic disruption caused by Coronavirus (COVID-19), the government recently announced that it would introduce and subsidise a Job Retention Scheme.

The scheme encourages employers to keep their staff on payroll even where they are not required to work, instead of laying them off without pay or making them redundant. In an unprecedented move, the government has committed to paying staff 80% of their gross wage costs, up to a maximum of £2,500 per month. In addition, employers will be reimbursed for the associated employer NICs and minimum auto enrolment pension contributions on that wage. Fees, commission and bonuses are not included.

The scheme will take effect from 1 March 2020, it is planned to run for an initial period of three months though it may be extended where necessary. Full details are yet to be confirmed, however, this article explores the initial guidance published by HMRC and how it might be used in practice.

 

Initial Guidance

All UK employers who operate through the PAYE payroll scheme on or before 28 February 2020 and have a UK bank account, will have access to the scheme. Salary reimbursements may be claimed for all staff employed before this date on any type of contract including flexible, zero-hour or agency contracts.

The guidance states that employers will be reimbursed wage costs subject to the caps set out above by way of a grant. This must be applied for through a new HMRC portal which is currently under development and set to launch at the end of April 2020. This means that employers will need to continue making salary payments, albeit reduced to the limit of the government grant (subject to the practical considerations set out below). However, if this poses a problem, there are separate government schemes in place to provide cash flow support, including loans and tax relief.

Employers are not under any obligation to top-up salary in addition to the government grant.

 

The Scheme in Practice

  • Step 1 - Identify

    In order to access the scheme, employers must first 'furlough' (or temporarily lay off) affected staff. This scheme will also cover employees who were made redundant since 28 February 2020 but have been rehired by their employer.

    In some cases, electing affected staff might be straightforward where an entire workforce or category of staff is to be furloughed as an alternative to being made redundant. However, in the case of keyworkers or other essential personnel, it is likely that a skeleton staff body will need to continue to work.

    Where the latter applies, employers should be able to evidence the objective selection of furloughed staff and those who will remain at work. If an employer elects to top-up the government grant during the furlough period, this decision may be contentious where there are staff who continue to work. We recommend that a clear business case and rationale for the selection of affected staff is retained.

    One further consideration to note, is that furloughed staff cannot undertake any work for their employer during the furlough period. However, they can volunteer or undertake training, so long as it does not provide services to or generate revenue for, or on behalf of the employer.


  • Step 2 - Consult

    The guidance requires that staff must be notified of the change in status and confirms that existing employment law continues to apply. What this means in practice is likely to depend on the circumstances and an assessment of the risks. Best practice would be to seek agreement with staff, and in many cases, this should not be contentious in view of the nature of the disruption and limited alternatives.

    Employers will also need to consider whether it is appropriate to undertake a consultation process, or simply advise staff of the change in status and give them an opportunity to confirm agreement or raise objections. Given the sudden financial disruption and continued uncertainty, employers may decide that it is necessary to unilaterally impose the change in status, but must consider how to mitigate the risk of claims (such as breach of contract) which could be pursued as a consequence. One way such claims may be avoided is to ensure staff suffer no financial loss as a result of being furloughed by exercising discretion to make up the difference between the government's grant and affected staff members' full salaries. However, thought should be given to the perceived unfairness of doing this where other staff members are required to continue to work.



    Employers should take caution agreeing a change in status directly with an employee where a collective agreement with a trade union is in place. Under of s145b the Trade Union and Labour Relations (Consolidation) Act 1992 the union will be entitled to bring an action against the employer for breach and seek compensatory damages for each affected employee.


  • Step 3 - Action

    As highlighted above, once furloughed staff have been selected, employers will be required to upload their details to a new HMRC portal. Employers must calculate and submit the total amount being claimed for the entire furlough period for each employee and HMRC will reimburse the gross cost of the salaries in arrears. HMRC reserve the right to retrospectively audit all claims and claw back fraudulent or erroneous claims.

The Job Retention Scheme is an unprecedented scheme which has been designed to support employers and staff in a very uncertain situation. Whilst further detail and access to the scheme is yet to be released, employers may wish to commence action to furlough some categories of staff who clearly fall into the remit of the scheme.


For specialist legal advice on consultation procedures, please contact Jessica Scott-Dye in our Employment Law team on 0117 314 5652, or complete the form below.

 

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