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.
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.
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.