Please note: the legal advice given in this article is correct as of 16/04/20. As the situation develops, guidance is subject to change and, while we will do our best to give you up to date information, it is always advisable to speak with a solicitor for specific advice.
On 20 March 2020, the Government announced the Coronavirus Job Retention Scheme as a measure to help businesses ride out the economic crisis created by Covid-19.
The Coronavirus Job Retention Scheme is the introduction of Government grants to cover 80% of the salary of PAYE employees who would otherwise have been laid off during this crisis. The scheme, open to any employer in the country, will cover “most of” the wages backdated to 1 March 2020 and will be open before the end of April. It will continue for at least three months, and covers those employees who are put on furlough leave and who were on the payroll on or before 19 March 2020.
A key feature of the scheme is that employees must be on “furlough leave” rather than dismissed by the employer.
Furlough leave is an American word used to describe temporary “leave” or a “sabbatical” due to special needs of an employer which may be due to economic conditions. To be classed as on furlough leave, the employee must be instructed by the employer not to do any work in relation to their employment and this instruction is due to circumstances arising from the coronavirus crisis.
HMRC are clear that an employee must not do any work for the employer (or a person connected with the employer) whilst on furlough leave, and this includes working “indirectly” for the employer.
If an employee does any work for the employer and the employer claims through the Coronavirus Job Retention Scheme, the employer could face an investigation by HMRC at a later date.
Confirmation that the employee has been asked to cease work must be agreed in writing between the employer and employee and a record of this must be kept for up to 5 years.
Further, where an employer wants to pay the employee just 80% of their wages so that it is all covered by the scheme, this would also need to be agreed with the employee in writing.
Furlough leave has implications for many aspects of employment including annual leave, sick leave, maternity and other forms of parental leave and therefore any employers should take detailed advice about how they can implement furlough leave and ensure they stay within the boundaries of the Coronavirus Job Retention Scheme.
Employers who need to make a claim under the scheme must submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will then reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. The period of furlough must last 21 days in order for the pay to be reclaimed from HMRC.
HMRC have made clear that they retain the right to retrospectively audit all aspects of employers’ claims and therefore you should ensure you keep full records and abide by the requirements of the scheme.
The portal is expected to be open for claims by end of April. Businesses that need short-term cash flow support may be eligible to apply for a Coronavirus Business Interruption Loan.
Employers need to be conscious of all the usual employment law considerations where seeking to change employees’ status and pay and should take advice to ensure that they are not risking potential future claims.
If you are an employer and you require advice and/or assistance about the Coronavirus Job Retention scheme and/or with notifying and communicating with employees about the above or if you encounter difficulties with employees in this situation, please contact us on 0845 287 0939 or by email through our online contact form.
Farleys Solicitors specialise in employment law & HR for businesses and employees. If you or your business requires HR & employment law advice and support in relation to the current Covid-19 / Coronavirus situation and/or in relation to any other specific area for example; contracts of employment, staff handbooks, absence from work, home-working, apprentices, recruitment, restructures, redundancies, lay-off; short-time working; disciplinaries, grievances, employee exits, settlement agreements; and Employment Tribunal claim or defence and representation, speak to our team.