On Friday, Rishi Sunak, Chancellor of the Exchequer, announced an “unprecedented” intervention to protect jobs through “The Coronavirus Job Retention Scheme” and all UK businesses, irrespective of size, are eligible.
To access the scheme, employers will need to designate “affected employees” with a new status called “furloughed workers” and submit details through a new online portal being set up by HMRC.
As a “furloughed worker” the Government proposes to reimburse up to 80% of the employers’ “wage costs” to a cap of £2,500 per month, per employee, with payments being backdated to 1 March 2020. It is anticipated that the scheme will run for three months and the reimbursements will be through a new, yet to be implemented system being set up by HMRC.
It would appear that being designated as a “furloughed worker” is not automatic. The employer must still comply with employment law and contractual provisions when “laying off” the relevant employees. This means that the employer cannot just impose the change on an employee unless there is a right to vary in the employment contract. Employers may need to go through the normal redundancy procedures of identifying and consulting with at risk employees, including the collective consultation requirements where more than 20 employees are affected. This could mean that it takes up to 45 days before the employees can be “designated” as a “furloughed worker”. It will be interesting to see how the Trade Unions approach this where employers are bound by collective union agreements, and whether the Unions will be amenable to agreeing the status change quickly to secure the protection for their members.
Unfortunately, the fine details of the scheme are not yet available which means there are lots of grey areas. For example;
- What does “wage costs” mean? Does it cover bonuses, commission, and other benefits? Does it cover the employer NI costs?
- Is the cap of £2,500 applied to the wage costs before application of the 80% or after?
- Will employers still be liable for employees NI and PAYE on the full payments?
- What about holiday accrual – is this covered?
- Will it cover employees who are on notice or who have been reinstated following a redundancy dismissal?
- Will it cover employees who have been “laid off” under existing express terms of an employment contract or who have agreed to other job preservation measures before the scheme was announced?
The title of “furloughed workers” is also interesting. It could suggest a move to the inclusion of casual, agency and other non-employee workers, like those in the “gig economy” as a means of helping that sector of the jobs market.
Hopefully more specific details will be available shortly. We will keep you updated!
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