Julia Fitzsimmons, a Partner with FBC Manby Bowdler’s Employment Team, says employers have welcomed new measures announced to help save jobs – but that more guidance is needed on how the scheme will work in practice.
“These new measures aim to provide a lifeline to employers at this crucial time. It’s more important than ever for employers to keep up to date with the latest developments so you can tap into this vital support and pass this onto your staff.”
What is the Coronavirus Job Retention Scheme?
The Coronavirus Job Retention Scheme has been introduced to prevent swathes of redundancies while the country deals with this unprecedented scenario.
The Government has committed to covering the cost of 80% of an employee’s salary excluding NI and pension contribution up to a maximum of £2,500 per month for “furloughed” workers who would otherwise be laid off by employers. Employers can claim this back from the Government in the form of a grant. An employer can choose whether to pay the additional top up of wages to 100%,
Government payments will be backdated to the beginning of March and will initially run for at least three months although this could be extended if necessary.
What is a furloughed worker?
A furloughed worker is someone that an employer has asked to stop work but who has not been made redundant. They are still employed by the company and can be recalled at any time. Employers can apply to the Coronavirus Job Retention Scheme (see above) for financial support to pay the wages of a furloughed worker.
How do I make someone a furloughed worker?
Changing the status of an employee is subject to employment law and, as such, should be covered in an employment contract. You will need to get specific agreement from the employee to allow them to join the scheme and to receive furlough pay. If you would like assistance with that agreement if you do not have one already, please contact us here.
Can a furloughed worker still work?
Employees who are furloughed cannot work for your business while classified as such. They could seek alternative employment but the Government has not yet stipulated whether there will any restrictions on employees who are furloughed and being funded through the Coronavirus Job Retention Scheme working elsewhere. They can undertake training or volunteer work while on furlough.
Can I ask staff to take paid leave?
Asking employees to take paid leave is another way to prevent making redundancies. Employers have the right to ask staff to take holiday at a specific time but you must give them notice of at least twice the amount of time as the leave you want them to take. This may not be possible in a fast developing situation like the one we are currently experiencing.
How do we pay furloughed workers if cash flow is an issue?
In the short term, companies are expected to use deferred VAT payments to provide cash*. VAT payments due for the quarter ending June 2020 do not have to be paid to HMRC until March 2021. Where retained VAT is no sufficient to cover the outgoing it is hoped that companies will access new loan schemes, including the Business Interruption Loan Scheme or the Bank of England’s Covid Corporate Financing Facility. The latter is suitable for the largest, investment-grade companies.
*Companies with Direct Debits set up to pay HMRC should cancel these immediately to avoid payments being taken automatically. The Treasury cannot cancel them itself.
I've just made a group of employees redundant, can I re-employ these people to furlough them?
Yes, you can re-instate them. The coronavirus retention scheme covers employees who have already been made redundant after 28 February 2020, if they are rehired by the same employer. It is not mandatory for employers to reinstate employees and place them on furlough, but for redundancies that are still in the pipeline, there is a risk of unfair dismissal claims if the furlough option is not considered along with all the usual method of avoiding redundancies.
