Employers were provided with some reassurance last week when the Chancellor announced a new scheme which will provide a grant for salary costs of employees who are retained by employers during the coronavirus crisis.
This article appeared with the announcement of the Job Retention Scheme. Read an updated insight that followed publication of more guidance from government.
The scheme will apply to all employers, which we understand will include public and private sector employers and charities.
Detailed guidance on how the scheme will operate in practice has not yet been released. At the moment, we know very little about how the scheme will operate in practice.
Brief government guidance for employers is here and sets out that employers will need to
HMRC will reimburse 80% of furloughed employees’ wages, up to a cap of £2,500 per month.
The government guidance states that changing the status of employees to ‘furloughed’ is subject to existing employment law and may be subject to negotiation.
Our understanding is that this means putting employees on furlough leave must be after discussion with an employee and with their agreement. This is supported by the government’s employee guidance which states that employers will discuss with employees becoming furloughed before sending them home.
In practice, given that the opportunity to be put on furlough leave only arises when it is an alternative to redundancy, most employees are likely to agree. The government’s guidance does not specifically mention that you must obtain employees’ written agreement, but this would be advisable.
Employees who are on furlough leave will not be able to undertake work for you. It is not clear whether they can undertake work for other employers, or undertake voluntary work, while on furlough.
Employers will have the option to ‘top up’ furloughed employees’ earnings to 100%, but there is no obligation to do so.
The government guidance refers to the government covering ‘all employment costs’. This suggests that the government will reimburse employers for pension contributions and other elements of salary, such as allowances and commission.
There is currently no information about how the government will prevent abuse of the scheme or to what extent HMRC will police applications for reimbursement.
We will keep you updated as more detailed guidance and draft legislation becomes available, both via our regular email briefing and on Twitter @TLT_Employment
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at March 2020. Specific advice should be sought for specific cases. For more information see our terms & conditionsContributor: Sarah Maddock