Laura Binnie and Jessica Smith, in our Employment Law team, explain the Coronavirus Job Retention Scheme and the impact of “furlough leave" on employers and employees.
The Government has faced huge pressure to support workers and to prevent mass unemployment since anti-Coronavirus measures have caused the revenues of many businesses to evaporate almost overnight. In light of this, the Chancellor, Rishi Sunak, has confirmed that the Government will pay a proportion of wages for workers who are kept on by their employer, but who are unable to work due to the pandemic, under the Coronavirus Job Retention Scheme (“the Scheme”).
What do we know about the Scheme?
It is understood that the Scheme, run by HM Revenue & Customs, will apply to all UK businesses, including those where workers have already been laid off due to the Coronavirus impact, as long as they are brought back into the workforce and granted a leave of absence instead of being dismissed. This is why the word “furlough” is being used in relation to the Scheme – “furlough leave” being where workers are given temporary leave due to the special needs of a business or employer.
To be classed as being on “furlough leave”, a worker must be sent home without work. It is not available to workers who continue to work (e.g. from home as a result of the pandemic). Employers will need to designate affected workers as “furloughed workers” in order for them to benefit under the Scheme, which means that the workers would otherwise be laid off as a result of the pandemic.
Employers will be able to contact HMRC via an online portal for a grant to cover most of the wages of the affected workers. It is expected that HMRC will reimburse 80% of wages of furloughed workers, up to a cap of £2,500 (gross) per month. The Scheme will also be backdated to 1 March 2020, for a period of three months, although the Government has said that provisions can be extended if necessary.
When will the scheme start paying out to workers?
In his speech on 20 March 2020, the Chancellor simply said: “I can assure you that HMRC are working night and day to get the scheme up and running and we expect the first grants to be paid within weeks – and we’re aiming to get it done before the end of April.”
In light of this, the Federation of Small Businesses has warned that the delay will result in small businesses suffering "an immediate, potentially terminal cash flow crunch". Although, medium and large businesses will also be at risk whilst waiting for the financial support.
Does the Scheme provide for self-employed individuals?
The Scheme does not guarantee wages for those who are self-employed. Instead, it is understood that the Chancellor has increased the benefits that many will need to fall back on. For example, it is expected that every self-employed person will be able to access Universal Credit at a rate equivalent to Statutory Sick Pay for employees, and that the next self-assessment payments will be deferred until January 2021.
There are also other aspects of the Scheme which may not be guaranteed, as the Government is yet to confirm how it will, for example, impact the statutory annual leave entitlement of workers. We await further information as a result and will keep you updated.
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This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.