Partner Sue Dowling, head of our Employment Law team, explains the updated Coronavirus Job Retention Scheme (“the Scheme”) and the process of furloughing staff.
This blog article was updated on 1 June 2020.
About the Scheme
Under the Scheme (now due to run until 31 October 2020, albeit in different terms as from 1 August 2020) and operated by HMRC, employers can place designated workers (with their consent) on furlough leave (a period of paid temporary leave) for a minimum of three consecutive weeks.
Employers can, subject to certain criteria being fulfilled and procedural aspects being followed, then claim a grant from HMRC for 80% of the furloughed employee’s salary (capped at £2,500) – the amount of the grant will reduce from August onwards (see below). The Government’s aim is to protect jobs by helping employers to fund the retention of staff who otherwise may be laid off as a result of the COVID-19 pandemic.
Which employers can claim under the Scheme?
Any employer can apply under the Scheme, including businesses, charities and partnerships, providing that certain criteria are fulfilled. More information can be obtained from the gov.uk website.
Since the Scheme was first introduced in late March, there have been around 10 reiterations of the guidance issued by the Government to explain the scope and criteria of the Scheme. Before taking any steps to apply for a grant for the first time, employers should review the latest guidance at www.gov.uk in case it has changed since last published.
Which staff can be placed on furlough leave?
To be able to claim the furlough leave grant for a particular employee’s salary, the employee (or worker) must have been on their employer’s PAYE payroll on a certain date and other criteria need to be met.
It is also unlikely that an individual’s employment contract will contain a specific right for their employer to furlough them. As a result, employees cannot be made to take furlough leave and must agree to do so, in discussion with their employer. This is particularly important when the employer wishes to reduce the employee’s salary to 80% to match the grant to be paid by HMRC. When considering whether to furlough staff, we would strongly advise seeking legal advice to safeguard against any potential claims against the employer for example for breach of contract/wrongful dismissal.
A separate scheme (the Self-Employed Income Support Scheme) exists for self-employed individuals who meet the eligibility criteria set out. This Scheme will also run until the end of October. The next self-assessment payments will also be deferred until January 2021.
Making a claim for a grant
The Furlough Scheme will close for new applications on 30 June. This means that employers who wish to furlough employees (whether or not they wish then to bring them back on a part-time basis from July) will need to place their staff on furlough leave and apply under the Scheme on or before 9 June 2020. You may find our blog article setting out the levels of support available via the Scheme of interest.
From July, a month earlier than previously suggested, employers will be able to bring employees back on a part-time basis whist both employers and employees continue to benefit from the Scheme.
In his briefing on 29 May, the Chancellor was clear that the Scheme will end on 31 October. The amount of the grant available to Employers will be tapered down – see the details (as currently available) via the gov.uk website.
Further Guidance relating to flexible furlough leave is expected by 12 June 2020 (unfortunately three days after the deadline of 9 June 2020 for placing staff on furlough leave).
Employers may face difficult decisions (before 9 June 2020 and as time goes on including whether to keep relying on the Scheme (particularly when it is varied from 1 August), or whether they need to consider making redundancies and/or other changes to their businesses.
It is imperative for employers to appreciate that the terms of the Scheme do not affect employees’ existing employment rights and protections (e.g. not to be unfairly dismissal and/or not to be subjected to unlawful discrimination). For this reason, a careful, objective and fair process would need to be undertaken before any redundancies are implemented to minimise the risk of any claims being brought against the employer. This is something our specialist Employment Law team can advise on.
You may also find our blog articles, 'Flexible Furlough Scheme Announced - What is Flexible Furlough?', 'Chancellor Extends Furlough Scheme Until October - A Summary', ‘Life After Furlough Leave - Employment Issues Which May Face Employers’ and ‘Collective Consultation - Multiple Redundancy Situations Explained’ helpful.
For further information or legal advice, please contact email@example.com or call 0118 951 6800.
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.