On Friday 20th March 2020, the Government announced the Coronavirus Job Retention Scheme to protect jobs and avoid redundancies.
At the moment there are some key areas that still need to be clarified, but there are some important considerations employers to think about. The devil is in the detail and you should approach with caution. The scheme is not a ‘get out of jail free’ card to disregard existing employment law which is there to protect employees.
The Coronavirus Job Retention Scheme is a Government scheme whereby employers can opt to participate by registering with HMRC. The scheme allows an employer to retain an employee on their payroll, and pay them 80% of their salary capped at £2,500 per month, when they cannot afford to pay them. The scheme applies to employees of any type of organisation who were in employment on the 29th February 2020. If they wish, employers can ‘top up’ the 20% but this cannot be claimed back through the Scheme.
The Scheme works by an employer designating any employee as a ‘furloughed worker’. A word of caution here. You need to obtain an employees agreement as you are changing their status of employment. If an employer exercises this unilaterally, they run the risk of an Employment Tribunal Claim, particularly for higher paid workers who will receive a pay reduction. You should consult with your employees and if this involves over 19 employees, then collective consultation rules will apply.
An employer also needs to consider what criteria they are using to select employees to be furloughed and to ensure that the selection criteria they use is fair and transparent and not discriminatory under any of the 9 protected characteristics under The Equality Act 2010. Poorly executed, this could lead to a deteriation in employee relations.
If an employee does not provide their consent, then the options for the employee may be quite limited. If an employer has a lay off clause or short term working clause in their contract of employment, then the employer can exercise this. If not, and the employer is considering lay off or short term working, they need to consult as appropriate and obtain the employees agreement. Otherwise, you may need to re-think and consider compulsory redundancy. As part of the redundancy consultation, the employer needs to consider whether there are any other options to redundancy during the redundancy consultation period including taking unpaid leave for a period of time. I would recommend employers ask their employees their preferred option and follow the correct procedures for their chosen path.
If employees agree to be furloughed, it is good practice to put this in writing, outlining when the period of furlough commences, how long it is expected to last for, and how and when it will be reviewed. Also include how you as the employer intend to continue communication with furloughed employees. Furloughed employees remain on your payroll.
It is unclear as yet whether furloughed employees continue to accrue benefits, including holiday and whether the 80% of pay will be subject to tax and national insurance, and pension contributions. The general view is that it will. I also believe employees who are furloughed continue to accrue holiday as per The Working Time Directive, but this is to be confirmed. The Government are in the process of setting up the scheme through HMRC and the employer will need to submit information to make a claim for reimbursement. At the moment, it appears that employers will not be able to claim back any employment reimbursement costs for furloughed employees until April 2020.
The Government have confirmed that the Coronavirus Job Retention Scheme will run for 3 months as from the 1st March 2020, although the Government will extend the scheme if required.
If you furlough an employee it is an important condition of the scheme that the employee does not carry out any work for the company whilst they are furloughed.
If you need assistance in implementing lay offs, short term working, furloughing or redundancies, get in touch.
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