On Friday 20 March 2020, the UK Government launched the Coronavirus Job Retention Scheme following discussions with business groups and trade union leaders.
In summary, the scheme allows all UK employers to access financial support to allow them to continue paying part of an employee or worker’s salary, where they would otherwise have been made redundant or laid off because of the COVID-19 pandemic.
Through the scheme, HMRC will reimburse 80% of an employee’s wage costs, up to a cap of £2,500 per month (for each worker or employee). Exact details of the figures are still to be confirmed (e.g. whether this is a gross or net figure).
All UK employers will be eligible to join the scheme, and it will apply to any employees or workers who are paid through PAYE.
The scheme is not yet live, but we understand HMRC is working to create a new portal through which the grants will be paid as a matter of urgency. It will be backdated to 1 March 2020, be open for at least three months and will be extended if necessary.
Accessing the Job Retention Scheme
To access the scheme an employer will have to designate employees as ‘furloughed workers’ and notify HMRC of this. This change in status from active worker to ‘furloughed’ will be subject to agreement with affected employees. Some contracts may include a right to remove work, and in this scenario, employers can simply notify employees of the status change.
However, in most cases, employees will need to agree to becoming ‘furloughed workers’, which may involve an element of consultation and negotiation, particularly to seek agreement that they will see a pay reduction of 20% (or more for higher earners).
While employers can choose to fund the difference in salary, there is no obligation to do so.
Where the alternative to ‘furloughed leave’ is redundancy or unpaid leave, it is anticipated that most employees will agree to this.
Those who are designated as ‘furloughed workers’ will remain employed, but they must not undertake work for the employer while furloughed.
The scheme therefore cannot be used to help to pay staff who are still carrying out work. This may create issues of fairness in situations where workload has reduced but the business has not closed its doors altogether, or between those who can work remotely and those who cannot.
Where some element of the business is continuing, employers will need to decide which employees are selected for furlough leave, and which are asked to continue working.
Selection decisions may lead to tension within the workforce. Employers should act consistently and fairly to minimise the risk of such a situation arising and to avoid claims of discrimination and unfair detriment.
Rebecca Nicholson is a solicitor in Shepherd and Wedderburn’s employment team. For more information, join our COVID-19 Webinar Series: Employment Update at 10:00am on Thursday 26 March, or contact Rebecca on 0131 473 5256 or at firstname.lastname@example.org.
This information is correct as at 24 March 2020