By Anthony Wilcox
Coronavirus has presented many businesses with less or no work, leaving those businesses with the difficult decision of what to do with their employees.
Two possible options are laying employees off (providing them with no work and no pay for a period while retaining them as employees) or placing them on short-time work (providing them with less work and less pay for a period, again retaining them as employees). These are temporary solutions to the problem of no or less work. If employees are laid-off or put on short-time working in circumstances where the employer does not have the contractual right to do so, then the employer may be in fundamental breach of contract entitling a qualifying employee (an employee with two years service) to resign and claim constructive unfair dismissal. There may also be a right to claim any unpaid portion of wages using unlawful deduction of wages.
It should also be noted that after specific periods of lay-off/short-time working, for example 4 or more consecutive weeks, employees with 2 years qualifying service acquire the right to serve a notice seeking a redundancy payment, although this entails ending their employment which employees may have no interest in doing.
Employers faced with a temporary cessation of work, and the employees working for them, have been provided with new support that seeks to avoid unpaid lay-off and short-time working. The government has introduced the Coronavirus Job Retention Scheme, which involves the government paying part of employees' salaries up to a maximum of £2,500 per calendar month as long as they are kept on the payroll.
On 20 March 2020, the government clarified how the new measures would work, confirming that:
Any employer in the country will be eligible for the scheme.
Employers will be able to contact HMRC for the grant to cover wages of furloughed employees.
Employers can top up salaries further if they choose to.
The Scheme will cover wages backdated to 1 March 2020, will be open currently until the end of June and will be extended if necessary.
The first grants should be paid within weeks and they are aiming to have it in place by 20 April 2020.
I am an employee - what will happen if my employer wants to furlough me?
You cannot elect to be furloughed - your employer has to make that decision. If your employer does intend to access the Coronavirus Job Retention Scheme, they should discuss with you that they intend to class you as a furloughed worker. Once furloughed, you remain an employee and are kept on your employer’s payroll.
If you are chosen to be furloughed you will have the same rights as you did previously. This includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
In order to qualify as a furloughed employee and allow your employer to claim the grant, you must not be undertaking any work for your employer whilst furloughed. It is possible to take part in volunteer work or training, but you must not be providing services to, or generating revenue for, your employer. Any employment you have with an unconnected employer is unaffected.
Your employer can choose to fund the differences between this payment and your salary, but does not have to. If your salary is reduced as a result of these changes, you may be eligible for support through the welfare system, including via Universal Credit.
Further guidance for employees can be found here.
I am an employer, or in charge of my business’s HR - what do I need to do to access the Coronavirus Job Retention Scheme?
You will need to ensure that:
The business had created and started a payroll scheme on or before 19 March 2020 and holds a UK bank account.
You only claim for furloughed employees that have been on your PAYE payroll since 19 March 2020. Employees cannot be furloughed whilst on sick leave or self-isolating, but they can be furloughed whilst shielding.
- If required to select only some employees to be furloughed, you must comply with your employment law obligations, including taking care to ensure that you do not discriminate.
You write to those employees who are to be furloughed, recording that they are being furloughed, that it is agreed that the employee will not do any work for the employer whilst furloughed, when the furloughing starts, how much the employee will be paid, when their furloughed status will be reviewed and how contact will be maintained. You need to keep a record of this communication for 5 years. Changing the status of employees remains subject to existing employment law and, depending on whether the employment contract permits this, agreement may be required (or some other lawful means of making the change adopted).
You submit to HMRC your ePAYE reference number, the number of employees being furloughed, the claim period (start and end date), the amount claimed (per the minimum length of furloughing of 3 weeks), your bank account number and sort code and your name and contact number through a new online portal.
Claims may be submitted no more frequently than once every 3 weeks, which is the minimum period that an employee can be furloughed for.
Once the necessary steps have been taken, HMRC will reimburse 80% of furloughed workers wages, up to a cap of £2,500 per month. Wages for these purposes include Employer National Insurance contributions and minimum automatic enrolment employer pension contributions and can include compulsory commission (but not discretionary commission or bonus). HMRC is working urgently to set up a system for reimbursement, as existing systems are not set up to facilitate payments to employers, and this is expected to be set up by 20 April 2020.
As it is a grant, you will not be required to repay the amounts received under the Scheme.
You must also keep in mind that if under their terms of employment your furloughed employees are entitled to take bank holidays as part of their holiday entitlement, then those days will still need to be paid for at the full rate of pay applicable to days of holiday, even if this means topping up their pay. You may instead be able to defer those days of holiday to be taken later, but only if you agree this with the employee or their employment contract permits it. Your employees will also be able to take their annual leave entitlement whilst furloughed and these days will need to be paid at their full rate of pay.
Further guidance for businesses can be found here.
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