Coronavirus Job Retention Scheme
We have been blogging about the impact of Coronavirus over the past two weeks. You can find our most recent blog here.
On Friday 20th March 2020, the government announced a scheme called the Coronavirus Job Retention Scheme, under which all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been made redundant during this crisis. The bare details of the scheme can be found here.
All UK businesses are eligible. The web page says the following:
How to access the scheme
You will need to:
- designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
- submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)
HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers
This unprecedented step by the government is very welcome, but this an emergency step which does not take into account the complexity of the employer/employee relationship. To our knowledge these steps have not been written into law yet.
The first queries we have had to answer are whether the 80% and the £2,500 include Employer NI (which is equal to 12.3% for the part of the salary above £166.01 per week). The use of the phrase ‘wage costs’ on the website would indicate that it could but we are awaiting details.
Like everyone, we are learning a new language through Coronavirus; ‘furlough’ being the word this week. The dictionary definition of a furlough is a leave of absence. There isn’t an employment law concept of ‘furloughed workers’. The closest employment law concept to a furlough is a lay off. The main point about lay off is that there is no right to lay off an employee without their consent. Such consent can either be contained in their existing contract of employment or obtained at the time of putting the furloughed employees’ scheme in place.
The vast majority of contracts of employment do not include any right to lay off. This is because typically, layoffs were only common in some manufacturing industries. Most contracts of employment are based on the idea that the employer is bound to provide work, the employee is bound to do that work and the employer pays for it.
This means that for most employers, putting staff on furlough will be a matter of negotiation. We commented in our earlier blog about the repercussions of forcing a lay off on staff where there is no contractual right to do so. In particular, the employee could resign and claim constructive dismissal. It is a changed world now though (even from last week), and it is our opinion that given the choice between a furlough on 80% of salary and a redundancy with some cash up front but facing unemployment in this uncertain job market, it is likely that most staff will take the furlough.
This will hopefully be the case for most employees, but we have already received questions which are not easy to answer.
- Can an employee on long term sick leave or on maternity leave can decide to return to work to benefit from the generous scheme?
The wording seems to indicate that the employer can designate which employees benefit from the scheme. However, refusing payments to women wishing to return from maternity leave or disabled employees may lead to claims of discrimination.
- How does the scheme apply to employees on zero-hour contracts?
The scheme is currently silent on whether employees on zero hour contracts can benefit from the scheme. We are awaiting details.
- Can an employee insist on taking their holiday instead?
An employee needs to give notice of their intention to take holiday. Employers have usually reserved the right to refuse holidays. This may prove tricky if you are reaching the end of your holiday year, as employees should be able to take their holiday in the year it accrues.
There has already been much publicity on the fact that the self-employed’s protection is only a fraction of that afforded to employees. Many self-employed are not truly independent and can challenge their status in an employment tribunals. Cases on employment status are likely to flourish through the tribunals.
In practical terms, we have been talking to clients all week about consulting with staff about your thoughts and plans for your business. Does the furlough make a difference between continuing your business in some way and shutting down completely? Think about your essential services and who you will need to fulfil them. If there is to be a furlough, talk to the staff potentially affected and seek their agreement. We will be able to help with getting this set out in writing, so there are no doubts later as to the employee’s agreement.
We hope that you are well. If we can be of any assistance, please do not hesitate to get in touch. We are spending our time trying to stay on top of a rapidly changing employment environment so that you don’t have to!
For more specific information or to discuss your requirements please call either Amanda Galashan or Julie Calleux at Employease on 0333 939 8741, or email us at email@example.com. This note does not constitute legal advice on any particular situation you may have.