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Coronavirus Job Retention scheme – what it is and how can you apply?

On Friday 20 March, the Chancellor announced temporary measures to help support businesses at this challenging time. The most eye-catching of those measures was the ‘Coronavirus Job Retention Scheme’.

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Published 24 March 2020

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There is still much uncertainty as to the particulars of this scheme and we encourage readers to regularly review the government guidance for employers and employees. Whilst we await further details, we set out below a brief Q&A summary of the guidance available at the time of writing.

1. What is the Coronavirus Job Retention Scheme?

This scheme is open to UK employers enabling them to access financial support towards payment of their employees’ salary in situations where there is no work available and staff would otherwise be “laid off”. It is not yet clear what the government means by this. Legally, “laying off” is where an employer unilaterally requires an employee to no longer attend work for a temporary period without pay. There must be a contractual right to do so. However, it is likely that the intention is for the scheme to also apply to staff who would otherwise be made redundant.

Staff who are ‘furloughed’ will result in HMRC reimbursing 80% of their salary to their employer subject to a cap of £2,500 per month. It is not yet clear whether this is a gross or net sum but probably more likely to be gross.

The government guidance explains that it is intended that the Coronavirus Job Retention Scheme will run for at least 3 months from 1 March 2020, but that it will be extended if necessary. It is not yet clear in what circumstances employers will be able to claim for backdated pay. 

2. Who can apply?

The scheme is open to all UK businesses, including companies, sole traders, LLPs.

3. How do you apply?

  • First, identify those who would be at risk of being laid off or at risk of redundancy. This will include those to whom you cannot provide work and/or who cannot work from home.
  • Check whether you have the right to ‘lay-off’ the employee in their employment contract.
  • If not, consult individually to see if they will consent to the furlough.
  • If yes, this needs to be properly documented and we can advise you on the correct procedure.
  • Depending on the initial take up, you might need to ask for volunteers for the scheme or, failing that, engage in a fair selection process to force the issue.
  • If businesses do not ‘top up’ the individual’s pay to match their normal remuneration, then it will be necessary to obtain consent to the temporary reduction in pay.
  • The second stage is to submit the relevant information to HMRC via a new online portal. This has not yet gone live and we await further details.

4. Can someone who is furloughed work?

No, workers who have been furloughed cannot carry out any work for their employer. We await clarification on what the funding position will be if they fall sick during this period.

More information on the scheme is likely to be forthcoming over the next few days.

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Shorter Reads

Coronavirus Job Retention scheme – what it is and how can you apply?

On Friday 20 March, the Chancellor announced temporary measures to help support businesses at this challenging time. The most eye-catching of those measures was the ‘Coronavirus Job Retention Scheme’.

Published 24 March 2020

Associated sectors / services

  • Employment law for employers
  • Employment law for employees

Authors

There is still much uncertainty as to the particulars of this scheme and we encourage readers to regularly review the government guidance for employers and employees. Whilst we await further details, we set out below a brief Q&A summary of the guidance available at the time of writing.

1. What is the Coronavirus Job Retention Scheme?

This scheme is open to UK employers enabling them to access financial support towards payment of their employees’ salary in situations where there is no work available and staff would otherwise be “laid off”. It is not yet clear what the government means by this. Legally, “laying off” is where an employer unilaterally requires an employee to no longer attend work for a temporary period without pay. There must be a contractual right to do so. However, it is likely that the intention is for the scheme to also apply to staff who would otherwise be made redundant.

Staff who are ‘furloughed’ will result in HMRC reimbursing 80% of their salary to their employer subject to a cap of £2,500 per month. It is not yet clear whether this is a gross or net sum but probably more likely to be gross.

The government guidance explains that it is intended that the Coronavirus Job Retention Scheme will run for at least 3 months from 1 March 2020, but that it will be extended if necessary. It is not yet clear in what circumstances employers will be able to claim for backdated pay. 

2. Who can apply?

The scheme is open to all UK businesses, including companies, sole traders, LLPs.

3. How do you apply?

  • First, identify those who would be at risk of being laid off or at risk of redundancy. This will include those to whom you cannot provide work and/or who cannot work from home.
  • Check whether you have the right to ‘lay-off’ the employee in their employment contract.
  • If not, consult individually to see if they will consent to the furlough.
  • If yes, this needs to be properly documented and we can advise you on the correct procedure.
  • Depending on the initial take up, you might need to ask for volunteers for the scheme or, failing that, engage in a fair selection process to force the issue.
  • If businesses do not ‘top up’ the individual’s pay to match their normal remuneration, then it will be necessary to obtain consent to the temporary reduction in pay.
  • The second stage is to submit the relevant information to HMRC via a new online portal. This has not yet gone live and we await further details.

4. Can someone who is furloughed work?

No, workers who have been furloughed cannot carry out any work for their employer. We await clarification on what the funding position will be if they fall sick during this period.

More information on the scheme is likely to be forthcoming over the next few days.

Associated sectors / services

  • Employment law for employers
  • Employment law for employees

Authors

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