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Coronavirus - financial support for employers and employees

23 Mar 2020

There is very little guidance so far on the new financial support package announced by the Chancellor on Friday in relation to the coronavirus job retention scheme. We will of course need to consider the ‘small print’ as soon as it’s available but in the meantime:

What we know:

  • Employers will be able to access significant financial support to continue paying 80% of the wages (subject to a cap of £2,500 per month) for those who would otherwise have been ‘laid off’, which is to be known as ‘Furloughed leave’.
  • Under current employment legislation employers can only ‘lay off’ if there is a contractual right to do so (which most employers don’t have) however current thinking is that, in the context of ‘Furloughed leave’, it will mean that the employee would otherwise have been made redundant or ‘laid off’ without pay.
  • Employers will designate affected employees as Furloughed employees however this is subject to employment law (please see below).
  • Employers will have to decide which employees are on Furloughed leave – employees cannot self impose it.
  • Employees should not undertake work for their employer whilst on Furloughed leave.
  • Employers will submit information to HMRC about their Furloughed employees and their earnings through a new online portal.
  • Employers can choose to fund the difference in salary (i.e. top up to 100%) but they do not have to.

Key issues:

  • HMRC will reimburse 80% of wage costs up to a cap of £2,500 per month, however we do not yet know with certainty whether this will include pensions etc and how the cap will work in practice (e.g. is the maximum £2,500 or 80% of £2,500?). We are assuming at present that the £2,500 is a gross cap.
  • As referred to above, the process is subject to employment law therefore depending on the employment contract it is very likely that Furloughed leave will have to be with the employee’s agreement, particularly where there is no lay off clause and/or the employer is not paying 100% of the salary.
  • Employees are likely to agree Furloughed leave if the employer is topping up to 100% or if the alternative is redundancy or a contractual lay off, however this will depend on the employee’s individual circumstances and consultation and documentation is key. We can of course assist with the consultation process and relevant documentation if required. To help get employees to agree, you may wish to encourage them to speak to their mortgage/finance/childcare providers and see if ‘loan breaks’ are available and what outgoings they can save on in the meantime.
  • Colleagues left at work whist others are on leave may feel disgruntled, especially if those on Furloughed leave are on 100% pay…
  • Employees should not undertake work for their employer whilst on Furloughed leave therefore working less hours does not seem to be an option which would be many employers’ preference. It is not clear what the position is with second jobs.
  • The system could be open to abuse, e.g. some employers who were already struggling irrespective of the current circumstances may use it to support their businesses. The government may introduce further measures to limit this.
  • It is not clear at the minute the extent to which employers can backdate the payments. Some employers agreed for employees to take unpaid leave last week.
  • Last, but certainly not least, we do not know when employers will receive the money as the HMRC system is not set up yet.

For more information on any of the above, or how we can help you, please contact Sarah Hall, or call 0191 232 8345.