On Friday 20th March, the government announced a job retention scheme, to avoid job losses and/or redundancies. The details currently are very high level and therefore we need to approach any action with a level of caution. This document is intended to set out what we do know and probably importantly what we do not know.
This guidance will be updated as we receive further details.
|What is the scheme?||The government announced that (to avoid job losses and redundancies) they would fund an employee’s salary up to a value of 80% capped at
£2,500 per month – where the employer cannot afford to pay them.
|Who does it apply to?||Employees of any type of organisation (e.g. Ltd, PLC, LLC etc).|
|When does it apply from?||Employees on payroll from 28th February 2020. Employment costs can be claimed from 1 March 2020.|
|How can I use it?||You 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|
|How do I change an employee’s status?||If you have existing contractual clauses that relating to lay-off, you can invoke that clause. If not, you will need to consult with your employees to get them to agree to this change|
|What if they don’t agree to the change||Ultimately options become quite limited for an employee when there is no work available. Currently as we see it, you have three options that you would give to your employees:
2. Unpaid leave
You can ask them to select what they would like and use the correct process for what they have chosen.
|Now I have made my employees “furloughed workers” who pays them?||You do.
They would remain on payroll and you continue to pay them. The government are working to set up a system where you would submit information to HMRC for reimbursement
|How long will this last for?||The government have said that the scheme will be available initially for 3 months but will be extended if required.|
|What happens if I cannot afford to pay staff while waiting for the government grant||Currently there is no guidance on this and our advice is to contact your financial institution to see what arrangements they have on offer.|
|If I have cut salaries already, would the subsidy cover the difference?||No. This is not a mechanism to boost salaries of employees still working. It is a scheme designed to safeguard jobs, and keep employees on payroll, where there is no work to undertake.|
|Will tax, NI and pensions still be deducted?||Currently this is unclear, and we need to wait for further guidance|
|Can companies make up the balance of the 80% to 100%||Yes – if you wish to.|
|How to reduce the workforce as there is not enough work for all?||If you need to choose a proportion of your workforce to “furlough” then you would need to implement a fair and transparent process to determine who to keep and work.|
|What happens if an employee has a period of booked annual leave while on a period of Furloughed?||Currently this is unclear, and we need to wait for further guidance|
|What happens to holiday accrual?||Employees would continue to accrue holidays at their standard rate|
There are still many unknowns about this scheme and this guidance will be updated as new information becomes available.