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Job Retention Scheme

By Alison Weatherhead
March 21, 2020
  • COVID-19
  • Employee welfare
  • Government Proposals
  • Legislation
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UK Coronavirus Job Retention Scheme

The Government announced its groundbreaking Job Retention Scheme on Friday 20 March 2020.  This is still very early days and we are waiting for a number of details to come through. However, this could make a massive difference for many employees and businesses. Please see below for what we know so far.

In headline terms:

  • The scheme is intended to avoid redundancies and protect jobs. All employers in the UK will be eligible to participate in the scheme.
  • HMRC will reimburse employers for 80% of wage costs, up to a cap of £2,500 per month. 
  • The workers covered by the scheme are those who have been “furloughed”.  Workers must be informed of, and in some circumstances consent to, this change of status (see below).
  • Employers will continue to pay the furloughed workers- but at the reduced scheme rate.  The Government will reimburse the employer.
  • Timing:  HMRC is administering the scheme and it is not yet live.  The Government expects first grants to be paid within weeks and is making alternative help available for employers to continue to pay employees while the scheme is set up.  Please see below. 

How it will operate: 

  • Certain workers will become “furloughed workers”.  Furloughed workers must carry out no work for their employer.
  • Workers must be informed of this change.   But first note:
  • This is a change in status and therefore subject to the usual employment law rules on changing terms and conditions. 
    • If employers have collective bargaining arrangements in place they must agree this change with the union in the usual way.
    • Otherwise:
      • A: employers may be able to vary contracts without worker consent.  Some contracts permit certain changes without worker agreement and in those cases employers can notify this change in the usual way. OR
      • B: where employers cannot make this change to contracts without consent, they require the agreement of individual workers. 
      • In both scenarios above we recommend this is documented by letter or email where practicable. We can advise on how you do this and properly document it.  Please get in touch with your usual contact in the Dentons PRM team.
  • The scheme is being administered by HMRC.  Employers must submit information to HMRC about workers who have been furloughed, together with their earnings.  A new online portal is being set up for this.  We understand it is not yet operational, but watch this space. 

Some further clarification points:

  • The scheme is being backdated to 1 March and will initially run for three months.   
  • It will cover workers who have already been laid off or dismissed. We are not clear whether employers will need to re-engage workers who have been dismissed to grant them the protection of this scheme.  We will update you when we know more.
  • Workers who are furloughed are not being dismissed or made redundant.  This means furloughed employees are not entitled to redundancy payments.
  • There is no requirement for a business to be closed to access the scheme, which means employers should be able to furlough some workers and not others. 
  • Furloughed workers are not entitled to receive a top up of wages from their employers.  Some employers may choose to top up the furloughed wage from 80% to 100%.  Some may not be able to do so.
  • Workers remain employed/engaged during this period.  Which means most normal terms and conditions apply.
  • Workers who receive a lower income as a result of these changes may be eligible for support through the welfare system, including universal credit.
  • Where employers are still considering implementing redundancies please contact us.  We expect there will be a requirement to show why you are not operating this scheme and retaining employees. 

There are still some gaps, including:

  • We are waiting for clarification whether workers on sick leave can be furloughed in the same way as active workers. 
  • The guidance does not currently specify how this affects workers in receipt of statutory sick pay (SSP) (for COVID-19 reasons or otherwise). 
  • As employment/engagement continues most other terms of employment will also continue.  This could include pension obligations. 
  • We are waiting guidance on holiday accrual and the costs that come with that.

It is very early days and we expect to be able to provide further information during the course of next week as the Government works this through.  We will update you on this as soon as we can.  

Reminder of some other relevant measures announced by the Government:

  • SSP: This relates to small or medium-sized employers with fewer than 250 employees on 28 February 2020.  It provides a refund to cover up to two weeks’ SSP per eligible employee who has been off work because of COVID-19.
  • Business Interruption Loan Scheme: we understand those loans will now be available starting on Monday 23 March 2020.  This support is aimed primarily at small and medium-sized businesses to access bank lending and overdrafts.  Businesses can access the first 12 months of these loans interest free.
  • Corporate Financing Facility:  the Bank of England will buy short term debt from larger companies.
  • VAT payments: the next quarter’s payments are deferred.  That means no business will pay any VAT from now until the end of June 2020.  This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the Government as normal.
  • Business rates: a business rates holiday is introduced for hospitality, retail and leisure business in England for the 2020 to 2021 tax year.
  • Self-employed:
    • The minimum income floor has been suspended for everyone affected by the economic impacts of coronavirus.  That means every self-employed person can now access, in full, universal credit at a rate equivalent to SSP for employees.
    • Income tax payments due in July 2020 under the Self-Assessment system have been deferred to January 2021.  This is an automatic offer with no applications required.  No penalties or interest for late payment will be charged in the deferral period.
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Alison Weatherhead

About Alison Weatherhead

Alison supports and advises clients on the full range of human resource queries and acts for clients in employment tribunals and judicial mediations, predominantly for employers. Her experience in tribunals includes advising on unfair dismissal, disability discrimination claims, whistleblowing claims and unlawful deductions from wages.

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