The UK Government is setting up a new Coronavirus Job Retention Scheme which will help employers pay their workers’ wages.  Any employer (regardless of size or sector type) will be eligible for the scheme.  Employers can apply to HMRC for a grant to cover most of the wages (up to 80%) of salary of workers who are temporarily not working but kept on the payroll (furloughed workers) for up to a total of £2,500 per worker each month.  The scheme will be backdated to 1 March and will run for three months, but the Chancellor will extend it if required.

In order to access the scheme an employer will need to:

  • designate affected employees as ‘furloughed workers,’ and notify the employees of this change. Changing the status of employees will be subject to existing employment law and, depending on the terms of the employment contract, an employer may have to obtain the employee’s consent to such change. If the contract includes a clause which entitles the employer to not provide work then the employer may simply be able to notify the employee that they have become a furloughed worker. In the absence of any right to cease to provide work or a lay-off or short-time working clause the employer will need to seek the employee’s consent. It is likely that employee’s will agree to this as the alternative may be redundancy.
  • 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.

As set out above, HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. It is not clear if the £2,500 is the amount after applying the 80%. Employers can top up salary further to the full amount of salary if they want to, but there is no legal obligation on them to do so. If the maximum amount of payment is less than the salary then it would seem that the employer would have to have the employee’s consent to this reduction in pay.

The employee cannot ask to be placed on the Job Retention Scheme, this must be agreed with the employer. Employers will need to consider the industrial relations of some employee’s being furloughed while others are not.

With regard to self-employed people the government has taken steps to strengthen the safety net for self-employed people by suspending the minimum income floor which means self-employed people can now access Universal Credit in full at an amount equivalent to SSP. The Government is also   increasing the Universal Credit Standard and Working Tax Credit by £1000 per year. An additional support is that the next self-assessment payments for self-employed will be deferred until January 2021. Further announcements regarding the self-employed are expected.

The Government information on the Job Retention Scheme can be found here


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