On 20th March 2020 the government announced a new 'Coronavirus Job Retention Scheme that aims to support businesses to help pay people’s wages.
Employers will be able to contact HMRC for a grant to cover most of the wages of their workforce who remain on payroll but are temporarily not working during the Coronavirus outbreak to avoid layoffs.
Guidance about the scheme has been published by the government - click here.
How it works
Employers will need to:
- Designate affected employees as ‘furloughed workers,’ and notify each employee of this change.
- To be covered the employee must have been on the PAYE on 28th February 2020.
- Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (still in development)
- HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.
ie the employer will need to make the wage payment and then apply for a reimbursement. If the employer needs short term cash flow support in the meantime they may be eligible for a Coronavirus Business Interruption Loan.Who is a 'furloughed worker'?
It isn't a term we use in UK employment law. and no further information is available about who will be able to be classed as a 'furloughed worker', but the dictionary definition of 'furloughed worker' is one that has been granted a leave of absence, it is 'temporary leave of employees due to the special needs of a company or employer, which may be due to economic conditions at the specific employer or in the economy as a whole'...
So it essentially means putting employees on temporary leave of absence where they do no work but they are retained on the employers books to be brought back in when needed.
Theoretically any employee can be furloughed. But they need to be on PAYE in order for their employer to be able to claim the grant for their wages.
The decision is made by the employer. An employer should determine what they need to do as a business in order to survive during this period, separate to any consideration of the Scheme. If staff lay-offs or redundancies are financially unavoidable, then it would be expected that they will be covered by this Scheme.
Some commentators have suggested that any employee that will struggle to work eg due to having to look after children, should ask to be furloughed. It is currently unclear whether the scheme does in fact cover such employees..What if the employee is getting Statutory Sick Pay?
Then they cannot be a furloughed worker until they are able to return to work. This new scheme is to protect jobs for those who are able to work, who cannot currently work due to the current situation, but who are willing and able to return to work at any time.What if the employee is getting Statutory Maternity Leave or Maternity Leave?
An employee who is getting SMP will be being paid more On SMP than they would under the Job Retention Scheme.
For those on Maternity Leave, the guidance to employers says: 'If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.'
Impact on benefits
We are assuming that because the employer pays the employee a wage and then requests a reimbursement from the government, that the employee will be treated as working their normal hours.
Will it mean no-one loses their job?
Unfortunately not. The Guardian reported (21st March) that without the Job Retention Scheme unemployment would have doubled to 8%, with more than 1.5 million people losing their job. Instead the unemployment rate is now expected to climb to 6%, with about 700,000 people losing their jobs.
What about those who are still working but on reduced hours?
The Job Retention Scheme is about helping employers keep someone on their payroll who they would otherwise have laid off altogether, this is both to protect employees who could otherwise suffer hardship but also to help business stay afloat. The employer has to designate an employee as a 'furloughed worker', so where someone is still going to work but on reduced wages it is unlikley that they will be able to benefit from this scheme.
Zero Hour Workers
If they are on the PAYE system should be covered by the scheme, with the amount their employer will receive based on their regular earnings.
Someone who works in the gig economy will commonly use an intermediary, such as an app or a website. This acts as a go between, linking workers with customers.
Common gig economy platforms include ride hailing company Uber, food delivery company Deliveroo and courier Yodel.
The work is flexible, in that the worker can choose the hours they work and there is nothing forcing them to work certain times.
At the moment, many people in the gig economy are classed as self-employed and will submit a Self Assessment tax return so will not be covered by the Job Retention Scheme.
What about the self-employed?
The Job Retention Scheme does not cover the self-employed*. They will instead be covered by the Self-Employed Income Support Scheme (click here
NOTE: Self employed people who pay themselves a salary and dividends through their own company are not classed as self employed for these purposes and so if they operate a PAYE scheme they can 'furlough' themselves if they have no work and therefore benefit from the Job Retention Scheme.