Coronavirus Job Retention Scheme - Summary

Over the past couple of weeks we’ve been monitoring closely the Coronavirus Job Retention Scheme which was launched with the aim of protecting jobs through the crisis period.

Through the Scheme, the Government will reimburse 80% of the wages of those who, otherwise, would need to be laid off by their employers because of the impact of COVID-19

We thought it may be useful to summarise what we’ve learned through consultation of the best information we could find from, with thanks to MBM Commercial, Johnston Carmichael, HR Services Scotland and KPMG

Please note this is for directly engaged workers who are on your payroll. It is not for agency workers or self-employed individuals.

  • All UK employers can access the scheme (e.g. limited companies, sole traders, LLPs, charities etc)
  • The scheme is designed to help employers retain those employees who would be otherwise “laid off”, by which we understand to mean made redundant or put on a period of “lay off” (an employment law term meaning a temporary period when employees are required to take unpaid leave because of a downturn in work)
  • Employees will have to be designated by their employers as “furloughed” and notified of this designation. Reasons for designating employees as furloughed should be documented
  • Under normal circumstances you would need to have a consultation period of 30-45 days with your employees but as these are exceptional circumstances this is likely to be waived
  • Furlough Leave needs to be agreed between employer and employee. An employee cannot choose to be furloughed and the employer cannot furlough an employee without their agreement
  • However, if employers ask employees to agree to Furlough Leave, if faced with the choice of being furloughed (and receiving 80% of pay up to a specified cap) or being laid off without pay or made redundant, employees are likely to choose the furlough option
  • You will need to change your contracts of employment as it is highly unlikely that the contract will contain the right for employers to put employees on Furlough Leave. You need to obtain employee consent to vary their contract of employment. You can do this by asking them to sign Letters of Variation of Contract containing the right to put them on Furlough Leave
  • Whilst on Furlough Leave, employees can be paid 80% or 100% of salary. The Government will reimburse the employer 80% of salary up to a maximum of £2,500 per month for each employee
  • You can choose to make up the remaining 20% of salary themselves. If you decide not to do this or are not in a position to do this, the Letter of Variation of Contract should make it clear that the employee also consents to a deduction to their salary of 20%. Johnston Carmichael’s Coronavirus Hub gives helpful examples of how you could process a salary equal to the government subsidy or could reduce this so that the overall cost to the employer is nil after the subsidy
  • In order to participate in the scheme, the employer should submit information to HMRC about the employees in question and details of their earnings via a new online Portal (still to be set up). We recommend you sign up for this as soon as it becomes available. The employer will need to upload certain information to the portal that will then trigger the payments from HMRC. Please note for cashflow planning purposes, it is likely that it will be several weeks before payments are made
  • HMRC will reimburse 80% of employment costs (including employer pension contributions and employer national insurance contributions) up to £2,500 per employee per month
  • This could cause some employee relations issues if some employees are not working and are receiving 80% of salary and others are having to work as normal. Some employees may be happy to be furloughed (e.g. those with children and those who will only lose 20% of their pay) whilst others may want to continue working such as higher paid workers who will potentially lose a lot more of their pay
  • It is our hope that as the scheme has been backdated to 1 March it would seem reasonable that it would cover employees who were employed prior to that and who have already been laid off. You could offer to withdraw their dismissal by re-engaging them on the condition that they are being furloughed from the date of their dismissal
  • The scheme will run for three months from 1 March 2020 but the Government has said it will be extended if necessary
We will continue to share information with you as and when it becomes available.