The Coronavirus Job Retention Scheme will be a government grant – to reimburse employers for 80% of furloughed workers wage costs, to a cap of £2,500 per month. All UK businesses are eligible, small or large, charitable or non profit will be eligible to claim on the scheme.
The latest guidance says that employers can choose to top-up pay, either for the unfunded 20% of pay or the amount above £2,500 for higher earners, but this will not be a formal requirement to obtain access to the scheme.
The scheme will be backdated to March 1st and will be open initially for at least three months but extended ‘for longer if necessary’.
- The scheme will be administered by HMRC and they are working to get information out to businesses about how to claim the grant. It is likely that the employer will make the wage/ salary payment to the furloughed worker and then be reimbursed by HMRC so you will still need to be able to cashflow the wages payment initially. It is expected that the first grants will be paid within weeks but if your business needs short term cash flow support, you may be eligible for the Coronavirus Business Interruption Loan Scheme” administered by your bank.
Employers will need to:
- Designate affected employees as ‘furloughed workers’ (see further below)
- 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)
Furloughed workers are “workforce who remain on payroll but are temporarily not working during the coronavirus outbreak” per GOV.UK.
It is noted that employers will need to notify employees of this change in employment status to furloughed, but that changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation. Make sure you look at employees’ contracts before “furloughing” them to make sure you are allowed to do it within employment law parameters.
There is insufficient detail available at the moment to ascertain what kind of controls will be in place to monitor abuse of the system.
There has been criticism that the scheme with warnings that it takes controls away from businesses who could have put staff on half time and equally employees could have found other jobs in critical areas where there is real need at the moment.
It is also not clear whether directors and shareholders of owner managed companies can put themselves ‘on furlough’, or how it affects zero hours workers.
There are going to be many more questions about the practicalities of this in the days to come but we will make sure we keep you up to date as much as possible.