The Chancellor has set out a package of temporary, timely and targeted measures to support public services, people and businesses through this period of disruption caused by COVID-19.
- businesses and workplaces should encourage their employees to work at home, wherever possible
- if someone becomes unwell in the workplace with a new, continuous cough or a high temperature, they should be sent home and advised to follow the advice to stay at home
- those who follow advice to stay at home will be eligible for statutory sick pay (SSP) from the first day of their absence from work
- if evidence is required by an employer, those with symptoms of coronavirus can get an isolation note from https://111.nhs.uk/covid-19 and those who live with someone that has symptoms can get a note from the NHS website
Job Retention Scheme (JRS)
Key points include:
- Furloughed workers should not undertake any work for the company, including answering calls or emails
- JRS should not interrupt an employees' continuity of service
- Annual leave will continue to accrue
- The grant is a reimbursement by HMRC so businesses may face cash flow issues
- Changing the status of employees remains subject to existing employment law and may be subject to negotiation
All UK businesses are eligible.
How to access the scheme:
You will need to:
- designate affected employees as 'furloughed workers,' and notify your employees of this change - changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
- 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)
HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
The Job Retention Scheme is a huge incentive for companies to keep employees on payroll. To access the support companies need to classify employees as a furloughed worker, which means they should not undertake any work for the company while furloughed, including answering calls or emails. In exchange employers can claim a grant of up to 80% of each employee's wage for all employment costs, up to a cap of £2,500 per month.
The employee remains employed and their employer can choose to fund the difference between this payment and their usual salary, but it's not compulsory. Assuming notice hasn't yet been served on 'at risk' employees, and even if it has, employers should discuss the JRS with them as part of any consultation process and agree to either carry on with the redundancy process, or agree to use the JRS as an alternative. Should the business decide, at a later point, that redundancies are still necessary, they should take legal advice at that stage on the associated risks.
We don't yet know whether employees will be restricted from taking on other/new work while receiving a salary under the scheme, but government advice is being updated on a daily basis. It's likely that the JRS will not interrupt an employees' continuity of service. Likewise, annual leave will continue to accrue while staff remain employed.
The grant is a reimbursement by HMRC of salary costs paid to furloughed workers, so businesses may face cash flow issues in paying these workers. A number of options may be open to businesses, including the Government's Coronavirus Business Interruption Loan.
JRS is intended to run for at least three months from 1 March 2020, but it will be extended if necessary. The JRS will cover the cost of wages backdated to 1 March 2020 and will be open before the end of April. It is open for workers who were in employment on 28 February.
Putting the scheme into practice:
We anticipate furloughed employees will be deemed as taking a leave of absence. On that basis, they would strictly be unpaid. The government needs to structure the grant so it isn't 'pay', and therefore no PAYE tax or national insurance contributions (NIC) are due, and no benefits driven from pay are applicable. It's normal practice in countries such as the US, that already have the status of furloughed worker, for benefits like health and life cover to continue while an employee is furloughed. However, in our view the JRS should be implemented in such a way that these do not impact on the flow of the 80% from the government via the employer to the employees.
There could be further complications, for example where the employee pays for additional private medical cover as part of an employee benefits scheme.
We also await details on how the JRS will apply to employees within personal service companies (PSCs). We anticipate that PSCs will be eligible in the same way as other businesses and subject to the same expected rules on the reference salary for the 80% calculation.
How businesses should prepare – the financials:
- Set up the payroll with a furloughed pay element to identify the amounts for reclaim
- Calculate furloughed pay based on the 12 weeks up to the end of February. Use regular basic pay but not overtime or bonuses. Please note: This is our estimate of the likely period for assessment – details still to be confirmed by the Government.
- For employees off sick during that 12 weeks, base furloughed pay on the amounts excluding sick pay
- Assume this is still pay and that PAYE tax and NIC deductions will be due
- This is a grant that reimburses the business, so cash flow could still be an issue. A bank facility or loan may be required to fund these payments prior to reimbursement.
Those who follow advice to stay at home and who cannot work as a result will be eligible for statutory sick pay (SSP), even if they are not themselves sick.
Employers should use their discretion and respect the medical need to self-isolate in making decisions about sick pay.
Anyone not eligible to receive sick pay, including those earning less than an average of £118 per week, some of those working in the gig economy, or self-employed people, is able to claim Universal Credit and or contributory Employment and Support Allowance.
For those on a low income and already claiming Universal Credit, it is designed to automatically adjust depending on people's earnings or other income. However, if someone needs money urgently, they can apply for an advance through the journal.
Enforcing use of holiday entitlement
Businesses are permitted to require employees to take any paid holiday entitlement they have but must give notice of twice the length of the period of holiday they are being required to take.
What happens if you have to close the business?
If the employer shuts the business and tells staff who are ready and able to work not to come into work, it is the employer that is not providing work for them. The employer would have to continue to pay them in full pay unless there is a shortage of work/lay off clause in their contracts and the employees have signed their contracts.
Further guidance is available from ACAS.
For more information or advice, please Contact Us.
By Jasminara Begum