On 20 March 2020, in a bid to prevent mass job losses as a result of the coronavirus, the Chancellor, Rishi Sunak, announced the Coronavirus Job Retention Scheme. The government has agreed they will reimburse 80% of wages for all employees who are ‘furloughed’ but still on the payroll, up to a cap of £2,500 per month.
‘Furloughed’ is not a term that is used in UK employment law but in this context, it seems to be akin to being placed on unpaid leave.
Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis. We still await full details of the Scheme but for the moment, the government has provided the following information on how businesses may access the scheme.
- designate affected employees as ‘furloughed workers,’ and notify their 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; and
- 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. It is important to note that employers will not have to cover the missing 20%.
The Coronavirus Job Retention Scheme will cover the cost of wages backdated to March 1st and is initially going to be open for 3 months, but will be extended if necessary. The government claims HMRC are working urgently to set up a system for reimbursement. They expect the first grants to be paid within weeks and are aiming to finalise the process before the end of April.
Unanswered questions remain but the feeling is that this is unlikely to be a programme that involves much vetting of employers’ applications. It is a crisis measure to retain jobs and so it seems right that it will not have a host of hoops to be jumped through in order to benefit from the payments. Although we are being told that it is subject to existing employment laws, we think there is little chance of an employment tribunal having much sympathy for claims that individuals were unfairly selected for furloughing. In any event, the employment tribunals were already in a poor state before this started and with all current cases now postponed for what could, in reality, be months stretching to years, any claims based on this scheme are unlikely to see the light of day until at least 2022.
We are watching closely for the full details and will get these to you as soon as we can.
If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan. Further details can be found here. Further, as the government has announced the deferral of VAT payments for the period 20 March 2020 until 30 June 2020 till March 2021, businesses may want to think about whether they are able to use this sum of money to instead cover wage costs until the Coronavirus Job Retention Scheme is up and running.
Gender Pay Gap Reporting – Knock-on effects of the coronavirus outbreak
Due to the Coronavirus outbreak, the Government Equalities Office (GEO) and the Equality and Human Rights Commission (EHRC) have today, 24th March 2020, taken the decision to suspend enforcement of the gender pay gap deadlines for this reporting year (2019/20).
The decision means there will be no expectation on employers to report their data. In a joint statement, Minister for Women & Equalities, Liz Truss, and EHRC Chair, David Isaac, said:
“We recognise that employers across the country are facing unprecedented uncertainty and pressure at this time. Because of this we feel it is only right to suspend enforcement of gender pay gap reporting this year.”