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At 5 pm on Friday 20 March 2020, Rishi Sunak, Chancellor of the Exchequer, announced a scheme which will assist employers in paying workers’ wages. This scheme is being called the Job Retention Scheme. Under this scheme, employers will be able to access support to continue to pay employees’ salaries who would have ordinarily been made redundant during this crisis. These affected employees will be designated as “furloughed workers.”
Although there is presently very little detailed guidance from HMRC, the following can be noted.
Any employer can contact HMRC and submit an application for a grant, covering 80% of the salary of these furloughed workers, up to £2500 per month. This scheme covers all UK employers, including limited companies, partnerships, sole traders and charities. This scheme is available to all workers who would otherwise have been made redundant during this crisis. Any grant application can be backdated to 1 March 2020 and will last for a minimum of three months. The capped contribution from HMRC will cover all salary, pension contributions and national insurance contributions.
It is yet unknown when HMRC will create this online portal that employees can access. It is also unknown how this portal will work although HMRC is working urgently to set up a system for reimbursement. The “COVID-19: support for businesses” Guidance is silent on whether the employer requires to pay the 20% salary themselves. However the “COVID-19: guidance for employees” states that it is up to the employer whether to pay the 20% or not. It is also unclear whether employees who earn £3125 per month will be able to claim 80% of that (£2500) although again the “COVID-19: guidance for employees” suggests that £2500 is what will end up in the employee’s pocket (so £3125 is probably the cap on their salary).
The future challenges
This scheme is open to abuse. It is yet unclear as to the sanctions on any employer (or furloughed worker) who submits a grant application for the Job Retention Scheme grant and where that furloughed worker carries out work for the employer (not performing work is one of the conditions). Similarly whilst an employer and employee may agree to various workers becoming furloughed workers, how will the employees who remain in the workplace feel about their furloughed colleagues? Will there be resentment? Lastly, will there be issues of discrimination if, for example, an employer agrees to females becoming furloughed workers and the males remaining in the workplace?
Employers should assess whether or not their existing contracts contain an express right to remove work or to unilaterally change the workers’ status. In such cases, an employer may not need the employee to consent to become a furloughed worker. However, if employers’ contracts do not contain such an express clause, employers should be looking to identify which employees can become furloughed workers and getting their signed agreement to their status change.
As ever, employment lawyers are playing catch up with this ever-changing legislation so, if in doubt, take advice from the Blackadders Employment Team. We will update you further when we can.
Simon Allison, Partner
Accredited by the Law Society of Scotland as a Specialist in Employment Law
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