The Government have published further details about the Coronavirus Job Retention Scheme (CJRS). The key elements of the CJRS are set out below, but employers should read the guidance document in full to understand all the elements of the scheme to date, appreciate the employee relations implications and identify those parts where legal advice is needed.
The CJRS is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. It is designed to support employers whose operations have been severely affected by coronavirus. The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020 and have a UK bank account.
The Government expects that the scheme will not be used by many public sector organisations, as the majority of public sector employees are continuing to provide essential public services or contribute to the response to the coronavirus outbreak. In a small number of cases, for example where organisations are not primarily funded by the Government and whose staff cannot be redeployed to assist with the coronavirus response, the scheme may be appropriate for some staff.
Under the Job Retention Scheme, employers can claim specified wage costs for employees (see below) who are furloughed (on leave of absence) and who must have been on the PAYE payroll on 28 February 2020. They can be on any type of contract, including full-time employees, part-time employees, employees on agency contracts employees on flexible or zero-hour contracts. The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with the scheme. Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February 2020.
Employers need to make a claim for wage costs through this scheme. Employers will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer NI contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.
To be eligible for the subsidy, when on furlough, an employee cannot undertake work for or on behalf of the organisation. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
Employers should discuss furlough arrangements with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way. To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication.
Employers may need to take legal advice on the furlough process. If sufficient numbers of staff are involved, it may be necessary to engage in collective consultation processes to procure agreement to changes to terms of employment. This is because under S.188 of the Trade Union and Labour Relations (Consolidation) Act 1992, read with S.195, where the employer proposes to vary the contracts of 20 or more employees, and intends to dismiss employees who do not consent to the change in their terms within a period of 90 days or less, those employees will be classed as dismissed by reason of redundancy and collective consultation must be undertaken.
HMRC’s online service, which will have to be used to make a claim, is not available yet. It is expected to be available by the end of April 2020. Employers can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until 1 March 2020 if applicable. Once HMRC have received the claim and established eligibility, they will pay it via BACS payment to a UK bank account.