COROANVIRUS JOB RETENTION SCHEME (FURLOUGH): CAN I ACCESS THE SUPPORT?*
Has Coronavirus forced you to close your business and maintain wage payments or risk high redundancy costs? Are you wondering if you can access the UK Government’s Coronavirus Job Retention Scheme (CJRS) and for how long it will be available? Do you know how the UK Government’s CJRS will affect your employment rights?
This note explains how the CJRS can help businesses maintain their workforce via furlough and considers how long it will last now that there are over 6 million employees on furloughed leave.
We are here to help you
We are currently facing unprecedented circumstances. Although this briefing note is intended to give you an overview of commercial landlords and tenants’ positions, your circumstances may require bespoke advice.
We have put in place contingency plans so that we continue to stand ready to assist you notwithstanding the stringent health measures now put in place by government.
If you have any questions or concerns about the issues raised below or by your situation, please contact our office on 020 7034 4200 or at firstname.lastname@example.org.
What is the CJRS?
To furlough means to “lay off or suspend temporarily”, usually without pay.
The UK Government launched a job retention scheme on a temporary basis to help businesses severely affected by the Coronavirus pandemic to retain their employees and avoid redundancies by reimbursing employers for a portion of wage packets of their staff on furloughed leave.
As part of the scheme, employers can claim 80% of furloughed employees’ monthly wage up to a total of £2,500, plus the associated employer national insurance contributions, minimum automatic enrolment employer pension contributions and any other regular payments made to employees.
For now, the scheme has been extended to 30 June 2020 and backdated to 1 March 2020, though the Chancellor of the Exchequer is now looking at ways to wind down the scheme.
During furlough, the employees cannot continue to work for their employers but retain their employment status and employment rights such as sick and holiday pay.
Which employers are eligible for CJRS support?
The scheme is available to all UK employers who have a PAYE payroll scheme registered on HMRC’s real-time information system on 19 March 2020 and have a UK bank account. This includes businesses, charities, recruitment agencies and public authorities. There are no restrictions in place concerning the size of eligible organisations.
Employers can place full-time, part-time employees and employees on agency, flexible or zero-hours contracts on furlough so long as the furlough placement is for reasons arising from the Coronavirus pandemic.
Employees made redundant after 28 February 2020 may be re-hired and placed on furlough.
How do employers access the CJRS?
To access the scheme, employers should first consult, notify and agree in writing with employees to place them on furlough. A record should be kept of the written communication for 5 years. Then, submit the furloughed employees’ details to the HRMC, including calculated earnings. Employers
- may select any employees, whether UK or foreign nationals (including on all categories of visa) to place on furloughed leave.
- continue to pay furloughed employees’ salary, and then claim reimbursement under the scheme.
- should calculate employees’ gross salary, and wages will be subject to the usual tax and reductions.
The HRMC application portal can be accessed here.
Key points for employers
There are a number of key legal implications that employers must keep in mind when selecting a furloughed employee and throughout the duration of furlough.
- Equality and discrimination laws apply. Therefore, employers need a clear and objective basis for selection of furloughed employees.
- Furloughed employees retain employment status, and will continue to accrue holiday entitlement.
- The same rights will remain during and after furlough, including Statutory Sick Pay (SSP) entitlement, maternity rights, other parental rights, rights against unfair dismissal and redundancy payment.
- A minimum three-week furlough period is required, but employees can be placed on and off furlough in consecutive three-week periods.
- Employees cannot work in any capacity that generates revenue while on furlough, but can partake in training and volunteering.
- If there are no clauses in contracts concerning furlough, which is likely, and if there are more than 20 employees, then the employer must start a collective consultation process.
- Employers must include the payments received under the scheme as income when calculating taxable profits for income tax purposes and corporation tax purposes.
- Given the financial cost to the government of the furlough scheme it is unclear whether any further extensions of it will be made beyond June 2020.
Key points for employees
There are a number of points to bear in mind if you are asked by your employer to consider furloughed leave. They include:
- The provisions of your contract of employment remain important and you should ensure you have a proper understanding of those. Seek advice where necessary.
- Variation in your holiday entitlement cannot drop below the minimum statutory period of 5.6 weeks of paid annual leave.
- Guidance from the UK Government is unclear as to whether you may be placed on furloughed leave if you are already on sick leave or self-isolating due to the virus. HMRC clarification is required and you should seek advice if you are in doubt.
- If you have more than one job, each job is treated separately for the purposes of furlough consideration.
- The right to maternity pay continues. Some forms of contractual enhanced earnings applicable to parental leave would not be recoverable under the scheme.
- There is no obligation on employers to retain the services of furloughed employees after the end of the Job Retention Scheme.
What future for the CJRS?
The latest statistics show that by midnight on 3 May 2020, HMRC had received applications from 800,000 employers to use the CJRS, and it is reported that the value of wages now covered by the UK Government today is £8bn.
Rishi Sunak, the Chancellor of the Exchequer, has confirmed in an ITV news interview on Monday 4 May 2020 that there would be no ‘cliff edge’ at the end of the CJRS, though it was now costing as much as the NHS to maintain. Pressure is undoubtedly mounting on the UK Government to re-shape and tailor the scheme to meet the financial pressure it has created so that if it survives at all it may have to be reformed.
To discuss how we can help you, please call our office on 020 7034 4200 and ask to speak to a member of the Dispute Resolution team.
*The Briefing Note reflects the position as at the date of publication. The information in this Briefing Note is not intended to amount to legal advice to any person on a specific matter or case. You are advised to obtain specific, personal advice from us about your case or matter and not rely on this Briefing Note.