Coping with Covid 19 ~ Support for Employees
As large numbers of people now find themselves unable to work, and large numbers of employers struggle to meet their Payroll commitments, in this report we examine the Government’s measures aimed at assisting staff retention.
Coronavirus Job Retention Scheme and Furlough Leave
What is it?
This scheme allows all UK employers to access financial support to continue paying part of the payroll for employees who would otherwise be laid off or made redundant due to COVID-19.
Who is eligible?
All UK businesses are eligible from limited companies, sole traders who employ people, LLPs and partnerships through to charities.
How does it work?
- the employer must designate affected employees as furloughed workers
- they should notify the employee that they have been marked as furloughed. Agreement from the employee may be required depending on the terms of the employment contract
- HMRC must be notified of the employees designated as furloughed workers as well as details of their earnings. This is done through an online portal which has not yet been set up
- HMRC will reimburse 80% of furloughed workers pay, based on their February earnings, up to a cap of £2,500 per month together with the Employers’ National Insurance and minimum automatic enrolment employer pension contributions thereon
- employees remain employed whilst furloughed, and the employee must be furloughed for a minimum of three weeks
- employers may choose to top-up the remaining 20% of salary or indeed the entire salary, but that will be at their own expense
What are the employment issues?
Changing the status of employees to a furloughed worker remains subject to existing employment law. Generally, where an employee’s contract contains a layoff or short term clause employers should be able to place employees on furlough leave. Where there is no such clause, it is best advised to get agreement from the employee.
Additionally, a 20% reduction in salary will be a change in terms and conditions of employment. Where employers are not topping up the Government payment, they should also seek agreement from the employee.
Comment
Given the current situation and the alternatives for those employees should they not agree, one can expect that most employees will agree to be furloughed. That said, prudent employers will seek to get their employees agreement as part of their furlough leave process.
We have a template letter for employers to give to furloughed employees.
Furloughing employees will be an excellent way of keeping a valuable workforce together if during this period of disruption they are not needed in the workplace.
