Like many employment law solicitors I have spent the last few days fielding query after query relating to Coronavirus / COVID-19 from employers, grappling with what seems like an ever changing landscape.
There is no precedent for what our nation is going through at this challenging time and no precedent in law either to which advisers such as myself can draw guidance from. When advising clients who need to adapt and respond with great speed, often in the absence of any details from the government as to the finer points of the bold economic plans aimed at staving off a depression, clear, concise and jargon free advice, provided without delay, is not just important – its an absolute necessity.
Within just a few hours of the PM announcing the UK is now entering a period of ‘lockdown‘ requiring all non-essential workplaces to close, I have set out the key questions which employers need the answers to in the coming hours and days:-
Do we still have to keep paying our employees?
Some employers will be able to continue to run their business with employees working remotely, but many employers will not be able to do so. All employers should consider whether there is work that some or all of their employees could carry out in this situation, at least for an initial period. If an employee is expected to work from home, covering their normal hours, they must continue to be paid normally (in the absence of any agreement to the contrary between the employee and employer).
This may mean asking employees to temporarily carry out work that is not within their usual job description. Given the circumstances we all find ourselves in, employees are likely to be flexible in order to both help their employer’s business keep running and to keep getting paid.
Where an employer is not able to continue its business with employees working remotely, the Coronavirus Job Retention Scheme will pay employees’ salaries of up to £2,500 a calendar month as long as they are kept on the payroll.
What is Coronavirus Job Retention Scheme (CJRS)?
The CJRS (furlough leave) was announced last Friday 20th March. Under the CJRS all UK employers, regardless of size or sector, can claim a grant from HMRC to cover 80% of the wages costs of employees who are not working but kept on the payroll (“furloughed”), of up to £2,500 a calendar month for each employee. The government has indicated that the CJRS will run for an initial period of 3 months but will be extended if necessary.
The CJRS will be backdated to 1st March 2020 meaning that those employees who have already been dismissed by reason of Coronavirus-related redundancy could, subject to their employer agreeing to re-employ them and place them back on payroll (and given a leave of absence), be eligible.
The first grants under the CJRS will be paid before the end of April.
Does the CJRS apply to all staff?
The CJRS applies to all employees on PAYE. This includes those on zero hour contract workers. It does not apply to the self-employed, The Government is, it is expected, likely to reveal further measures to support the self-employed in the coming days.
What steps must employers take to put employees on furlough leave?
Employers will need to:
- Decide which employees to designate as furloughed employees.
- Notify those employees of the intended change.
- Agree the change with the furloughed employees. Most employment contracts will not permit an employer to reduce an employee’s pay, provide them with no work, and change their employment status, without agreement. However, faced with the alternatives, which are likely to be unpaid leave, lay-off, or redundancy, the majority of affected employees are likely to agree to be placed on furlough leave.
- Confirm the employees’ new status in writing. Ideally, the employer should advise how long it expects furlough leave to continue, however, this may be difficult in the current climate. Employers may wish to put employees on furlough leave for an initial period, subject to review.
- Submit information to HMRC about the employees that have been furloughed and their earnings through the new online portal. This is not yet in place but is currently being developed by HMRC.
- Ensure that the employees do not carry out any further work while they are furloughed.
What does the £2,500 cover?
The ‘COVID-19: support for businesses guidance’ currently available online states employers will be reimbursed “80% of furloughed workers wage costs, up to a cap of £2,500 per month”. The ‘COVID-19: guidance for employees’ states that the scheme will allow an “employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month”.
It is unclear at this stage whether the £2,500 reimbursement is intended to cover anything other than the employee’s basic salary. However, the use of the words “all employment costs” in the guidance for employees suggests that this could include additional costs such as pension contributions or other benefits. The intention also appears to be that the employee will actually receive £2,500 net. However, confirmation on this point is required from HMRC.
Are employers obliged to top up the remaining 20%?
The ‘COVID-19: guidance for employees’ states that “your employer could choose to fund the differences between this payment and your salary, but does not have to”. Withholding 20% of an employee’s salary, will however, amount to breach of contract and unlawful deduction of wages unless the employee gives their consent. It is expected that the majority of employees will consent since furlough leave is a better alternative than unpaid leave, lay-off, or redundancy.
Can an employee request their employer puts them onto the CJRS?
Yes, an employee can request this, but the employer does not have to agree. It is the employer’s decision which employees to place on the CJRS (‘Furlough Leave’), if any. It seems that it is also the employer’s decision whether to place employees on Furlough Leave, or make them redundant.
Potentially redundant employees do not have a right to require their employer to place them on Furlough lLeave as an alternative to redundancy. However, it is hoped that many employers will see the new scheme as preferable to business closure and making redundancies.
Can I place someone on Furlough Leave AND reduce their hours and/or decrease their pay?
No. there is currently no option to a mixture. Furlough Leave has been designed for employees that would otherwise have been laid off or made redundant due to the impact of Coronavirus on the employer’s business.
The Coronavirus job retention scheme sounds great but are they any drawbacks?
Employer’s must acknowledge that the Coronavirus job retention scheme has the potential to create resentment between colleagues For example, there will be instances of some employees still working long hours and receiving full or even reduced pay, whilst others will be on Furlough Leave getting paid at least 80% for doing nothing. There is also the comparison to be drawn with those who are off work sick – for instance if they are struck down with Coronavirus or self-isolating and receiving only SSP, which at around £95 p/week is likely to be less than 80% full pay.
Employer’s will need to manage a potential sense of unfairness between those who have to work and those who can stay at home and be paid 80% of their full pay
Such scenarios could also have further serious consequences such as the coronavirus job retention scheme acted as an incentive for employee’s not to notify their employer if they become sick, or need to self-isolate because of the adverse pay consequences. Likewise, the employer will also be better under the coronavirus job retention scheme off as they can only reclaim 14 days of SSP (if less than 250 staff) as opposed to indefinite furlough leave pay.
I hope the above is helpful. Please be advised that further government guidance is due to follow in the coming days. Please review my previous articles on Coronavirus and follow me to keep up to date with developments in the law as and when they happen.
If you or your business are affected in anyway by the Coronavirus or any other employment law issue please contact Lloyd Clarke on 01206 239761 for a free consultation.