If an employer can’t cover staff costs due to COVID-19, they may be able to access support to continue paying part an employees wage to avoid redundancies through the Coronavirus Job Retention Scheme.
An employer must classify an employee as a furloughed worker which means that the employee is kept on the employer’s payroll, rather than being laid off.
To qualify for this scheme, the employee can’t undertake any work for them while they are furloughed. This will allow the employer to claim a grant of up to 80% of the employee’s wage for all employment costs, up to a cap of £2,500 per month.
The employee will remain employed while furloughed. The employer could choose to fund the differences between this payment and the employee’s salary, but does not have to.
If an employee’s salary is reduced as a result of these changes, they may be eligible for support through the welfare system, including Universal Credit.
The Coronavirus Job Retention Scheme to run for at least 3 months from 1 March 2020, but will extend if necessary.
Points to Note
- Changing the status of employees to a ‘furloughed worker’ remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
- The information needs to be submitted to HMRC about the employees that have been furloughed and their earnings through a new online portal, HMRC will set out further details on the information required in due course, they are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
- HMRC will not backdate pay if the employee has been working
- There is a possibility that the employee may have to wait for their salary due to the time it will take HMRC to set up the online portal
- The employee would still need to pay their pension costs
- It is unclear if a furloughed worker can start work again and then need to be furloughed again
- If an employee leaves because of childcare they are unable to be classed as furlough
- Employees will still accrue holiday