UK Coronavirus Job Retention Scheme
Coronavirus Job Retention Scheme ("JR Scheme") - Updated content below
As the pandemic progresses, many businesses have laid-off staff, reduced working hours or closed as economic activity reduces. Recognizing the impact on workers and on general economic activity that such closures and the associated lay-offs and redundancies will cause, the UK government announced on 20 March that 'unprecedented support' is to be available to all employers to try and keep individuals in employment but on paid leave.
Employers who wish to retain employees rather than terminating their employment may now be able to place employees on paid leave (furlough). Where an employee is furloughed as an alternative to lay-off (redundancy), the UK government will reimburse 80% of that employee's salary, subject to a cap of £2,500 per month (the "reimbursable sum"). All UK employers will be able to apply for support under the JR Scheme.
HMRC (the UK revenue authority) are working urgently to set up the new reimbursement system required. Once operating, reimbursement will be available for salary due from 1 March 2020; which may encourage some employers to reinstate employees who were laid off between 1 March and 20 March and place them on furlough instead.
Employers will have to submit information about furloughed employees and their earnings through a new online portal. The portal and full details of all information required will be available once the system has been established.
Issues for Employers
Can an employer put employees on the JR Scheme and have them continue to work?
No, employers cannot place all employees (or all employees in a specified pool) on part-time working and recover salary costs under the JR Scheme. The current approach is all or nothing; the employee must be on leave for the employer to recover salary costs.
If an employer and employees have already agreed other alternatives to termination, e.g. employees accepting reduced pay and possibly reduced hours, they may wish to consider whether to revisit those arrangements. Employers may also wish to pause any current redundancy consultation until they can assess whether the JR Scheme is an appropriate alternative to lay-offs for their workforce.
Can an employer impose a furlough and reduced pay?
Employers and employees must agree a variation of the employee's contract/terms and conditions to place the employee on furlough and take advantage of the JR Scheme, unless an employee’s contract or a collective bargaining agreement already permits furlough (which is not typically the case in the UK).
If an employee is not prepared to agree to go on furlough, the employer will need to consider whether the employment will be terminated; if so, the employer must comply with the employee's contract when giving notice of termination. An employee who is let go and who has sufficient service with the employer, may try to bring an 'unfair dismissal' claim; however, provided the employer has acted reasonably in all the circumstances, the likelihood of a successful unfair dismissal claim would seem remote.
Employers will need to consider whether they seek volunteers to go on 'furlough' if they need some, but not all, employees in a specific area to remain working. In determining who will go on furlough, employers will need to apply non-discriminatory criteria which they can objectively justify.
Can an employer pay more than the amount which the government will reimburse?
Employers may pay a furloughed employee more than the reimbursable sum but will only recover an amount up to the relevant reimbursable sum. Employers who propose to pay some employees more than the reimbursable sum, should ensure that they have objectively justifiable reasons for doing so. For example, employers may choose to ‘top-up’ the amount paid to employees on low pay rates but ask more highly compensated employees to agree to receive only the reimbursable sum or a smaller percentage top-up than lower paid employees might receive.
Will employees on furlough be permitted to take on other employment?
The details released by the government so far do not address this. However, employers will also have to consider their own contracts and policies and decide whether, even assuming this is permitted under the JR Scheme, they are prepared to allow individuals to take on other work and if so on what basis.
What is the effect on other employment obligations and rights?
Although not set out expressly it seems that employees placed on furlough will retain all other 'normal' rights, e.g. to paid holiday, and the scheme will not interrupt an employee's service record (continuous service) with the employer. They will also be bound to continue to observe all the terms of their contract.
What if, despite this an employer ultimately has to implement a work-force reduction?
If an employer ultimately has to reduce workforce numbers, then it will have to comply with UK laws in implementing any redundancy programme including where more than 20 employees are at risk of redundancy in a 90 day period, informing and consulting with employee representatives about the proposed redundancies and possible alternatives to redundancy.
How long will the JR Scheme operate?
Initially the JR Scheme will run for 3 months; however, the UK government has been clear that this will be kept under review and that it will be extended should this prove necessary.
What about self-employed consultants/contractors?
The JR Scheme does not apply to self-employed individuals however, it is likely that the UK government will bring forward additional assistance for such individuals. In the meantime, employers should consider whether they have any long-term 'contractors' where there may be exposure to assertions from such persons that they are in fact employees of the entity with whom they contract.
The UK Government has now issued further guidance on the operation of the JR Scheme, please click here for more details.
We summarize below the main points of the guidance.
Employers will be reimbursed for employers National Insurance (Social Security) charges and the minimum employers automatic enrolment pension contributions due on the reimbursable sum paid to an employee.
The JR Scheme is open to all employers who had ‘created and started a PAYE (pay as you earn) payroll scheme’ on 28 February 2020. The JR Scheme will cover full and part-time employees, those on flexible and ‘zero hours’ contracts as well as individuals on agency contracts. However, employers cannot claim under the JR Scheme for new employees hired on or after 28 February 2020.
For full and part-time salaried employees an employee’s actual salary before tax as of 28 February 2020 must be used to calculate the 80%. An employer must not include fees, commissions and bonuses in the calculations. Where employees have variable pay (e.g. because they work shift hours or are on a zero-hours contract) the employer may make a claim for the higher of either a) the same month’s earnings for the previous years, or, b) average monthly earnings from the 2019-20 tax year.
The guidance confirms that employees on furlough cannot work for the employer.
Employees on unpaid leave cannot be furloughed under the JR Scheme unless they were placed on such leave on or after 28 February.
Employees who are on sick leave or self-isolating should be paid statutory sick pay but can be furloughed after their sick leave ends.
Employees who are ‘shielding’ may be placed on furlough. A shielded employee is a person who because of serious underlying health conditions has been advised that they must remain at home and in self-isolation for a twelve week period from 23 March 2020.
Employees on maternity or adoptive leave must be paid statutory pay for such leave i.e. 90% of average weekly earnings for the first 6 weeks of absence followed by the lower of 90% of their average weekly earnings and the statutory flat rate currently (£148.68 per week) for a further 33 weeks. HMRC confirm that if an employer pays enhanced contractual maternity, adoptive paternity or shared parental leave to its employees these are wage cost which may be claimed through the JR Scheme.
Employers will need to calculate and submit claims through the new JR Scheme portal once this is running. Claims may only be submitted once every 3 weeks which, it now appears, is the minimum period for which any employee may be placed on furlough.
COVID-19 UK Coronavirus Job Retention Scheme extended
The UK Government has today May 12 2020 announced that the UK Coronavirus Job Retention Scheme (“JRS”) is to be extended to the end of October 2020. Employers are to ‘start sharing’ the cost of the JRS from the beginning of August.
The JRS will be revised to ‘give greater flexibility to support the transition back to work’. From at latest August when ‘cost sharing’ for employers commences it will be possible for employees to return on some form of part-time working pattern while payments are still being received under the JRS by their employer although the level of Government payment will reduce.
Further details including ‘technical details’ will be released by the end of May allowing employers and employees to start to plan a transition back to work. Employers may of course at some point have to consider whether their workforce requirements have changed and therefore if they have to implement any redundancies (workforce reductions).
We will provide further details and an analysis of the implications for UK employers when the proposed revisions to the JRS are published.
On 12 May 2020 the UK Government announced that the UK Coronavirus Job Retention Scheme (“JRS”) would be extended and run to the end of October 2020. On 29 May headline details of the revised JRS arrangements were announced and a Treasury factsheet containing somewhat more detail was released, click here for more details.
Further guidance on flexible furloughing including the revised arrangements for calculating and making claims is to be published on 12 June 2020.
From 1 July employers may bring back employees on a part-time/flexible basis (‘flexible furlough’) and claim under the JRS for ‘normal hours not worked’ by an employee on flexible furlough. The start date for flexible furlough arrangements has been brought forward from 1 August which many employers will welcome.
Employees who return to work on a flexible furlough basis must be paid their normal wage for the hours they work for their employer and will receive a JRS payment for the hours when they are furloughed, e.g. if an employee returns to work three days a week, and is furloughed for two days a week the employee must be paid 60% of their normal wage for that week by the employer and will receive 40% of the JRS payment.
Employers must agree the new arrangements with their employees and ‘confirm that agreement in writing’. Employers will need to review existing furlough agreements and agree any changes with those employees in advance of their return to work.
Closure of JRS to ‘New Entrants’
The JRS will close to ‘new entrants’ from 30 June 2020. From that date employers will only be able to furlough employees and claim under the JRS for individuals they have furloughed for a full three-week period before 30 June. If an employee has previously been furloughed for at least three weeks he or she can continue to be included in the new ‘flexible furlough’ arrangements as can any employee furloughed for the first time, as long as their furlough commences no later than 10 June 2020 and is for at least three weeks.
However, the maximum number of employees for whom an employer may make a JRS claim from August cannot exceed the maximum number claimed for in any one previous claim period under the current JRS arrangements, i.e. if the biggest number of employees for whom an employer claimed is 75 in a ‘claim period’ under the JRS out of a total workforce of 100 it cannot, from August make claims under the JRS for more than 75 employees whether they are on full or flexible furlough.
Employer Costs and Tapering of JRS
From August 2020 the JRS reimbursement to an employer will be ‘slowly tapered to reflect the fact that people will be returning to work’.
If an employee returns on flexible furlough in July, the employer must pay normal wages and employers National Insurance (social security) charges for the hours worked while claiming JRS on a proportionate basis for the hours which continue to be furloughed for that employee. The JRS will continue to be calculated as 80% of pay capped at £2,500 per month for a full-time employee and continue to include employer’s national insurance costs and pension contributions on the JRS payment.
Where employees remain on full furlough (i.e. carrying out not work for the employer) the current arrangements remain in force during June and July i.e. the UK government will pay the full JRS payment of 80% of pay capped at £2,500 per month plus employers National Insurance and pension contributions.
In August the UK Government will pay 80% of wages (subject to the £2,500 cap) for an employee who remains fully furloughed (and a proportionate amount for employees on flexible furlough) under the JRS. However, employers will be required to pay employers National Insurance contributions and employer pension contributions on the JRS pay as well as employers National Insurance and employers pension contributions on pay for the period the employee is working.
In September the government reimbursement will be calculated as 70% of wages (capped at £2187.50); employers will be required to make up the employees pay to the total JRS pay i.e. 80% of pay (capped at £2,500) as well as paying employers National Insurance and pension contributions on the JRS pay.
In October the government contribution will drop to 60% of wages (capped at £1875) and the employer will make up the difference to 80% of pay (again capped at £2,500) as well as paying employer national insurance and pension contributions on the JRS pay.
The JRS cap and reducing claim for each employee will be proportionate to the hours worked.
Further detailed guidance is to be issued on 12 June. This is likely to include more detailed information about the new requirements for lodging JRS claims and the enhanced information likely to be required e.g. for employees who go onto flexible furlough information about working hours in any JRS ‘claim period’ from 1 August.
In the meantime, employers should consider whether and when they may wish to approach employees to return from furlough and to plan the basis of the return including proposed working basis i.e. days and hours of work; whether they will work from home or return to the employers’ premises. Employers should note that government guidance continues to be that where possible employees should work from home and that before employees return to a physical workplace the employer should have carried out a COVID-19 risk assessment and implemented safe working practices, click here for more details.
If you have questions about the above issues, please contact Sheena McCaffrey.
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