HR Update Covid19 - Job Retention Scheme -'Furloughed Workers'
What is the Government's Job Retention Scheme?
The scheme is for all UK employers with a PAYE system, including charities, and will enable employers to access financial support to continue paying part of the salary for those who would otherwise have been laid off during the crisis. These workers are described as 'furloughed workers'. Full guidance on the Scheme is now available from HMRC.
What financial support is available to employers through the Scheme?
Employers will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included. This is a grant which the employer will not have to pay back.
What is a 'furloughed worker'?
The word furlough generally means temporary leave of absence from work though until now, this term had no meaning in UK employment law. Furlough leave has been introduced by the Government to help employers during the coronavirus pandemic. A furloughed worker is someone who is still employed by the employer and remains on the payroll. However the worker does not carry out work for the employer during the time they are designated a 'furloughed worker'.
How do employers access the Scheme?
Firstly the employer should designate the employee as a 'furloughed worker', notify the employee of this and then submit information on an HMRC portal about the employees and their earnings. This HMRC portal is under development and is expected to be live before the end of April 2020.
From what date was the Scheme set up?
The Job Retention Scheme will cover the cost of wages backdated to 1 March 2020 and is initially open for three months but may be extended if necessary.
How should employers do this practically to designate staff as furloughed workers?
Some contracts will have provision in them for employers to be able to lay off staff or otherwise the employer should agree this contractual change with the worker. It is good practice to consult and agree changes to terms and conditions with your staff. Here are some pointers to follow:
- Decide which employees will be designated as furloughed workers.
- Decide whether to pay the 80% or to supplement it (there is no requirement to do so). However a reduction in salary is a change to the contract and should be discussed and agreed with employees.
- Discuss the rationale and decision with affected employees.
- Consider if you need to consult with trade unions.
- Inform employees what it means ie. that otherwise they would be laid off or made redundant, that they will no longer carry out work for you, that they will remain an employee and on the payroll and will receive 80% pay (or more if you choose to supplement this).
- Agree the changes with employees and gain their consent to the changes in writing.
- Communicate the situation in writing and confirm/include the following:
- the change in status to furloughed worker
- the date furlough status starts
- when it will be reviewed
- how long it will be for (though this is difficult to determine in the current circumstances)
- how you will keep in contact with the worker during the period
- what it means ie. remains an employee of the organisation and on the payroll but carries out no work
- Finally ensure that the furloughed worker ceases doing work for the organisation.
What if the employee does not agree to be furloughed?
If employees do not agree to be furloughed, the employer may dismiss the employees by reason of redundancy so long as redundancy definitions are met and the proper process is followed. There is redundancy guidance available on the LRA (Labour Relations Agency) website including specific guidance for small businesses.
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