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The Job Retention Scheme – a lifeline to employers?

23 March 2020

On Friday, the government’s daily briefing included an announcement that it would be implementing the Job Retention Scheme, designed to keep people in employment over the next few months as businesses are forced to temporarily close and others suffer a reduction in work, leading to a reduction in income. The scheme will be available to all employers, with unlimited funding to cover the next three months.

Job Retention Scheme

The Job Retention Scheme introduces a new concept of a ‘furloughed employee’ – whilst not a defined term at this stage, we expect this to mean an employee who is at risk of redundancy, lay off or short time working as a result of a downturn in work because of the current coronavirus situation. The scheme will cover employees who have already been laid off or dismissed for redundancy, although it is not clear whether such workers must be re-engaged.

The government has pledged to cover 80% of a furloughed employee’s wage costs, up to a maximum of £2,500 per month. The employer has the discretion to top up the employee’s wage to their normal salary, but is not obliged to do so. Payments under the scheme can be backdated to 1 March 2020.

The government has described this as a reimbursement scheme. An employer will designate an employee as a furloughed worker and submit information to HMRC through a new online portal in order to claim a reimbursement of an employee’s salary.

Government guidance calls this a change of status, which we envisage means that, unless an employer has an existing contractual right to lay off an employee or to drastically change their terms and conditions, an employer will need to consult with each worker about their role being at risk of redundancy, and, in that context, the possibility of a period of what would otherwise be unpaid leave, in order to agree with the individual that their status shall change to being a furloughed employee.

A furloughed employee may not work for their employer during this period of time.

During the government’s briefing on Friday, the Chancellor said that the scheme was intended to cover zero hours workers, as well as those with fixed hours. We expect the government’s detailed guidance on the Job Retention Scheme to include information about how to calculate a zero hours worker’s monthly salary in order to submit a claim to HMRC.

We await clarification on the interaction of this new initiative with the statutory sick pay regime.

The Chancellor encouraged all employers to consider this scheme before proceeding with any redundancy programme.

During the briefing, the government also announced the following:

  • Loans made under the Business Interruption Loan Scheme would be interest free for 12 months, instead of the 6 months originally announced.
  • The next quarter of VAT payments would be delayed, giving businesses until the end of the year to pay the missed quarter.
  • The self-employed would have full access to Universal Credit to be paid at the same rate of Statutory Sick Pay, i.e. £94.25.

If you would like advice on any of these issues, or how to protect your business in the coming months, please call us on 01483 548500 or 01483 543210 or alternatively email enquiries@barlowrobbins.com or michelletudor@barlowrobbins.com or davidludlow@barlowrobbins.com

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