Updated 22.03.2020 @7.52 am
The information here may be subject to change , we will update it when we have further information.
HMRC current guidance:
Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.
All UK businesses are eligible.
How to access the scheme
You will need to:
• designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
• submit information 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)
• HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
Our commentary – this is based on the information we have at the time of producing it. It is subject to change and we will update it as soon as further information becomes available.
Q: What does “furloughed” mean?
A: We had to look this one up. It’s if you allow someone to be absent from work for a period.
Q: How will it work?
A: Again there is no advice on this, but we anticipate it working on a similar basis to Autoenrolment, where the pay details for the employer will be uploaded through a website. This gives the information to HMRC who will make the payment to the business. Where we undertake the payroll we will do this for you if you take part in the scheme.
Q: What part of the wages does the business pay?
A: The HMRC wording says that ‘it will reimburse 80% of furloughed workers wages costs, up to a cap of £2,500 per month’.
Q: I pay the staff on ‘furlough’ when will the business get reimbursed?
A: HMRC are working on systems to facilitate repayment to employers, so you should consider your cashflow and if necessary get assistance through the Support for businesses through the Coronavirus Business Interruption Loan Scheme. Also there are VAT deferral schemes in place and time to payments to assist with cashflow.
Q: Are the government going to pay my team’s wages?
A: There seems to be a common misconception that the government will subsidise 80% of your team costs while they work for you. Not so – it’s only for people who you would normally make redundant in any other situation. They are in effect on “garden leave”, and should not be doing any work during the “furloughed” period.
Q: Surely they can do some odd jobs for me whilst off?
A: Absolutely not
I have added supplementary commentary from our HR support Enlighten HR.
Q: Does it mean all employees?
A: It will apply to all employee who would otherwise be made redundant or laid-off. This does NOT mean every employee, just those who you would lay-off or make redundant if there was a reduced capacity required
Q: Do have to go through some HR processes?
A: Employers will have to agree with the employee that they are to be re-designated as “furloughed” employees, the employee would probably be given three options so it would seem unlikely that they wouldn’t agree;
o Lay-off without pay
o Furlough with 80% pay (although it’s not yet clear whether that’s 80% of net or gross)
Q: Do I have top up the 20%?
A: The employer does not have to top up the missing 20% but would need the employee’s agreement to that reduction or it would be an illegal deduction from wages and subject to a ET claim – see above about reaching agreement, it seems unlikely that the employee wouldn’t agree. A Furlough agreement is recommended, but our advice is to hold off for a couple of days if you can, pending Government guidance being published.
Q: Does holiday pay accrue in the furlough period?
A: The employment would continue – not yet confirmed but likely that holiday would continue to accrue, whether that could be taken whilst on furlough (and therefore at what rate) is not clear.
If you have any questions on this, please contact us.