The Government has announced a new scheme to protect people’s jobs during the crisis. The scheme is open to all UK businesses and will see the Government pay part of the wages of employees that would otherwise have been laid off. The scheme will be open for an initial three months from 1 March however Rishi Sunak said “… and I will extend the scheme for longer if necessary”.
This is a grant from the Government, not a loan, so it will not need to be repaid.
To access the scheme employees, or certain employees, need to be designated as “furloughed workers”. You will need to notify these workers of the change, in writing (email will be fine) making sure you follow a fair selection process. It’s worth noting that the Government is not changing employment law to allow this to change in status. Therefore, making this change to an employees status remains subject to employment law.
You have the option of topping up the remaining 20%, but it is not mandatory.
You must not make the employees redundant and guidance will most likely be issued, in due course, about the time frame the Government expects you to keep them employed after society and business can return to normal. If you have already laid staff off, you can reverse this decision if you wish, as this scheme is backdated to 1st March.
HMRC are developing a system that will allow employers to provide this information through an online portal and once processed they will issue reimbursement. At the time of writing this (21 March 2020) there was no method of reimbursing these costs and the system isn’t expected to be available until April. Therefore, managing cash during this intervening period is still crucial (see our advice about cash flows).
There is a cap on the reimbursement of £2,500 of the employee’s wage costs per month, based on their regular salary. It should also be noted that the employee should be shown on the February pay run and that a claim will be possible for periods from 1 March 2020. It is not clear yet how much those on zero hours’ contracts or fluctuating wages will be treated, but it is expected that it will be either the amount which was paid through last month’s payroll or an average of the past few months.
Careful planning and consideration of employee’s contracts of employment is required when considering this scheme but it is certainly a significant boost to companies in what are unprecedented times.