HR Alchemy’s Jo Davies answers the questions most businesses are asking her during the coronavirus crisis…
What’s the Coronavirus Job Retention Scheme? And which organisations can access the scheme?
It involves organisations placing their employees on furlough. This isn’t a term we usually use in UK employment law, and originates from the USA. It essentially means putting employees on temporary leave of absence where they do no work and receive no pay, but they are retained on an organisation’s books to be brought back in when needed. Organisations who do this will be able to obtain a grant from the Government to cover 80 per cent of furloughed employees’ wages, to a maximum of £2,500 per employee per month. All organisations can access it, there is no restriction on size or type.
Which employees can be furloughed?
Theoretically, any employee can be furloughed. They need to be on PAYE in order for an organisation to be able to claim the grant for their wages. Guidance states that the ability to furlough an employee depends on their contract. It is not likely that employee contracts will include a specific right to use furlough. However, contracts which contain a right to lay-off employees on no pay already gives organisations the right to send employees home and not pay them for a temporary period and so can likely be used to furlough employees. If contracts do not contain a right to unpaid lay-off, organisations can ask the employee to agree to furlough. Although 80 per cent of wages may not be an initially attractive option next to full pay, it is likely to be more attractive than redundancy, which may be the end result if alternative options cannot be found.
How do I get the government grant?
Guidance sets out that organisations will need to designate which of your workforce will be furloughed employees and then submit that information to HMRC via an online portal, along with each employee’s earnings. A grant will then be received to cover the 80 per cent wages. It is hoped that the first grants will be paid by the end of April 2020, and could be backdated to 1 March 2020. The scheme is initially intended to run for three months but may be extended.
How do I decide which employees to furlough?
Organisations need to designate employees as furloughed, which means it is their choice. However, if organisations are not placing everyone on furlough, they should consider carefully who it should be. Think about whose skills will continue to be in demand through this difficult period. Where employees need to be selected for furlough, it may be best to ask for volunteers across the workforce, although as a general rule it should always be those you would have considered to ‘lay off’ or have made redundant in the first instance.
Do I have to make up the other 20 per cent of an employee’s earnings?
There is no requirement to do this but an organisation can do so if they wish.
Managing director, HR Alchemy
Email: firstname.lastname@example.org, call 03338 802810 or visit hralchemy.co.uk