Coronavirus: What do employers and recruiters need to know in light of new changes?

Employment Law

Written by Brabners LLP

Coronavirus: The latest information for employers and recruiters

The Coronavirus (Covid-19) pandemic has escalated rapidly in the past two weeks. Many businesses are now closed and employees who were able to work are now in their homes on ‘lockdown’. We assess the current position, two weeks on from our previous article, in light of legislation which has now been passed that makes the position clearer.  

The Government has introduced the option for employers to ‘furlough’ their employees who are paid through PAYE, so that they can still be paid if they are unable to work. The Government also clarified the position in relation to SSP. Read on to find out more…

What is furlough leave?

The concept of ‘furloughing’ has been introduced to help employers who are struggling to pay wages to retain employees who might otherwise lose their jobs because they either cannot work remotely, there is no work for them to do, or their site/place of work has been shut down on government instruction.

The Government’s Coronavirus Job Retention Scheme is open to all UK employers that had a PAYE scheme in place on 28 February 2020. For employees to be eligible they must have been on payroll on this date; if they were hired later they will not be eligible. However, anyone hired prior to this but made redundant as a result of Covid 19 can be rehired and put on the scheme.

Under the scheme, HMRC will provide a grant to employers of 80% of furloughed employees’ wage cost up to a maximum of £2,500 per calendar month per employee, plus the associated employer NIC’s and minimum auto enrolment pension contributions on that wage. It has now been made clear that fees, commission and bonuses are not included for the purposes of calculating the individual’s pay. The scheme will be backdated to 1 March and will initially be open for a period of 3 months.

Employees’ normal contractual and statutory rights will still continue during furlough, but unless their employer tops up the Government grant, their pay will reduce. This would mean a change to the individual’s contractual terms and conditions, so their employer will need to notify them of this and obtain their consent (ideally in writing) prior to furloughing them. Otherwise employers leave themselves open to the risk of claims for unlawful deduction of wages, breach of contract or in some cases constructive unfair dismissal.

How can employers apply to the scheme?

The first step is to identify the employees which you wish to place on furlough and obtain their agreement to the change, explaining the impact of the scheme and why they need to be furloughed. You will need a copy of the furlough agreement/letter in order to be able to claim the grant from HMRC.

HMRC are urgently setting up the portal for application. If possible, employers should continue to pay their employees until they are able to benefit from the grant. It is not yet clear whether HMRC will require evidence that the employees have already been paid before the employer can apply for the grant. Clearly, this would cause significant difficulties for umbrella companies who will be unlikely to be able to pay their employees until they receive the grant. The Covid 19 business interruption loan scheme may be able to help with this.

Anything else?

 Quick-fire useful points to note are that:

  • Businesses are able to re-employ employees who have been made redundant since 1 March 2020, and then furlough them.
  • An employee must be furloughed for a minimum of three weeks in order for the employer to qualify for the grant.
  • Employees cannot do any work for their employer whilst on furlough leave. However there is nothing in the guidance which prohibits rotating furlough leave every three weeks amongst employees, provided each employee is off for a period of at least three week before rotating.
  • Employees on sick pay or self-isolating cannot be furloughed during this time but can be furloughed afterwards.
  • For pay that varies, the employer can claim the higher of either the same month’s earnings from the previous year (i.e. March 2019) or the average monthly earnings in the 2019-20 tax year.
  • Although employees are not allowed to do any work for their employer during furlough leave, they can do volunteering or training providing it does not generate any money for the employer.

 As always- keep up to date with government guidance

Whilst this article provides some guidance on recent developments, the situation is changing at a rapid pace. Employers should keep themselves up to speed with official and regularly-updated guidance from the UK Government.

 

This bulletin is for general guidance purposes only and should not be used for any other purpose. Brabners is a Limited Liability Partnership.

 

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