Coronavirus Job Retention Scheme

At TAG Accountants we’ve been receiving numerous questions about this scheme, how it is going to work and who is eligible.

It is fair to say plenty of confusion remains and there are many unanswered questions at the moment, many of which fall into the employment law world rather than accounts.

Nevertheless, we have set out some information below that has been gleaned from various sources and we hope it boosts your knowledge of this area. As in other areas that we have produced articles on, we intend to keep you updated as more information is forthcoming.

Headline information on the scheme

Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salaries for those employees that would otherwise have been laid off during this crisis – this will be in the form of a grant, not a loan. All UK businesses are eligible.

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. It is a condition of the scheme that the employee must do no work at all during the furlough period. The intention of the scheme is to allow employers to pay staff who are without work. HMRC will of course have visibility of pay records.
• 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).
• Continue to pay the employee through payroll, using the Real Time Information (RTI) system as usual, as required by the employment contract. This contract may be renegotiated but that is a matter for employment law. So RTI system reporting of payroll will continue as normal.

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. We understand that this includes employers’ NIC and pension contributions. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers. It would be prudent to assume there will be no reimbursement until at least late April as the system is still in development – you may need to consider a CBILS loan to help fund the interim period.

The scheme will apply from 1 March 2020 meaning that it runs from the date of furlough of the employee or 1 March 2020 if earlier – i.e. it is potentially possible to retrospectively furlough employees who were laid off prior to the announcement of this scheme.

The scheme has been put in place for an initial period of 3 months but will be extended if necessary.

An employee furlough refers to a temporary leave or modification of normal working hours for a specific amount of time. It’s a leave of absence given to an employee with the promise that they will still have their job once the leave is over.

Employee furloughs are becoming common practice in both public and private sector organisations. There are numerous reasons why employers implement a furlough employee policy, such as plant shutdowns, seasonal work, company reorganizations and reduced demand due to COVID-19.

We believe the best advice is not to rush into implementing an employee furlough policy without talking to your lawyer or HR specialist first – if you need one let us know.

Employee notification

If you decide that putting employees on furlough is the best option for you and your employees, then you need to prepare a notification letter. Your furlough notice letter should contain the following:

• Address – This is a formal letter, a furlough notice should clearly state the date, employee’s name, and their address.
• Purpose – State the purpose of the letter. Get straight to the point. Include the employee’s position, department, the reason for the furlough, and information about any changes to employee benefits. It is advisable to tell the employee that this action does not reflect dissatisfaction in job performance.
• Detail – Explain what a furlough is, determine the length of the furlough (as far as possible), and communicate employee benefits during this period to employees.
• Future communication – Offer a way for the employee to keep in touch. End the letter on a positive note.

We have provided a potential template at the end of this article as an appendix for you to use as guidance, but it is best to take proper legal advice from a lawyer or HR professional before proceeding with the furlough process.

Where is information still sketchy?
Some areas where information on operating this scheme are as follows:

• Implications of employer not funding the 20% of salaries not covered by the Scheme
• Employees’ rights to reject going on furlough
• Future difficulties if employer chooses redundancy route rather than furlough
• Impact on staff still expected to work when others have been furloughed.
• Dealing with employees who have variable salary payments e.g. employees on zero-hour contracts
• Scope for fraud e.g. uplifting salary levels just prior to furloughing employees.
• Can directors of companies be furloughed?

 
Key actions for you to take

• Keep an eye out for further guidance on the scheme and how it operates – best to look at https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses – you can also sign up for e-mail updates to let you know when anything has been amended.
• Map out who is going to be furloughed and inform those concerned (note some employees may not have a lay-off clause in their employment contracts and so will need to be asked to consent), retaining records of dates and employee details to enable future claim to be made on the portal.
• Take legal advice to ensure you have followed correct procedures in line with employment law.
• Consider whether you are going to do about the 20% of employment cost not covered by the Government.

We are here to help and support and will be more than happy to assist you in making your claim under the scheme once the portal is in place. We are working remotely but can still be contacted on 01902 783172. Many of the queries we are getting relate to employment law so do take appropriate advice and, if you need to be referred, let us know.

******* Appendix A – template furlough letter *******

Name
Address

Dear

Furlough Leave

Following our discussion on [insert date] regarding the Government’s Coronavirus Job Retention Scheme.

As you have been advised we do not have work for you due to the closure of the setting.

Please find attached Furlough Leave Agreement for you to sign and return a copy to me.

If you have any queries about the contents of this letter, please do not hesitate to contact me.

Yours sincerely,

******* Appendix B – template furlough agreement   *******

COMPANY/BUSINESS NAME

AGREEMENT FOR FURLOUGH LEAVE

Employee Name:             XXXX

This is a variation to your contract of employment, designed to implement and take advantage of the government’s Coronavirus Job Retention Scheme.  

1. We agree that from [DATE] you shall be on Furlough Leave.  This means your contract of employment continues, but you shall not be required to come into work.  We will pay you [80%] / [80% subject to a maximum liability for us of £2,500 per month, including employer’s national insurance contributions and employer’s pension contributions] [100%] of your salary during that time.

• Your Furlough Leave shall end on the earliest of the following events: –
  
  (a)          the government’s Coronavirus Job Retention Scheme ending

(b)          either you or us ceasing to be eligible for funding under that scheme; or,

(c)           us deciding to cancel Furlough Leave and bring you back to work.

• During your Furlough Leave, you may not work for any other organisation, or on your own account.  If you do, you must tell us, and you may be liable to repay any sums we have paid you under this scheme if we become liable to repay it to the Government.

• When your Furlough Leave ends, while we will always endeavour to provide you with work, in the event of insufficient work being available you agree we are entitled to place you on short time or lay you off without any pay except for statutory guarantee payments.

Signed: _________________                                     Date                     ___________

                                             (Employer)

Signed:_________________                                       Date                     ___________

                                             (Employee)