Coronavirus Job Retention Scheme
Earlier this month, the Chancellor announced a range of support measures
for employers affected by the coronavirus (COVID-19) pandemic, including
grants available under the Coronavirus Job Retention Scheme. Details of
available support can be found here, and the latest specific guidance can
be found here.
What is the latest position as of 27 March 2020?
The Coronavirus Job Retention Scheme is open to all UK employers with a
PAYE scheme in place as of 28 February 2020 and any organisation with
employees can apply. If an employee was on the payroll on 28 Feb and
has since been made redundant, he or she can be rehired and put on the
Job Retention Scheme.
Employers can reclaim up to 80% of wage costs up to a cap of £2,500 per
month, AND the associated employer NICs and
minimum auto-enrolment pension contributions on that wage.
An employer can choose to top up an employee’s salary to 100%, but
there is no requirement to do so.
For employees whose pay varies, the employer can claim for the higher
of: (i) the same month's earning from the previous year or (ii) average
monthly earnings in this tax year (2019-20).
Employees are only entitled to the National Minimum Wage for the hours
they actually work.
Furlough leave must be taken in minimum blocks of three weeks to be
eligible for funding.
During furlough leave, the employee must not be working at all,
although they can undertake training.
Employees on sick pay or self-isolating cannot be furloughed, but can
be furloughed afterwards.
More detail on how to claim will follow shortly.
Information on qualifying for the Coronavirus Job Retention Scheme
The scheme is intended to support employers to continue paying employees
who would otherwise be made redundant or put on an unpaid period of lay-off
during this crisis. It is open to all employers with a PAYE scheme,
including public-sector employers and charities. The scheme is to support
those whom ‘the employer cannot afford to pay’.
In order to qualify for the Coronavirus Job Retention Scheme, employers
will need to:
Designate affected employees as ‘furloughed workers’, and notify
employees of this change. The term ‘furloughed’ workers has no meaning
in law; for these purposes it just means they have been temporarily
laid off. Changing the status of employees remains subject to existing
employment law and, depending on the employment contract, may be
subject to negotiation. This means that, if the employer has a
short-term working/lay-off clause in their employment contract (and
many employers do not), they can just tell the employee that he/she is
furloughed. Otherwise, the employer has to consult and ask the employee
to agree to be furloughed. It would, however, be very surprising if the
employee did not agree to be furloughed if the alternative is
redundancy or being laid off with no money; and
Submit information to HM Revenue and Customs (HMRC) about the employees
that have been furloughed and their earnings through a new online
portal. This is not yet set up. It is anticipated that the online
portal will be set up by April with the first payments being made by
the end of April. HMRC will set out further details on
the information required.
Other points to note
The scheme is backdated to March 1 and will be open for at least 3
The scheme applies to everybody who is on a PAYE scheme through a
company and so a zero hours worker who is on a PAYE scheme with regular
hours would be covered.
The furloughed worker must have been on the payroll at the end of
HMRC will reimburse 80% of furloughed workers wage costs, up to a cap
of £2,500 per month (£30,000 pa).
Annual leave will continue to accrue during a period of lay-off or
Employers should note that they would have to proceed with care if they
only wish to designate certain workers as being furloughed as this may
lead to appeals and claims if the financial impacts are substantial. In
these circumstances, employers should go through a redundancy-style
If an employer facing financial difficulty because of the coronavirus
(COVID-19) crisis had given notice of redundancy to employees before
the job retention scheme was announced, they can now ask the affected
employees to agree to the withdrawal of the notice and to a period of
When notice of redundancy has been issued to an employee, it is legally
binding and cannot be unilaterally withdrawn by the employer. The
employer must, therefore, ask the employee to agree to a period of
furlough instead of redundancy. In the current circumstances, it is
likely that employees will agree to keep their jobs, albeit on reduced
pay, as an alternative to redundancy.
Furlough Leave Letter and Agreement documents
Two new documents are available to help you with the process of furloughing
staff. The Coronavirus Job Retention Scheme Furlough Leave Letter
should be used to explain an employer's plan to furlough staff in response
to the pandemic and pay them funds through the Coronavirus Job Retention
Scheme. Following the use of the above, the Coronavirus Job Retention Scheme Furlough Leave Agreement
should be used to seek employees' agreement to the Company placing them on
furlough leave. Placing an employee on furlough leave is a variation to the
contract of employment. Therefore, a written agreement is required to make
this change to employees' terms of employment.