Last month the government introduced the Job Retention Scheme, to help employers affected by the Covid-19 pandemic. The scheme introduced the concept of “furlough leave” and provides for employers to recover up to 80% of employees’ pay from HMRC.

Whilst somecompanies are benefitting from the current circumstances, many small companies,who are the backbone of the UK economy when things are going well, are facinghuge downturns in profits and therefore laying off or making employeesredundant. For them this news was welcomed, although many are still confusedabout who qualifies for the scheme, how to apply for it and how to calculatethe amounts to claim back.

The scheme is open to all UK employers who had created and shared a PAYE payroll scheme on 28 February 2020 and have a UK bank account. The scheme covers full and part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts, provided that they were on the employers’ PAYE payroll on 28 February 2020, and regardless of their contract type.

Employees who were made redundant after 28 February 2020 can qualify if they are re-engaged by their former employer, as can those who went on unpaid leave (were laid off) after 28 February. It has not been confirmed but it appears the intention is to prevent employees who are on unpaid leave or who have left for reasons unrelated to the pandemic (i.e. resigned before the crisis but not yet left employment) from being transferred onto furlough leave and receiving a windfall. Slightly contradictory to this, it appears also to be available to employees who were given notice of redundancy before and for reasons unconnected with the pandemic, who were subsequently made redundant after 28 February. However, employers should take advice on this before furloughing staff, as HMRC has indicated that it will be making retrospective audits once the crisis is over.

Where an employeehas more than one job, their employments are treated separately for thepurposes of furlough leave, and the reimbursement cap applies to each employerindividually.

To apply for thescheme, the employer should decide which employees to designate as furloughedemployees; notify them of the change; consider whether it needs to consult withemployee representatives (ie when 20 or more employees are affected); agree thechange with the employees, who must consent to a pay cut if the employer is notgoing to top up the 80% grant to full salary; confirm the new status inwriting; submit information to HMRC through an online portal; and ensure that thefurloughed employees do not undertake any work for the employer.

The online portal through which employers apply for the grant is expected to be operational by the end of April and HMRC will backdate claims to 1st March. Many employers are asking how they pay their staff in the meantime but unfortunately there is no easy answer to this and it will be up to the individual concerned as to whether they can afford to wait or perhaps take a percentage only of this month’s salary – otherwise the employer may find themselves having to dip into their own pocket.

About the Author

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

Philippa Wood is a solicitor with many years’ experience advising on all areas of contentious and non-contentious employment law. Her clients include individuals and companies of all sizes from entrepreneurs to global brands. Philippa qualified as a solicitor in 2005 after working for 13 years in the media, most notably being part of the start-up team for two national cable television stations in the 1980s and 90s.

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  1. Employment Law

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