The government announced financial assistance plans for organisations affected by Covid19 on March 20. The grant will help retain employees for an extended period of time despite offering no work and avoiding lay-offs.
As little information has been published about the Job Retention Scheme for UK employers, HR Team answers your frequently asked questions.
What is the Job Retention Scheme?
This involves organisations placing their employees on ‘furlough’. This essentially means putting employees on temporary unpaid leave. However, they are retained as an employee to work when required.
Organisations with furloughed employees will be able to obtain a grant from the Government to cover 80% of their wages, to a maximum of £2,500 per employee per month.
Which organisations are eligible for the scheme?
All organisations are eligible, there are no restrictions on size or type.
How do I get the government grant?
Organisations will need to designate which of their workforce will be furloughed employees and submit that information to HMRC – along with each employee’s earnings.
A grant will then be received to cover 80% of wages. The government is yet to issue further details regarding the online portal to submit applications, and necessary documentation required.
When will the grants be issued?
Chancellor Rishi Sunak has stated the first grants hope to be issued by the end of April 2020 and backdated to March 1. The scheme is initially intended to run for three months, however this may be extended.
Which employees can be furloughed?
Any employee can be furloughed. The employee must be on PAYE in order to claim the grant. 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.
Laid-off employees will receive, subject to service criteria, statutory guarantee pay (SGP) whereas furloughed employees will receive 80% of their wages.
SGP is £29 per day for a maximum of five days in a rolling 13-week period, rising to £30 from 6 April, so furlough offers the employee a much more favourable option in terms of pay.
Despite a lay-off clause, organisations may wish to seek specific agreement to the period of furlough with employees at the time to avoid challenges in the future that the employee was not in full agreement to being placed on leave with reduced pay.
If contracts do not contain a right to unpaid lay-off, organisations can ask the employee to agree to furlough. Although 80% of wages is less than full pay, it is likely to be a better option than redundancy, which may be the end result if alternative options cannot be found. It may also be useful for employees who are struggling to find childcare.
What if I have already laid-off employees?
In this situation, an organisation can contact those employees and their current status from lay-off to furlough. This would simply involve changing their pay arrangements from nothing (if not entitled to SGP), or SGP to 80% wages.
Do I need to pick certain employees?
It is the employer’s choice designate which employees will be furloughed. However, if organisations are not placing everyone on furlough, employers should consider the best skills and – to continue working. There does not appear to be a maximum or minimum number of employees who can be furloughed.
It is assumed the best thing to do for employers is to furlough those considered high-risk by the government. However, employers should be cautious that reducing their wage to 80% without their input may result in discrimination claims from those who allege they were furloughed because of disability, age or pregnancy.
Where employees need to be selected for furlough, it may be best to ask for volunteers across the workforce. If any high-risk employees, who had previously been risk assessed as fine to still be in work, put themselves forward, it may be appropriate to choose them first.
Can I furlough employees now?
Full guidance is yet to be released from the government on how the Job Retention Scheme will work, it is advisable to wait before putting employees on furlough now.
However, employees are in a difficult position with regard to the security of their jobs and may welcome further communication about what is happening.
Can I furlough employees who are on short-time working?
Short time working employees could not continue working as furlough requires the employee to do no work. However, consider where possible to re-organise working hours to allow for some of those on short time working to receive full hours and for others to be furloughed. This should be discussed with employees first.
If I put employees on furlough and I get a grant to cover 80% of their wages, do I have to compensate the remaining 20%?
There are no legal requirements, unless the employer is willing to do so.
How will the 80% be calculated for zero-hour contact employees that have no standard wages?
If your worker’s pay varies because they are on a zero-hour contract, then the 80% limit will be based on the same month’s earning from a previous year, or their average monthly pay during the 2019-20 tax year – whichever is higher.
What’s the shortest amount of time I can furlough someone for?
To claim the government grant, furlough must be for a minimum of three weeks.
Can apprentices be furloughed?
Yes. Apprenticeship funding rules already account for ‘breaks in learning’. The apprentice can carry on training if possible, but you must pay them at least the minimum wage for this time.
Contact HR Team today for your HR Toolkit to assist you in dealing with the Covid-19 crisis.