Coronavirus Job Retention Scheme – FAQ

As we are getting numerous questions about this scheme, we have detailed some answers to the most common questions below.

How can employers access the Coronavirus Job Retention scheme?

Employers access the scheme through an online portal. The employer provides details of the affected furloughed employees online and submits information to HMRC about their earnings and any other information required, which will presumably include the employee’s NI number. Employers should probably:

• Fairly select employees affected for being furloughed (the government have not said this, but it seems sensible).
• Decide whether to pay 80% of the salary or to supplement it.
• Gain the employees’ written consent unless contractual provisions already cover lay off.
• Stop the employees from working if they are now working from home or send them home from the workplace.

Which employees can be furloughed under the CJRS?

The employees that can agree to be furloughed are those working for businesses that would otherwise have to dismiss as redundant or lay off part or all of their workforce.

The 80% wage guarantee will not cover zero-hour contracts or casual workers unless they work on the PAYE system.

The self-employed are also not covered although easier access to benefits will apply to them to cover a drop in income. This includes removing the income floor for universal credit and moving the application process to an online and telephone process. Additional measures may follow for the self-employed.

What about part-time employees?

There is no guidance as yet relating to part-time employees.

For example, an employee works two days a week for Employer A and three days a week for Employer B. The employee on furlough from Employer A would receive their 80% of salary for those two days. If their other role continues the employee could receive their normal salary from Employer B as well.

A problem arises if the employee is then offered additional work from Employer B. The scheme is intended to help employers and employees but is open to abuse in some respects and guidance will be forthcoming.

Do employees have to agree to be furloughed?

Yes, employees must be consulted and agree to be furloughed. Changing the status of employees always is subject to existing employment law.

Depending on the wording of the employment contract there may be an ability to lay-off workers. Although lay-offs under the Employment Rights Act 1996 are a different legal concept the wording in contracts may enable some employers to impose a furlough period.

If there is no lay off provision in the existing contract the employer will need to agree with the employee that they going to become furloughed because no work is available. Inevitably employees will mostly agree to this. The main alternative would be a dismissal by reason of redundancy with the possibility of a delayed redundancy payment or no redundancy payment (for employees who have worked for less than two years). In most cases, employees will agree where the alternative is redundancy.

In a minority of cases, there may be some negotiation. In sectors like hospitality, some staff may be needed and others not. Some employees may be resentful that they are having to work as they are classed as being essential whilst others are being furloughed on 80% of salary. Others may be resentful that they are classed as dispensable whilst others are working and receiving their full package. Discuss all of the options with employees and stay up to date with the latest on the Government website.

If employees do not agree to be furloughed can we dismiss by reason of redundancy?

Yes, if employees do not agree to be furloughed employers can dismiss by reason of redundancy if the redundancy definitions are met and a proper process followed.

Some employers may feel that the long-term effect on their business will be inevitable closure or rationalisation. If employers feel furlough is likely to be followed by redundancies it may help to select employees for furlough using a process similar to redundancy selection. This would involve using objective criteria, such as a scores matrix based on skills, productivity, previous appraisals etc.

Is an employer required to supplement employees’ salary over 80%?

No, employers can make up the additional pay, but they are not required to do so.

For employees who have been furloughed employers can choose whether to:

• Only make the salary payment reimbursed by the government.
• Pay all of the difference between the grant and the employee’s normal salary.
• Pay part of the difference between the grant and the employee’s normal salary.

Any extra payment the employer chooses to make will be either the additional 20% of salary or any amount in excess of £2,500. If management chooses to pay more, it will depend upon the business’ overall health and cashflow affecting the ability to fund payments. Concerns about staff retention once the crisis has passed may also affect decisions being made.

The employers affected will have greatly reduced or eliminated income during these three or more months. So many employers will not be able to supplement the government’s payment.

There is no reason why employers could not choose to supplement the salaries initially and then choose not to in later months, although presumably then the employee’s consent to the furlough could theoretically be withdrawn. An employee would be unlikely to withdraw consent when the alternative is redundancy.

Will furloughed employees receive £2500 exactly?

It is not clear if the furloughed employees will receive £2,500 exactly until more detailed guidance is issued. However, it is logical that employees who earn under £3,125 a month will receive less than £2,500.

This is because, for those earning £3,125 a month, 80% of salary would be £2,500:

• Employees who earn less than £3,125 a month normally, will get 80% of their salary for three months (or more).
• Employees earning in excess £3,125 a month will receive the £2,500 figure which is less than 80% of their salary for those three months (or more) unless the employer chooses to supplement it.

The £2,500 may include employer’s NI and pension contributions, but this is not yet clear. Therefore £2,500 may end up not being the precise maximum gross pay which the employee receives if, for example, pension contributions are then taken into account.

The £2,500 a month figure has presumably been chosen as it is broadly £30,000 a year which is the national median net salary.

Information is based on guidance from CIPD member website.