A number of EYE readers have been asking about the 80% staff pay bail-out scheme announced by the Government last week among the emergency measures during the coronavirus crisis.
Full details of the Coronavirus Job Retention Scheme are not clear yet, and bring in a new expression – “furloughed” workers.
Essentially the scheme enables employers to access grants from HMRC to allow them to reclaim 80% of staff’s gross salaries up to £2,500 a month per employee, backdated to March 1.
The scheme applies to staff on the employer’s PAYE system so will not help self-employed agents.
EYE is aware that some agency bosses may have put on hold plans to make redundancies, even as late as Friday when the scheme was announced, while they examine it in detail.
The information below was provided yesterday evening by law firm Greenwoods GRM LLP. It is reproduced in good faith and we hope you may find this helpful although obviously you should seek your own professional advice.
Under the scheme, employers will need to:
– Designate affected employees as “furloughed workers” and notify employees of this change; and
– Submit information to HMRC about the employees that have been “furloughed” and their earnings through a new online portal (HMRC have said that they will set out further details of the information required here).
However, there are a number of complex issues at play here, not least because the Government has made it clear that designating an employee as a “furloughed worker” remains subject to existing employment law and, depending on the wording of individual employment contracts, may be subject to negotiation.
It would seem, therefore, that the scheme will not give employers the automatic right to lay off their employees and expect the Government to pick up the salary costs.
In addition to this, whilst there are clear (but complicated) lay-off rules in the UK, the concept of “furlough” is a US term and is not specifically covered by UK law.
Employers will need to consider the scheme carefully and should take legal advice on the specific impact for their business.
Key issues
We hope to see the Government set out further details of how the scheme will work in practice in the coming days (although it has not given a timeframe for this).
In the meantime, a lot of significant questions remain unanswered. Some of the key issues that employers will need to consider are:
1. The scheme would appear to apply only to employees who are no longer working. Some employers will have already negotiated short-time working or other variations to employment contracts (such as reduced hours) in order to achieve a level of financial stability during this period. Employers will need to consider whether they can re-negotiate again with employees and potentially agree new terms making use of the scheme.
2. Some employers will have already commenced redundancy processes. Should they delay those processes while the scheme is running? The Government has made clear that its aim is to prevent mass redundancies. It would therefore appear risky to continue with redundancy processes in the current climate, and any redundancy exercises are likely to be judged against the complete factual background, including the government’s strong message that employers should pause before taking drastic action, when determining any unfair dismissal (and possibly discrimination) claims.
Assuming that notice has not yet been served on “at risk” employees (and even if it has), employers should discuss the scheme with them as part of the consultation process and agree to either carry on with the redundancy process (recognising the risks associated with this) or agree to use the scheme as an alternative.
Should the business decide, at a later point, that redundancies are still necessary, they should take legal advice at that stage on the associated risks.
3. Employers may have introduced (or already have in place) policies offering additional paid leave linked to the current crisis. If you continue to pay salary under these policies, employees are likely to fall outside of the Scheme. You may wish to consider whether to proceed with such policies until such time as there is more clarity about how they will interact with the Scheme.
4. We do not know whether employees will be restricted from taking on other/new work whilst receiving a salary under the scheme.
5. It is likely that the scheme will not interrupt an employee’s continuity of service. Likewise, annual leave will continue to accrue whilst staff remain employed.
6. The Government has said that employers can choose to make up the remaining 20% salary. However, we interpret this to mean that they do not have to do so.
7. How will salary be defined? We presume this will be defined as basic salary only, but we await further details on this.
8. Employers with zero-hours workers will need to carefully consider how their pay is calculated (bearing in mind that the reference period for workers with variable working patterns is changing from 12 weeks to 52 weeks from 6 April 2020). It is likely that the Scheme will cover zero-hours workers (given its stated wide ranging scope), but there may be practical calculation issues for employers to overcome.
9. Employers can ask senior employees and senior management to take a pay cut where their other staff are receiving 80% salary under the scheme, although you would need to reach an agreement on this. Any pay reductions will need to operate fairly so as to avoid the risk of discrimination and/or equal pay claims.
- It is currently unclear whether the maximum salary can be £2500 and employees will receive 80% of that, or whether employees earning up to £3,125 per month will receive 80% of that figure (which is £2,500).
https://www.greenwoodsgrm.co.uk/our-sectors/our-thinking/?_focus=coronavirus
I have very little faith that the Governmental promising “of the world” has been thought through, beyond the recent announcements, which in my view, are only attempting to “buy time” before we’re all unceremoniously “told” to stay at home (noting the Corona virus Bill is to be rushed through Parliament, today- containing powers that can only be described as those of a tyrannical dictatorship).
Now, there is so little detail on ANY of the financial “aid packages” that one wonders if the Government KNOWS they aren’t going to have to deliver on them (?).
In a time where our nation is so heavily buried under a mountain of debt, it begs the question…where is this money coming from?
In another article on PIE today, the suggestion of Agents “cryogenically freezing” themselves, is made. How will this work for Letting Agents?
IMHO Letting Agents should be considered firmly as “key workers” due to their importance as the guardians of rental payments, ensuring legal compliance in people’s homes, maintaining infrastructure within those homes, and maintaining safety.
In the event that Agents are to “cryogenically freeze” themselves (many simply having no choice but to do this)…what becomes of those Tenancies administered by said agent? Will Agents leave themselves wide open to future litigation? Will Agents be given a “pass”…who knows.
In a world where we used to plan for years ahead, in the period of 10 days…we live in a world where it’s scarcely possible to plan beyond the Government’s 5pm briefing.
I salute all of you who’s aim is to keep your staff, and keep them paid. This must be out only goal, for the time being…
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As always, this Government scheme is clear as mud.
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My view is that is may be a better and cheaper (or as cheap and easier ) option for the government to have us keep staff on and get us to pay them 80% and keep the process they way it was – we process pay / pensions / paye etc.
If you think about it – the reality is that today Millions of laid off workers are suddenly eligible for unemployment benefit ( which is not a huge amount of money but you are then eligible for other relief money etc etc.) How on earth is the government going to process and get theses millions off applications processed / checked / paid / queries answered and pick up the ongoing applications for additional relief benefits? it would be an absolute nightmare in a normal environment – but the government offices are not even working as normal – and probably should not be working at all if government is telling everyone to stay at home. Who will process this work and ensure people get any money at all?. That could all lead to a much bigger crisis.
Possibly the easiest way ahead for the government is to make it attractive for us as employers to do that money sharing exercise for them and get us to give folk 80% salary. – interesting indeed and actually fairly sensible. How it will work is anyone’s guess, but it could stabilise a lot of things
Just my thoughts.
Please stay safe
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Well thought out post if I may say. Definitely the most efficient way of dealing with this,
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Given the Governments inability to deliver the Universal Credit system I’m not confident that this scheme will be operating effectively any time soon.
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I came across this useful podcast over the weekend. It’s only 10 mins long but has some good practical analysis. I think it may be pulled in the next couple of days as the situation evolves so if you want a listen do so now. https://www.buzzsprout.com/442960/3074425-038a-furlough-leave-bonus-episode?fbclid=IwAR2D62mIYhPyfepkQVek0yGfgWacPguQdb4HgIDMYlTWV5ZgKlFaysG8S_8
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Brilliant!!
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Unprecidented times – we must give them a chance to work out the details..
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How long should we wait? A day, a week, a month??? It isn’t difficult to compose basic T&Cs and the blame for the 1000s of lay offs that are happening in the meantime should be placed at Boris’s feet, not the masses of desperate companies which have laid off to survive
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