The Details That We Have So Far

The Government have announced a drastic initiative to help businesses and employees who face the threat of redundancy. Employers can now be reimbursed by the Government for an employees salary for 80% of  workers wage costs, to a cap of £2,500 per month.

Who does it apply to?

The new grant applies to employees that are no longer required to work as there is insufficient work for them to do and rather than be made redundant they will be “furloughed”.  A furloughed worker is someone “ who remains on payroll but are temporarily not working during the coronavirus outbreak” per GOV.UK. The employee is still employed and bound by the terms of the contract. This is similar to placing a person on “Garden Leave” but in this situation there is no dismissal. 

The scheme will apply in respect of all employees on PAYE, including those on zero-hours contracts. This means that it will cover many workers as well as employees.

What steps must employers take to put employees on furlough leave?

Employers will need to:
  • Decide which employees to designate as furloughed employees.
  • Notify those employees of the intended change.

Can a business just enforce the salary reduction on their employees?

No. Employers will need to agree the change with the furloughed employees. Most employment contracts will not permit an employer to reduce an employee’s pay, provide them with no work, and change their employment status, without agreement. However, faced with the alternatives, which are likely to be unpaid leave, lay-off, or redundancy, the majority of affected employees are likely to agree to be placed on furlough leave.

  • Confirm the employees’ new status in writing. Ideally, the employer should advise how long it expects furlough leave to continue, however, this may be difficult in the current climate. Employers may wish to put employees on furlough leave for an initial period, subject to review.
  • Submit information to HMRC about the employees that have been furloughed and their earnings through the new online portal. The COVID-19: support for businesses guidance states that HMRC will set out further details on the information required.
  • Ensure that the employees do not carry out any further work while they are furloughed.

Who is eligible for the scheme?

All UK businesses are eligible small or large, charitable or non-profit.

What does the £2,500 cover?

The COVID-19: support for businesses guidance states employers will be reimbursed “80% of furloughed workers wage costs, up to a cap of £2,500 per month”. The COVID-19: guidance for employees states that the scheme will allow an “employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month”.
It is unclear at this stage whether the £2,500 reimbursement is intended to cover anything other than the employee’s basic salary. However, the use of the words “all employment costs” in the guidance for employees suggests that this could include additional costs such as pension contributions or other benefits. The intention also appears to be that the employee will actually receive £2,500 net. However, confirmation on this point is required from HMRC.

Are employers obliged to top up the remaining 20%?

The COVID-19: guidance for employees states that “your employer could choose to fund the differences between this payment and your salary, but does not have to”. Withholding 20% of an employee’s salary, will however, amount to breach of contract and unlawful deduction of wages unless the employee gives their consent. It is expected that the majority of employees will consent since furlough leave is a better alternative than unpaid leave, lay-off, or redundancy.

Can an employee request their employer puts them onto furlough leave?

Yes, an employee can request this, but the employer does not have to agree. It is the employer’s decision which employees to place on furlough leave, if any. It seems that it is also the employer’s decision whether to place employees on furlough leave, or make them redundant. Potentially redundant employees do not have a right to require their employer to place them on furlough leave as an alternative to redundancy. However, it is hoped that many employers will see the new scheme as preferable to business closure and making redundancies.

Scheme administration

Coronavirus Job Retention Scheme (CRJS) will be administered by HMRC.

Employers will need to:

  • Designate affected employees as ‘furloughed workers’
  • Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)

As noted above the grant is a reimbursement to the employer therefore the employer will make the wage/ salary payment to the furloughed worker and then be reimbursed by HMRC.

When will the scheme be live?

No set date but the following are indications it will not be immediate:

  • “HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.”
  • “HMRC are working night and day to get the unprecedented Coronavirus Job Retention Scheme up and running and we expect the first grants to be paid within weeks.”
  • “If your business needs short term cash flow support, you may be eligible for the Coronavirus Business Interruption Loan Scheme”

If you have any questions on this or any other employment law related issues concerning the coronavirus emergency, please do not hesitate to contact us on

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