How the Government’s Coronavirus Job Retention Scheme will work

As part of a package of measures to help businesses cope with the effect of Coronavirus, the Government announced that it was introducing the Coronavirus job retention scheme.

This means eligible employers will be able to apply to HM Revenue & Customs (HMRC) for a grant of up to 80 per cent of furloughed workers’ pay.

The concept of a furloughed worker is not something that has, until now, had any formal status under UK employment law. So what does it mean? It appears that the Government intends furloughed workers to be individuals who are doing no work at all for their employer and are on an agreed period of absence. The furloughing in this context is being done to avoid redundancies and unpaid leave.

The clear intention of the scheme is to save jobs and protect workers’ pay during this crisis. In turn, relieving businesses of a large proportion of their payroll costs will clearly allow a number of businesses to continue trading when they may otherwise not have been able to do so in the current economic situation. Furloughed workers would then, it is assumed, be brought back into the workplace on their previous terms and conditions once the crisis is over.

The scheme will be operated by HMRC and it is hoped that the first payments will be processed within a few weeks. We have been told the current system is not set up to make payments to employers, so this will take time. Businesses who cannot afford to wait until then are being urged to consider the other business support measures introduced by the Government such as business interruption loans and other tax relief options.

There are currently more questions than answers about how the job retention scheme will operate in practice, but what we do know is:

•Employers will be able to contact HMRC for a grant to cover most of the wages for workers who are not working but are “furloughed” and kept on payroll, rather than being “laid off”

•The scheme is stated to cover all workers paid through PAYE (so not just employees). It will therefore not cover self-employed contractors.

•The Government will pay up to 80 per cent of workers’ pay (up to a maximum of £2500 a month).

•The scheme will cover the cost of eligible workers’ wages, backdated to 1 March 2020 and for at least three months going forward.

•There will be no limit on the amount of funding available to the scheme.

•Payment of grants will be made within weeks and hopefully by the end of April 2020.

The scheme comes as welcome news to many businesses and workers who are facing immediate redundancy situations as a result of the crisis. With more stringent measures from the Government expected, more and more employers will be facing extremely difficult decisions about whether they can afford to pay – or indeed keep on - workers.

Further guidance on the details are anticipated in the coming days. The scheme is unprecedented and will need to be implemented in a manner consistent with existing employment law, so businesses will need to take care over the finer details to make sure they qualify for the funding.

Jennifer Skeoch and Mandy Laurie are Employment Law Partners with legal firm Burness Paull LLP. Read their guidance note on the job retention scheme here