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BLOG: The Government’s new scheme – should you stop laying off staff?

Images by Gareth Jones

For much of the past week, we have been taking urgent calls from frightened employers worrying how their staff can be retained, when income streams have suddenly dried up following the Coronavirus response measures.   Last Friday evening, there was a key announcement of Government assistance for employers.

Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salaries, but the Government makes clear that this applies to those employees that would otherwise have been laid off during the Coronavirus crisis.  The subsidy is being backdated to the start of March 2020.

The Government advises that in order to access the scheme as a business, the employer will need to designate affected employees as ‘furloughed workers,’ and notify their employees of this change.  The Government adds that changing the status of employees remains “subject to existing employment law” and, depending on the employment contract, may be subject to negotiation.  We discuss below how this could cause some confusion.

The employer should then submit information to HMRC about the employees that have been furloughed and about their earnings, through a new online portal.  The Government states that HMRC will set out further details on the information required.

The headline news from the announcement is that HMRC will reimburse 80% of furloughed workers’ wage costs, up to a cap of £2,500 per month. We are told on the Government’s website that “HMRC is working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.”

The Government also reiterates to employers that if their business needs short term cash flow support, they may be eligible for a Coronavirus Business Interruption Loan.

Whilst the Government can be commended for appearing to recognise the sheer scale of the situation that had been thrust on employers, another test will be how the scheme is rolled out and how many loopholes emerge in the process.

The following questions, which many employers may want answered, simply remain outstanding:

  • How quickly will employers receive the money from the Government?
  • Is there now a new status of worker in employment law – a “furloughed” worker?
  • Is a furloughed worker to be notified in the same way that an employer would notify an employee who is to be laid off?
  • If the employment contract does not contain the right to lay off the employee and there is no such custom and practice, can the employer no longer claim the 80% subsidy because they could not lawfully have laid off the employee?
  • Does the Government just accept the employer’s word that they would have laid off the staff whom they are now saying are “furloughed workers”.
  • If the employee is a furloughed worker, will the employer have to keep paying the remaining 20% of their wages throughout the time they are furloughed?
  • If so, will some employers still just take the cheaper option of laying off their employees?

It is hoped the Government will be able to answer these questions within the next few days.

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