Coronavirus: Government will pay up to 80% of 'furloughed' workers' wages

The Chancellor gave an extraordinary speech on Friday during which he announced a number of measures to help businesses keep afloat whilst emergency measures are taken to try and delay the virus spreading.

He promised to set up a Coronavirus Job Retention Scheme which all businesses can use to avoid making mass redundancies. 

There's still not much detail but the COVID-19: guidance for employees has been updated and includes a short section which says this:

If your employer cannot cover staff costs due to COVID-19, they may be able to access support to continue paying part of your wage, to avoid redundancies.

If your employer intends to access the Coronavirus Job Retention Scheme, they will discuss with you becoming classified as a furloughed worker. This would mean that you are kept on your employer’s payroll, rather than being laid off.

To qualify for this scheme, you should not undertake work for them while you are furloughed. This will allow your 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.

You will remain employed while furloughed. Your employer could choose to fund the differences between this payment and your salary, but does not have to.

If your salary is reduced as a result of these changes, you may be eligible for support through the welfare system, including Universal Credit.

We intend for the Coronavirus Job Retention Scheme to run for at least 3 months from 1 March 2020, but will extend if necessary.

What does furlough mean?

Furlough is not a legal term and it's not defined. I'm told that it's a term used by some IT companies when they lay someone off and is more commonly used in America. In this context we think it means either laying someone off in the strict legal sense (we've written a short blog about that here) or making them redundant.

So, if you would otherwise lay off staff members or dismiss them because there's no work for them to do, you'll be able to keep them on and use the fund to pay up to 80% of their salaries. Your staff won't be able to do any work for you - so you can't use it to top up wages if you've reduced someone's hours etc. Instead, to qualify employees have to sit at home and remain on the books and be ready to return when conditions change.

Your staff have to agree

You can't impose this on your staff either. They have to agree. But if the alternative is redundancy or being laid off, why wouldn't they? After all, they'll be at home and this might allow them to look after their children or other people who depend on them. 

You'll need to confirm this in writing as it will temporarily change their terms and conditions of employment.

How much will workers receive?

It's not entirely clear, but we think the reference to paying up to £2,500 per month is the maximum an employee will receive. If that's correct, it means that a worker earning £3,125 per month will receive 80% of that which is £2,500. That equates to someone earning around £30,000 per year.

We also don't know if the reference to £2,500 relates to basic pay, or will include overtime, bonuses etc. It's also not clear if the wages of someone whose pay varies will be based on an average and, if it is, what calculation period will apply.

You can top up salaries - but the government makes it clear that you don't have to. If you do top up, but don't do it for everyone you'll need a good, non discriminatory explanation should anyone complain.

How will businesses receive the money?

HMRC are building a portal so that employers can make claims. The new system isn't going to be ready for a few weeks; the Chancellor said it should be open before the end of April. However, claims can be backdated to 1 March. This means that businesses that have already started redundancy programmes can halt these (if they want to) and retain staff. 

Is this scheme available to all employers?

Yes. The Chancellor said it will be available to any employer in the country, small or large including those in the charitable sector.

Does it apply to all 'types' of workers?

We think the scheme will be administered via the PAYE system so it will apply to both workers and employees. However, it won't apply to those treated as self employed for tax purposes.

Rights of furloughed staff

Anyone included in the scheme will be entitled to paid holiday - unless the government legislates to remove this.

They may also be entitled to other contractual benefits - but we'll have to wait for more details to clarify this.

Staff that remain working

Most businesses will have a cohort of staff that continue to work throughout this crisis. Some of these may resent the fact that colleagues are being paid a significant amount of money to remain at home. You'll need to think about how you communicate this and make sure that your working staff continue to feel supported and valued.

Can staff that are working ask to be furloughed?

They can ask, but you don't have to agree! This measure is designed to assist people who would otherwise lose their jobs.

The scheme isn't designed to support individuals that are self isolating, can't work because of social distancing rules or are sick. 

Will we have to pay the money back?

We don't know. The Chancellor referred to the scheme as a 'grant' during his speech rather than a loan.

Our Coronavirus updates

We're working hard to keep you up to date with legal developments around Coronavirus. We've set up a portal which includes lots of helpful articles and advice to help you.

If you have a query, that we haven't answered, please contact us.