Coronavirus Job Retention Scheme
On 20 March 2020, the Chancellor, Rishi Sunak, announced the Coronavirus Job Retention Scheme (the “Retention Scheme”), which is designed to give employers support for paying salaries to those who would otherwise have been laid off due to the pandemic. This will be welcome news for many employers, although the details provided so far are very sparse and leave many questions unanswered. The brief governance guidance can be accessed here. We expect further guidance and details in the coming days.
Currently, we understand that the Retention Scheme:-
- will be open to all UK employers, regardless of size;
- allows an employer (most likely by agreement with its employees) to designate employees who would have otherwise been laid off as a result of Coronavirus as “furloughed” workers. In essence, these employees will remain on the payroll (i.e. their employment will not be terminated) and HMRC will reimburse 80% of their wage costs, up to a cap of £2,500 per employee per month. Employers can choose (but are not obliged) to “top-up” an employee’s salary to their usual amount;
- does not permit affected employees to do any work during furloughed leave; and
- provides that employees will return to work after the crisis and continue to be paid in the usual way.
Although it seems that the Retention Scheme will be backdated to 1 March 2020, it is not clear if employees whose employment has already been terminated will be eligible. The Retention Scheme will initially run for three months and shall be managed via a new HMRC on-line system. We expect further details about how to access the Retention Scheme in due course.
There are several outstanding questions about the Retention Scheme, including whether the £2,500 cap is gross or net and how pension contributions and employee national insurance contributions are to be considered. We also do not know whether HMRC will impose any eligibility criteria or conditions as to which employees can be furloughed and/or the manner in which employers handle matters. We expect this clarity in the coming days.
The current global crisis is evolving rapidly, and the rules and guidance for individuals, companies and other entities to manage its implications are similarly fast moving. Notes such as this may be out of date almost as soon as they are published. If you have any questions prompted by this article or on any other matter relevant to you, please get in touch with your usual contact at Forsters.