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Coronavirus job retention scheme and furlough leave

Covid-19: Coronavirus Job Retention Scheme and furlough leave

The Coronavirus Job Retention Scheme

As a result of the economic impact of the Covid-19 pandemic, the government has introduced the Coronavirus Job Retention Scheme. The scheme is intended to avoid redundancies by alleviating the pressure on employers to continue paying wages in full during the crisis period.

The scheme applies in respect of employees who have been “furloughed”, meaning that they have been put on a period of leave during which they are not required to work. The scheme itself does not directly change the employment relationship between employer and employee. Rather, it allows the employer to agree with employees that they will be put on temporary leave of absence (furlough leave), and then allows the employer to recover a proportion of pay from HMRC in respect of employees on that leave.

Employers can claim up to the lower of 80% of usual monthly wage costs or £2,500 per employee, plus the associated employer national insurance contributions and minimum auto-enrolment employer pension contributions.

The scheme is backdated to 1 March 2020, open for at least three months, and will be extended if necessary. The government expects the scheme to be up and running by the end of April 2020.

The scheme covers the following individuals, provided that they were on the employers’ PAYE payroll on 28 February 2020, regardless of their contract type:

  • Full-time employees
  • Part-time employees
  • Employees on agency contracts
  • Employees on flexible or zero-hour contracts.

Employers should discuss the proposal with staff and make changes to the employment contract by agreement. It is a condition of eligibility for reimbursement that furlough leave is confirmed to the employee in writing.

Employers will need to:

  • Decide which employees to designate as furloughed employees
  • Notify furloughed employees of the intended change
  • Consider whether it needs to consult with employee representatives or trade unions
  • Agree the change with the furloughed employees
  • Confirm the employees’ new status in writing
  • Submit information to HMRC about the employees that have been furloughed and their earnings through the new online portal
  • Ensure that the employees do not carry out any further work for that employer while they are furloughed

This article is provided for general information only and is not intended to be nor should it be relied upon as legal advice in relation to any particular matter. If you would like more information on employment matters please contact Richard Berry at richard.berry@burlingtons.legal.

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