On 20 March 2020, the Chancellor, Rishi Sunak, announced that the government would help employers to pay the wages of those employees that would otherwise have been laid off during coronavirus outbreak. According to new Coronavirus Job Retention Scheme (the ‘CJR Scheme’) 80% of employee’s wage would be covered by government capping at a maximum £2,500 per month.
The new governmental scheme provides support for any business in the UK. According to the Chancellor ‘any employer in the country small or large, charitable or non-profit, will be eligible’.
How to become a part of the Coronavirus Job Retention Scheme?
Employers will need to designate affected employees as ‘furloughed workers’, notify those employees of the change and obtain their agreement. The information will then have to be submitted to HMRC through a new online portal (which is not set up yet).
How much will employers get reimbursed?
HMRC will reimburse 80% of furloughed workers “wage costs, up to a cap of £2,500 per month”. Chancellor has emphasised that the reimbursement is a ‘grant, which means that employers will not need to repay anything to the government later on. The scheme is also backdated to the 1 March.
However, it is still unclear whether the £2,500 cap applies to the wage after a 20% reduction or total wage? There is also a question of how the ‘wage costs’ will be calculated under the CJR Scheme when the employee works flexible hours and their pay is not fixed. The government might use the formula of ‘weekly pay’ which will calculate the average pay from 12 to 52 weeks.
The requirement of ‘otherwise have been laid off’
The CJR Scheme applies to any employee who would otherwise have been laid off.
It is first of all unclear whether the government will permit employers to designate those employees who have already been laid off as ‘furloughed workers’.
Second of all, the Chancellor has not stated how will the government assess which employees would otherwise have been laid off. Most probably, they will ask to provide certain evidence for the employer to qualify for the scheme.
The requirement of ‘should not undertake work for an employer while furloughed’
Under the CJR Scheme, an employee that has been designated as ‘furloughed’ cannot do any work for the employer. For the employers that do not shut down their business completely but still require some work to be done the best solution would be to retain part of the workforce at their normal hours and rate of pay, while designating the rest as furloughed workers.
It is unclear whether it is possible to rotate employees. For example, theoretically, employer could designate half of the workers as furlough for week 1 and then designate the other part as furlough for week 2.
This is surely an unprecedented situation that leaves a lot of unanswered questions by both employers and employees. A lot of businesses, in the current situation, will be thinking of shutting down completely even after the crisis has passed. This might encourage them to terminate employment contracts rather than designating employees as furloughed. The more guidance is required from the government for the businesses to know which course of action to take as many employers around the country are struggling with ensuring the survival of the business and preservation of the workforce.
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