The Coronavirus Job Retention Scheme will support companies by helping them pay employees who would otherwise be laid-off or made redundant. Employees subject to the scheme will be kept on their employer's payroll and will receive 80% of their wages. A worker must be furloughed for at least 3 weeks for their employer to be eligible to claim support, and must not undertake any work for the employer during this time. The scheme does not apply to workers whose hours are reduced, but who are still working part time.
The scheme will back date pay to 1st March 2020. Employees taken on since 1st March 2020 are not eligible for furlough leave. Employers may re-employ staff who have been made redundant since 1st March and place them on furlough leave.
If the employee’s contract of employment allows the employer to temporarily lay off the employee, then they may do so and access this support. Otherwise, both the employer and the employee must agree to the ‘furlough’ arrangement. It is likely many employees will agree given the economic climate, as the alternative is likely to be redundancy.
HMRC will reimburse the employer 80% of the employee’s wages, up to £2,500 per month. Employees with variable earnings will be eligible for 80% of whichever amount is the higher, either their earnings for the same period last year or their average earnings for the last 12 months. If the employee has been with the employer for less than 12 months, they will receive 80% of their average earnings over their time with the employer.
Employers may claim the cost of Employer National Insurance contributions and minimum automatic enrolment pension contributions. These amounts will be based on the lower of 80% salary or £2,500 per month, rather than the usual amount. Employers may choose to pay the remaining 20%.
The scheme is currently in place for three months, from 1st March 2020, but may be extended if necessary. The system for informing HMRC and claiming reimbursements is still being developed.
There is no requirement that the employment continue after furlough leave is concluded. However, the normal requirements and protections of redundancy apply during and after furlough leave.