Job Retention Scheme
Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis. All UK businesses are eligible. To access the scheme employers will need to designate affected employees as ‘furloughed workers,’ and will need to notify employees of this change.
Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation. Employers will also need to submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required. HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.
HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers. In an update from the Association’s lawyers, Miller Samuel Hill Brown, the company gave their views on the recent announcement of the Job Retention Scheme:-
What does the Coronavirus Job Retention Scheme mean in practice?
“On Friday the government announced a never before seen scheme which will see it intervene in the employment relationship between employer and employee. The Coronavirus Job Retention Scheme will see the government take on the obligation to pay part of employees’ salary where those employees that would otherwise have been laid off during this crisis. Such a significant measure is unprecedented and will act as a lifeline to a number of businesses and their employees in trying to survive the crisis caused by the ongoing pandemic.
On the face of it, the scheme would seem to undermine the old adage: it’s too good and it’s true. At the time of writing (21.00hrs on Saturday 21st March) there is little further guidance that has been issued by the government as to how the scheme will work. However, there are already some points which can be clarified in terms of how the scheme will work and who can benefit from it.”
Which businesses are eligible to participate in the scheme?
“The indication is that there is absolutely no restriction on who may apply to the scheme, so long as the business is based in the UK. It would seem likely this means that the business would be required to be registered to pay tax in the UK via HMRC as a sole requirement to be eligible to apply.
”Is the scheme limited to employees?
“Again, there is limited guidance on this. However, from the Chancellor Rishi Sunak’s statement on Friday and the guidance, it would seem that so long as the employer pays tax for an individual by way of Pay As You Earn, then the individual will qualify. This means that the scheme can apply in respect of employees, workers and casual/ zero hours workers.
”Is there a limit on the number of employees an employer can claim for?
“In short- no, so long as the employee meets the eligibility requirement.”
What eligibility requirement does an employee need to meet?
“The scheme is set up to avoid employers terminating the employment relationship by dismissing employees by reason of redundancy as a result of the downturn in business which the coronavirus will cause. To achieve this aim, there are only 3 clear criteria which must be met for an employer to be able to make a claim in respect of an employee:-
1/ The employee must be (and remain) in employment when the application is made. One of the big criticisms made of the government in regards to safeguarding the UK workforce is it delayed for too many days in making any announcement on measures it would take to assist employers.
From the beginning of last week, a number of companies were announcing mass redundancies, with the decisions to dismiss those employees being given immediate effect to. On the face of it (and again bearing in mind there is only limited guidance on the scheme at present), it would seem that employers would not be able to make a claim to the scheme for an employee who has already been dismissed prior to any application being made. Given the apparent lack of limitations on the scheme and there being no need for any employee to have any minimum period of service before an employer can make an application, the potential here would seem to be for employers to re-engage those employees should they believe that with funding in place for wages there is a future role for that individual. Should any employee be dismissed at any stage after an application has been made to the scheme (whether by reason of redundancy or anything else) they will no longer be eligible for the scheme and the employer (it is expected) would lose any right to continue to receive the relevant funding for wages. How termination of employment is going to be monitored is something there is no comment on.
2/ The employee must be carrying out NO work for the employer. This is made clear. An employer cannot obtain funding for employees who have been retained at work to work on a part time basis or on short time working. Equally (and much more obvious) funding cannot be obtained for employees who are still working on a full time basis. It seems to be suggested that employees for who an application to the scheme is made will be required to sign a declaration to confirm they will be carrying out no work for the employer. This is one of the more obvious ways in which the scheme may be abused. It is not too much of a stretch of the imagination to see a situation where a business has an opportunity to generate some income by undertaking a piece of work which requires certain workers to be recalled from lay off (or furlough as the government guidance calls it). Given the other pressures on a business to make it through this period which will go far and beyond paying employees, there may be situations where the strict rule of the scheme for the employee not to be undertaking any work may be overlooked.
How the government can police this properly is debatable and is not commented upon at all in the guidance to date, nor is there any indication as to what the government’s powers will be in the event of a fraudulent claim being discovered.
3/ Finally, the employer will only be able to make use of the scheme if placing the employee on lay off/ furlough is something which can be done lawfully. There is no underlying common law or statutory right to send an employee home and provide no work and, consequentially, no pay. This can only be done lawfully if there is a term in the employee’s contract which allows for this. Very few contracts of employment would provide for this as lay off clauses are generally only found in particular specific sectors where the level of work regularly fluctuates. While lay off clauses are rare, importantly the government guidance includes the following words:-
“…changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.”
These last few words are going to be vital to most employers. Where they have no pre-existing contractual right to lay off the employee, it will be possible for an employer to seek to agree with the employee that they will be laid off contemporaneously.
It would not seem to be the most difficult of negotiations to have with an employee to state that their options are to be made redundant and lose their job; or to go home, do not work but receive 80% of their earnings.
”How much can an employer claim?
“The headline news contains the main answer her- an employer can claim for up to 80% of salary for each employee who remains in employment and is carrying out no work. There is a limit on how much can be claimed though, with there being a monthly cap of £2500. The current guidance does not state whether this is a gross or net figure or whether the amount paid will be net or gross. No doubt that will become clear in the coming days. There is however no overall limit to how much the government will pay out under the scheme. It will be at the employers’ discretion whether they choose to fund any “top up” of the government monies to allow employees to remain on 100% pay during any period of lay off.”
When will payments be made?
“There is little guidance on this yet, but the Chancellor’s statement provided a timeframe of weeks. HMRC will be administering the scheme and more news on the specific process is expected early next week.”
Does the employer need to repay the monies?
How long will the scheme last?
“Initially, the scheme will run for 3 months. However, the Chancellor indicated it would be extended if necessary in the event the coronavirus pandemic is still disrupting the country at the end of the 3 month period. The Chancellor’s statement also indicated the scheme would be backdated so claims could be made for employees placed on lay off from 1st March onwards. While the guidance is unclear, this would suggest the scheme’s initial term will be March, April and May.”
“With the country in turmoil this scheme will go a long way to assist employers to survive the next few months. With the perhaps uncharitable queries over how the government can properly oversee that the scheme is not abused and the longer term question of how funding such a significant scheme (the cost of this is estimated at circa £75 billion) will impact on the longer term financial health of the country and its businesses, it does seem as though this is a universally positive scheme which will put employers in a better position in a time of crisis.”
Correct as at 21.00hrs 21st March 2020.
If you are looking to take advantage of the Government scheme and put staff on furlough, Miller Samuel Hill Brown can provide you with a FREE step by step guide and document. Please email firstname.lastname@example.org if this would be helpful.
If more extensive advice is then needed you can arrange a call with one of their solicitors by e-mailing them in the first and taking it from there.
You can also access information via their Coronavirus Licensing Briefings which can be found here.
The industry, in general, has been praised for complying with both Governments announcements on closures. However, it can have escaped no-one that a handful of pubs took the decision to ignore both the UK and Scottish Governments instructions to close on Friday night. Referring to those who irresponsible ignored the closure statement from the Scottish Government, the First Minister in her speech yesterday said:-
“Let me say a word now about pubs, clubs, restaurants and gyms. I’m glad to say that the vast majority have complied with advice to close and I thank them for that. Last night a tiny minority of pubs, however, stayed open. Let me blunt – in doing so, they put lives at risk. My message to them is close now. We will have emergency powers within days to force you to close and we will use these powers if we have to. But you should not wait for that. You should do the right thing now and help us save lives. These are steps we all must take to protect Scotland.”
In a statement from Police Scotland Deputy Chief Constable Malcolm Graham said:-
“I am aware that a small number of public houses are intent on defying this instruction and have indicated that they will remain open until legally ordered to close. This is absolutely reckless and endangers not only the lives of customers, but wider communities, in an extremely fast moving and unprecedented situation where both the health and safety of the nation is at stake. Therefore, I have obtained further legal advice today and Police Scotland will now instruct officers to serve emergency closure orders on any licensed premises which refuses to comply on the grounds of the threat posed to public safety. Officers are now visiting these premises today to have them closed. A compulsory closure under the Licensing Scotland Act will see venues closed for up to 24 hours, but can be repeated if necessary.”
The Health Protection (Coronavirus, Business Closure) (England) Regulations 2020 came into effect today and similar legislation will be brought in by the Scottish Government very soon. The English regulations provide enforcement powers to ensure that all premises including restaurants; cafés, including workplace canteens; bars; public houses; bars, restaurants and dining rooms within hotels or members clubs; cinemas; nightclubs; theatres; bingo halls; concert halls; museums and galleries; casinos; betting shops; spas and massage parlours close or remain closed until otherwise directed by the Secretary of State. It does not include those premises which are open to sell food or drink for consumption off the premises nor does it apply to food or drink sold by a hotel or other accommodation provider as part of room service. The need to remain closed will be reviewed every 28 days and the Regulations will expire in 6 months. If premises fail to comply then a person carrying on the business (which can include the owner, proprietor, manager, and in relation to a corporate body a director, secretary or other similar officer) face prosecution and a fine.
Business Interruption Loan Scheme
The new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, launches today to support primarily small and medium-sized businesses to access bank lending and overdrafts. The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value.
You are eligible for the scheme if:·
- your business is UK based, with turnover of no more than £45 million per year.
- your business meets the other British Business Bank eligibility criteria.
The full rules of the Scheme and the list of accredited lenders is available on the British Business Bank website. All the major banks will now offer the Scheme, there are 40 accredited providers in all.You should talk to your bank or finance provider (not the British Business Bank) as soon as possible and discuss your business plan with them. This will help your finance provider to act quickly.
Operating as a take away.
If pubs and bars decide to operate as a takeaway, please note that whilst the Government has said such businesses can do so, the Government still needs to set out measures so that pubs and restaurants can operate as hot food takeaways.
The SLTA understands that relaxation of planning measures and operating restrictions will be introduced as soon as possible and will apply for a limited period. Premises operating plans must also be considered and the Association would suggest that contact is made with your local authority to discuss this. In these unprecedented times, we understand that some local authorities have relaxed the regulations, but you really should check.