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Coronavirus Job Retention Scheme

I was invited onto the BBC on 23rd March to discuss the Coronavirus Retention Scheme. 

Obviously, everyone is anxious to know: what is in place? 

Based on the Chancellor's speech itself and information on the GOV.UK website, here's the nuts and bolts of what we know so far - and what we don't yet know.

Added on 24.03.2020

The Coronavirus Job Retention Scheme (CJRS) has been introduced to encourage businesses to follow the latest medical advice for Coronavirus and ensure businesses who rely on physical interactions close their doors to the public.

It’s also designed to stop people losing their jobs following a downturn in business across all and any sectors across the country.  It’s hoped that employers will designate affected employees to the scheme rather than lay them off which could lead to significant social and economical consequences for those individuals and the country as a whole.

How will it work?

The Coronavirus Job Retention Scheme (CRJS) will be a government grant to reimburse employers for 80% of furloughed workers (employees are furloughed when they are required to take a temporary unpaid leave of absence) wage costs, to a cap of £2,500 per month.

It was suggested by the Chancellor that employers can choose to top-up pay, either for the unfunded 20% of pay or the amount above £2,500 for higher earners, but this will not be a formal requirement.

Payments will be backdated to 1st March 2020 and will be open initially for at least three months but extended “for longer if necessary”. The Chancellor has also said that he was “placing no limit on the amount of funding available for the scheme. We will pay grants to support as many jobs as necessary.”

All UK businesses are eligible and the CRJS scheme will be administered by HMRC.

To apply for the scheme:

The employer will need to designate affected employees as Furloughed workers (an employee is furloughed when they are required to take a temporary unpaid leave of absence) and submit the required 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).

The grant is a reimbursement to the employer therefore the employer will make the wage/ salary payment to the furloughed worker and then be reimbursed by HMRC.

When will the scheme be going live?

No precise date yet, however HMRC say that they are working urgently “night and day” to set up the system for reimbursement as the existing systems aren’t set up to make payments to employers. The Chancellor stated in his news conference that he expects the first payments to be made “within weeks”.

If you need help to pay employees in the interim, or require short term cash flow support, you could be eligible for the Coronavirus Business Interruption Loan Scheme.

Employers will need to notify employees of this change in employment status to furloughed and changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.

Things that we don’t yet know

How do employers know if they can furlough an employee and are there employment laws and rights implications?

Follow this link to the Citizen’s Advice website which lays out some of the possible limitations on when this can be done. There may well be additional measures be put in place to allow for this to happen.

Once furloughed, can an employee return to work?

If they are then subsequently be furloughed again, are they still entitled to CJRS?

Is CJRS available where the employee has not been completely furloughed?

Perhaps they are only partially active or have a reduced workload.

How long will employers have to wait to receive payment from CJRS?

The Chancellor seems to be suggesting that the scheme will be paying out by the end of April at the latest, but there’s no further information on whether particular businesses or sectors will be prioritised.

Can an employer delay making payment to employees until they receive funding from the scheme?

It seems from the initial guidance that employers will have to make the payment initially and then be reimbursed. Employers may be able to apply for a business disruption loan suggesting this can be used to bridge the cash flow gap until the employer is reimbursed.

What happens if an employer has already had to terminate employees before the CJRS was announced?

The initial guidance does suggest that the CJRS will look to support employer’s employees who were employed at 1 March, so some clarity is needed on whether terminated employees can be re-hired and qualify for CJRS. This is also an important question for people who have been offered a job and are working their notice periods.

Will the amounts paid under the CJRS scheme be liable to PAYE and national insurance?

We are guessing that the payments will be a reflection of the employee’s net earnings as this would greatly simplify the process, but again, clarity will be needed.