Furlough: Coronavirus Job Retention Scheme

Monday 23 March 2020

On Friday afternoon the Chancellor, Rishi Sunak, announced an unprecedented package of measures to support the UK economy through the COVID-19 crisis.

The government aims to help employers to retain their staff when they may otherwise have had to make them redundant.

At the time of writing we have scant information on how the Coronavirus Job Retention Scheme will work in practice. What we do know is that the government will pay 80% of the salary of any employees who would otherwise have been laid-off.

Whilst we wait for further details to be announced, our initial understanding is that:

• Any employer in the UK can apply to the Scheme, which will be backdated to 1 March and run for an initial period of 3 months.
• Employers will have to ‘furlough’ employees who have been or would otherwise be laid-off or made redundant. Employees who have already been dismissed can be re-engaged to benefit from this Scheme.
• Affected employees need to be informed by their employer of the change in their employment status, and in most cases (where the contractual right to lay staff off does not exist) must consent to the change in their terms and conditions.
• Furloughed employees remain employed and bound by their terms and conditions of employment, so they are not entitled to a redundancy payment and must not do any work during the furlough period.
• Employers can continue to pay the furloughed employees and will be able to reclaim 80% of their salary (up to a cap of £2,500 per month) from HMRC. There does not appear to be any obligation on the employer to ‘top up’ the payment from the government to 100% of the employees’ usual salary, though it seems an employer would be free to do so.

This Job Retention Scheme forms part of a wider package of measures to keep businesses going during this difficult time.

Our initial advice is for employers to review their staffing needs and identify those members of staff who could be furloughed to enable them to access the Scheme as and when the details of it are known.

Contracts of employment should then be reviewed to identify if the contractual right to lay staff off exists. If there is no contractual right to lay-off, conversations will need to be held with employees to obtain their consent to be furloughed as an alternative to being made redundant.

If you have any questions about the Job Retention Scheme or any other Coronavirus-related employment issues, please email or call our Employment Law team today on 0113 207 0000.