On 20 March, the Government announced new implementations to assist and support businesses which are experiencing financial difficulties as a result of the outbreak of COVID-19.
The Government has introduced the Coronavirus Job Retention Scheme which enables all eligible UK employers to “access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.”
Access to the Scheme
In order to access the scheme, employers will need to designate affected employees as “furloughed workers” and must notify employees in writing that they are being placed on furlough leave.
When employees are placed on furlough leave, employers cannot ask those employees to do any work that:
- makes money for the business; or
- provides services for the business.
The employees are, however, able to take part in volunteer work or training.
Changing the status of employees to “furloughed workers” remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation with the employee (please see the below section for further information on amending the terms of employment contracts).
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 in due course.
Once employers have submitted the required details, and subject to acceptance, HMRC will reimburse 80% of furloughed workers’ wage costs, up to a cap of £2,500.00 per month per worker plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Any balance due above this amount is at the discretion of the employer, however employers must be aware of the risk of unilaterally amending the terms of an employee’s contract if the contract does not expressly allow for this (please see the below section for further information on amending the terms of employment contracts).
HMRC have advised that they are working urgently to set up a system for reimbursement as existing systems are not set up to facilitate payments to employers, and all furlough workers shall remain on their employer’s payroll.
Despite the Government’s support throughout this pandemic, the implementation introduced above raised a handful of questions in the respect of Employment Law.
Making changes to employee’s terms of employment
In order to benefit from the above scheme, employers may need to amend their employees’ terms of employment, for example if it is their intention to lower employees’ wages in line with the relief available under the Coronavirus Job Retention Scheme (i.e. to make payment of 80% of the employees’ salary or £2,500 per month only, whichever is lower).
It is important to note that any expressly agreed terms with an employee, for example within the contract of employment, may influence the circumstances and due consideration must be given to any such terms.
This is a fundamental hurdle which should be addressed at the outset and may be challenging in itself as many employment contracts will not contain a clause allowing an employer to unilaterally alter the contract, and it may be that many employees do not wish to agree to the proposed changes to their employment terms in the alternative.
Employers must also bear in mind that there is a risk that any such action may give rise to employees having the right to bring a claim against the company, in respect of their employment rights, and consideration must be given to the fact that employees may refuses to waive any rights in respect of potential claims against an employer if the employer is looking to amend the terms of an employee’s contract.
Employers may wish to consider making redundancies, or dismissals for other reasons, as an alternative action to placing employees on furlough leave if it is not possible for the business to continue in its present form. Please see our article Redundancy and how to approach it: Advice for Employer for advice with regard to making employees redundant.
Should you, as an employer, be considering placing your employees, or some of your employees, on furlough leave, please do not hesitate to contact us for advice to ensure that you are not placing your company at risk of any potential claims.
Contact our employment solicitors