25.03.20

Furloughed Workers – COVID-19

This post is updated to 12:00 25/03/20

‘Furlough’ of Employees who are not Working due to the Coronavirus Restrictions.

In Summary, this relates to:

• Your Employees that have no work due to the Covid-19 Pandemic
• It relates to Employees that you wish to retain.
• It relates to the first step in the process before you can reclaim Wages on the Coronavirus Job Retention Scheme(CJRS)
• The Government has noted that it will pay 80% of their wages on the above Scheme (we await details on this)
• You need to decide before you issue your ‘Furlough’ Letter if you will  be able to, or want to, fund the remaining 20% of their wage.

PLEASE NOTE: YOU MAY NOT WISH TO SOLELY RELY ON THIS ADVICE. YOU MAY WISH TO HAVE YOUR OWN  LAWYER AND / OR HR SPECIALIST TO ALSO REVIEW and GUIDE YOU AS THIS RELATES TO EMPLOYMENT LAW

Employee furlough

An employee furlough refers to a temporary leave or modification of normal working hours for a specific amount of time. It’s a leave of absence given to an employee with the promise that they will still have their job once the leave is over.

Employee furloughs are becoming common practice in both public and private sector organisations. There are numerous reasons why employers implement a furlough employee policy – in this instance it is due to reduced demand due to COVID-19.

An Employer should not rush into implementing an employee furlough policy without talking to your lawyer or HR specialist first.

 Steps to take before we apply for a grant form for the Coronavirus Job Retention Scheme.

Government guidance advises of the following steps to be undertaken by employers in order to obtain a CJRS grant:

1. Employers will need to designate affected employees as ‘furloughed workers’ and notify those employees of this change and agree this with them. Currently, the government guidance notes that this change to the employee’s status is subject to employment law and, therefore, contracts will need to be reviewed to ascertain what rights employers have and/or employee consent obtained.
2. Employers then need to submit information to HMRC about those employees who have been designated as ‘furloughed’ and their earnings via a new online portal which is being set up.
3. HMRC will then reimburse 80% of wage costs for ‘furloughed workers’ up to a cap of £2,500 per month, per ‘furloughed worker’. Exactly when these funds will be available is currently unknown.

Furlough letters

If you decide that putting employees on furlough is the best option for you and your employees, then you need to prepare a notification letter. Your furlough notice letter should contain the following:

• Address – This is a formal letter, a furlough notice should clearly state the date, employee’s name, and their address.
• Purpose – State the purpose of the letter. Get straight to the point. Include the employee’s position, department, reason for the furlough, and information about any changes to employee benefits. It is advisable to tell the employee that this action does not reflect dissatisfaction in job performance.
• Detail – Explain what a furlough is, determine the length of the furlough, and communicate employee benefitsto employees.
• Future communication – Offer a way for the employee to keep in touch.

If you wish an example of a furlough letter please contact us via this Web-site or val@grampianaccounting.co.uk

Coronavirus Job Retention Scheme

The CJRS will allow UK employers to apply for grants to reimburse Employees for up to 80% of the salaries of furloughed workers.

We will update you once the government confirms whether this means £2,500 a month before or after tax. Our understanding is that the CJRS will run from April 2020 (date to be confirmed) but will be backdated to 1 March 2020 (such that anyone who has been laid off since 1 March and has not left the business under redundancy can be caught by the scheme) and is expected to run for at least 3 months.

The current guidance around the CJRS talks about “reimbursing” employers for wage costs. Therefore, our expectation is that employers will need to pay their employees at least 80% of their normal wages during any lay off period and then they apply for a grant which will reimburse them. This means that employers are likely to have to deal with cash flow issues in the interim. (Note the availability of the Coronavirus Business Interruption Loan which may be of assistance.)

As always, we are happy to answer any questions you may have. Please feel free to contact us.