Employer Advice - Coronavirus
In these difficult times it is important that, if you run a business, you must look to do all you can to ensure you support your cashflow and remain liquid for long enough to be able to trade yourself out of difficulties once we all beat the virus.
If you have employees, one vital measure that you can employ is reducing your wage overheads.
Amongst the support measures announced by the Government for employers affected by the coronavirus (COVID-19) pandemic is the Coronavirus Job Retention Scheme. The Coronavirus Job Retention Scheme is open to all UK employers with a PAYE scheme in place as of 28 February 2020 and any business with employees can apply. The scheme is backdated to March 1 and will be open for at least 3 months.
If you have a business with employees, the scheme is intended to support you to continue paying employees who would otherwise be made redundant or put on an unpaid period of lay-off during this crisis because you cannot afford to pay them.
When you take advantage of the scheme you can put employees on “Furlough Leave” and reclaim from the Government up to 80% of wage costs up to a cap of £2,500 per month and the associated employer NICs and minimum auto-enrolment pension contributions on that wage.
You can choose to top up a Furloughed employee’s salary to 100%, but there is no legal requirement to do so.
Furlough leave must be taken in minimum blocks of three weeks to be eligible for funding; during furlough leave, your furloughed employees must not be working at all.
If one of your employees was on the payroll on 28 February 2020 and has since been made redundant, he or she can be re-hired and put on the Job Retention Scheme.
In order to qualify for the Coronavirus Job Retention Scheme, you will need to designate affected employees to be temporarily laid off as ‘furloughed workers’ and notify those employees of this change.
To protect your business from potential claims of failure to correctly notify the affected employees, you should be sending out a Furlough Leave Letter to explain your plan to furlough staff in response to the pandemic and pay them through the Coronavirus Job Retention Scheme.
We can assist you with the bespoke preparation of this letter and advise you exactly how you should be notifying and consulting your affected Employees so you can make use of the Scheme whilst minimising risks to your business.
It is also very important to note that changing the status of employees remains subject to existing employment law and placing an employee on furlough leave is a variation to the employee’s contract of employment. In practical terms, this means that, unless you have a short-term working/lay-off clause in your employment contracts (which many employers do not), you cannot just tell the employee that he/she is furloughed; a written Furlough Leave Agreement is required to make this change to the affected employees' terms of employment.
If you attempt to put an Employee on furlough without an existing short-term working/lay-off clause or a Furlough Leave Agreement, you will be opening yourself up to valid claims from the employee for breaches of that Employee’s employment contract.
We can assist you with advice, assistance, drafting and follow up for a Furlough Leave Agreement specific to the individual needs of your business to ensure that you are protected from potential claims from any of your Furloughed employees.
It is also very important that you must proceed with care if you only wish to designate certain workers as being furloughed as this is likely to lead to appeals and claims from the affected employees if the financial impacts are substantial. In these circumstances, you should go through a redundancy-style selection exercise with identifiable, fair selection criteria and analysis to ensure the decision on who is to be Furloughed is reasonable, is clearly recorded and can be defended in the face of employee disputes or claims.
We can advise you in relation to all of this to ensure you utilise the best approach to help your employees, protect the continuation of your business, minimise risk to you and limit the potential for future employee disputes and claims against you.
We all find ourselves in uncharted territory with the current crisis and it would be easy to make understandable mistakes which could lead to considerable claims and difficulties for your business even after the crisis is over.
We appreciate that you may not think you have available funds for legal advice and assistance if you need to tighten your belt. However, engaging us to assist at this early stage will be a solid investment to ensure your business survives not only the crisis itself, but also the crippling aftermath that will face businesses that do not get the process right at a time when those businesses are most vulnerable.
For advice and assistance with any and all aspects of the Coronavirus Job Retention Scheme, please contact one of our expert solicitors: