Since March 20th, when the Government set out a wide range of measures to help both employers and employees as a result of the Covid-19 epidemic, things have moved on apace. Rishi Sunak, Chancellor of the Exchequer, sought from the start, to tackle the likely hardship that employees will suffer and to help businesses to retain a workforce that it will be able to call on when business picks up. Thus avoiding mass redundancies.
Measures such as the deferral of VAT and income tax payments, a 12 month break for payment of business rates in some sectors, in addition to changes to SSP, have been brought in to assist businesses in the current climate. Importantly, the Government has also introduced the Coronavirus Job Retention Scheme (CJRS) which is discussed below. A new website has been launched to help businesses find out how to access the support: Coronavirus Business Support Website.
As the situation evolves, the Chancellor, to his credit, has taken steps to ensure that businesses do not suffer more than necessary from the inevitable time lag in some of the measures coming into force.
The Government has, for instance, at the time of writing ordered banks to grant emergency loans from more businesses after fewer than 1,000 were approved out of 130,000 enquiries. Sunak has just announced that he is barring lenders from demanding personal guarantees from all borrowers for all loans under £250,000.
Several banks had asked directors to put their homes or savings up as collateral and charged interest up to 30%.
Here are some of the latest questions about the CJRS Scheme:
Q: What is the CJRS Scheme and what does it cover?
∞ CJRS will allow all UK employers (big and small, private and public) to apply for a grant to reimburse them for part of the salaries that they pay to those employees who are laid off because of the downturn in work (otherwise known as furloughed workers.) The furloughed workers will be on furloughed leave. During this time, they will continue to be employed by the employer but will not be allowed to work for a temporary period of time.
∞ The CJRS will assist employers by reimbursing them up to 80% of the wages of each furloughed worker, up to a maximum of £2,500 per month (we will update you once the Government confirms whether this means £2,500 per month before or after tax.)
Q: When does the CJRS start and finish?
∞ Our understanding is that the CJRS will run from April 2020 (date to be confirmed) but will be backdated from 1st March 2020 and is expected to run for at least three months.
Q: How can employers obtain a grant from the CJRS?
∞ As we understand it, (1) employers will need to designate affected employees as furloughed workers and notify those employees of this change and agree this with them (2) employers will 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. Exactly when these funds will be available is currently unknown.
Q: Will employers have to pay the money back?
∞ The word “grant” is used in all the guidance to date, which would suggest that the employer will need to pay the money back at some point, but that is not our understanding; it just seems that the Government could have chosen a better word to describe it, e.g. a “payment”. It was reported yesterday (4th April) an employer can reclaim 80% of compulsory (presumably meaning contractual) commission back from HMRC, as well as basic salary. The 80% apparently does not include non-monetary benefits (eg the value of health insurance or a car
Q: Does the £2,500 monthly cap refer to basic or the employee’s take-home pay?
∞ The Government has not stated whether this refers to basic pay or take-home pay. However, it would be reasonable to consider that the wages covered by CJRS would be applicable to the employee’s take-home pay.
Q: Does the employer have to make up the remaining 20% of the furloughed employee’s pay?
∞ The guidance does not deal with this point, although it does state that an employer could “choose” to make up the difference but it is not obliged to. We do not feel that many would want to make up this difference in the circumstances.
Q: Would self-employed people get similar help?
∞ Yes. The Bill which passed through the House of Commons includes provision for a new statutory self-employed pay. This will ensure that the net monthly payments of a self-employed or freelancer do not fall below 80% of that which they received in the previous three years.
Q: What about employee’s rights whilst they are furloughed?
∞ As the contract of employment will continue, we anticipate that any rights and benefits (save those in respect of their pay,) will continue to accrue as usual. As such, employees would also continue to accrue holiday as they are furloughed.
Q: When will the new HMRC portal go live for employers so that they can apply for the grant?
∞ HMRC are working to get this up and running before the end of April 2020. Hopefully it will be available before then.
Q: Can an employee start a new job when on furlough?
∞ Yes. The guidance expressly allows this.
NOTE: Employers must notify employees of their furloughed status in writing and keep the record of that written notification for five years.
As clarification on matters is announced, we will update you as quickly as possible.