The Coronavirus Job Retention Scheme enables employers to keep employees on payroll during the COVID-19 pandemic, paying 80% of the salary for employees that would have been laid off. It should be noted that the summary below covers what we know about the Scheme at this time. More (welcome) detail is to follow shortly from the government.

What is it?

HMRC will pay a grant to reimburse 80% of furloughed workers’ wage costs, up to a cap of £2,500 per month. The grant will be paid for a minimum of three months. There is no obligation on the employer to pay the 20% shortfall (or more if the employee is on a salary of £37.5K plus).

At this stage we do not know what specifically is covered by the term “wage costs” but hopefully this issue will be clarified when further details of the Scheme are released.

The Scheme is intended to run for at least three months from 1 March 2020, but will be extended if necessary.

Who can benefit?

It appears that all UK employers can potentially avail of the Scheme for all staff paid through PAYE.

All staff who would otherwise have been laid off can be immediately put onto furlough. This means that employees should be kept on their employer’s payroll (they would not be on the payroll if laid off). Whilst changing the status of employees remains subject to existing employment law and may be subject to negotiation it seems unlikely that any employee would refuse to accept being furloughed in the current climate.

Employees must not undertake work while furloughed including answering client calls or emails. Please note that they should be ready and able to return to work on demand.

What are the practical implications?

Employers need to identify which employees are required to remain in employment and those that will be furloughed. Employers should base such decisions around business needs and avoid any potential discriminatory selection processes.

From a payroll perspective employers should identify which employees are subject to the £2,500 cap whilst also ensuring a clear pay element is used to identify the 80% payments for reclaim from HMRC.

Based on general employment law practices it is envisaged that furloughed pay will be calculated based on the previous 12 weeks of salary, using basic pay but not overtime or bonuses.

Employees will continue to accrue annual leave while furloughed.

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