We are getting many enquiries about the above Scheme.
This is a massive state intervention in business activity. Many businesses are going to be forced into hibernation or animated suspension. The scheme will enable businesses to retain their employees so that when this crisis is over, they can hopefully restart with minimal disruption. It offers business and employees an extremely valuable lifeline.
Furloughed Workers
The scheme applies to ‘furloughed workers’ only. ‘Furlough’ is a term which is typically used in the US and means putting employees on temporary leave of absence, where they do not work and do not receive pay, but are retained on a the books to be brought back when needed.
Key Benefits
The key benefits of the scheme are:
- The Government will fund 80% of wages up to a maximum of £2,500 per month. It is up to the employer whether to make up the balance.
- The scheme is intended to run for 3 months but may be extended.
- Importantly, these are grants not loans.
- This applies to any employee who was on the payroll on 1 March 2020.
- The Government expects to make grant payments by the end of April 2020, and they will be backdated to 1 March 2020.
- Employers will need to designate which of its employees will be furloughed workers.
- A new HMRC online portal will be established through which details will then have to be submitted, together with details of each employee’s earnings.
The details are still a bit sketchy and more details of the scheme will emerge over the next few weeks.
Risks
Fraud. Tt is important that employees are genuinely ‘furloughed’. If an employee is continuing to work and is placed on the scheme, this, in our view, amounts to tax fraud. Employers therefore must be very careful in how they offer the scheme and how they implement it.
Employment Laws. Employers also must comply with the usual employment walls. Any change to anyone’s employment terms must be made in accordance with existing laws and employment contracts. In practice, this means placing someone on the scheme must be voluntary and by mutual agreement.
Discrimination. You must also select employees in a fair way and must not discriminate against any employees e.g. based on age, disability or pregnancy.
We do expect all laws to be rigorously enforced if not now than later.
If you need any further guidance, please do not hesitate to contact us.