A far-reaching plan for state intervention unfolded in the middle of March to support business and, ultimately, the workforce, in response to the COVID-19 crisis, which has seen organisations around the country suffering immediate and acute financial distress
- All businesses will be eligible for substantial reimbursement of wages through the Coronavirus Job Retention Scheme. Full details of how this enormous bail-out will operate in practice are yet to be revealed, but companies will need to designate those of its workers to whom it cannot provide work as ‘furloughed’ (a term which currently has no legal definition).
- Employees will, we think, need to agree with their new designation, which is likely if the alternative is redundancy.
- Employers must then notify HMRC of this fact and of the worker’s pay information, through a portal which has yet to be set up.
- The state will then reimburse 80% of salary up to a maximum of £2,500, per furloughed worker, per month.
- It presently appears that the employer will not need to make up the shortfall on wages.
- It is worth remembering that any employees who struggle with rent or mortgage payments will for the next 3 months have legal protection against eviction and very likely mortgage payment holidays, respectively.
The sheer scale of the task will inevitably mean that it will take time to put in place the infrastructure to enable these funds to be reclaimed from HMRC. In the meantime, and bearing in mind that business can back-date their claims to 1 March 2020, companies can shore up their short-term cash position by accessing funds through the Coronavirus Business Interruption Loan Scheme. This is expected to be operational from the end of March. The loans were originally interest free for 6 months, but this has been extended to 12 months. We can all only but hope that these extraordinary measures are enough to minimise layoffs and long-term structural damage to the labour market and economy.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.