Coronavirus Job Retention Scheme
The first question to answer is what is Furlough! For some reason we have used an American word for sabbatical.
The second question is will my employees be entitled to the 80% of wages proposed by the chancellor. Detailed rules are not in place at the time of writing and may be amended if there is abuse so it is very difficult to be certain. Our own interpretation is that the employee must be sent home and not to work. This appears to be a set period so an employee could not be furloughed one day and working from home the next.
The third question is whether this is legal. Clearly it is a material change of contract and either the employer or the employee can conclude this will not work for them. However it is a sensible arrangement in the current crisis.
Fourthly and perhaps most importantly is cash flow. The chancellor said the scheme should be in place by the end of April. Where only a small part of the workforce is furloughed the cash flow can be managed within the PAYE system but where the whole workforce is furloughed this may take a while to come through. Cash flow is likely to become the prime factor in all decisions.
From a legal point of view you would need to agree in writing that an employee is furloughed on 80% of pay and send the employee home. There will be a requirement to register this with HMRC but this element is not yet clear. An opinion should be sought from an employment lawyer for certainty.
The potential economic impact may lead to more health issues than COVID-19 itself if the current crisis is not carefully arranged. From a national perspective it is critical that as many businesses that can survive this crisis do. It will therefore be incumbent on all stakeholders from landlords through to suppliers to ensure that flexibility is allowed in all financial transactions.
As a package the various measures put in place are very generous but it may still not be enough for some businesses. The next VAT quarter payment can be deferred to assist struggling businesses, Self-Assessment payment on account due in July can also be deferred. There is a time to pay arrangement for Covid-19 on 0800 024 1222. Business rates holidays and cash grants are dependent on circumstances and so would need to be reviewed individually. The Coronavirus Business Interruption Loan scheme is designed to help businesses that otherwise might not be able to cope. Upon application there are also mortgage and rent holidays available to individuals. It will be important to maintain communication with customers, suppliers, and employees during this crisis. As far as possible life should continue as normal whilst following the government guidance on distancing and isolation.
Searching the internet is perhaps more of a risk currently than normal. The following is a link to the government advice which we trust will be updated regularly. www.gov.uk/coronavirus
Updated on 30th March 2020