These are testing times, and many businesses are having to take difficult decisions as the Coronavirus crisis continues. Among them may be the need to reduce employee costs. Every business is different, and the options available to them may vary – you may be considering temporary measures such as pay freezes, short-time working arrangements and the Coronavirus Job Retention Scheme.
In most of these scenarios, there are processes that must be followed and obligations that you have as an employer.
Here is some information about the options you can consider:
Coronavirus Job Retention Scheme (CJRS) – Furloughed Workers
On Friday 20 March, the government announced it is setting up a new Coronavirus Job Retention Scheme. Under this scheme, the government will step in and help pay the salaries of employees who would otherwise be laid off without pay or made redundant as a result of the Coronavirus crisis.
Under the Job Retention Scheme, any such employees would be “furloughed” (i.e. only temporarily laid off).
What we know so far
- Any employer (whatever size) will be eligible for the scheme, including charitable and non-profitable organisations.
- The scheme is being backdated to 1 March and initially will run for three months.
- Where there is no work, employers should fairly select designated workers to be furloughed. You should provide as much communication to employees as possible about the reasons and impact of furlough, then notify them in writing. NB if employees DO NOT have a layoff clause in their contracts, then you must get written agreement from each employee to be designated as furloughed.
- The employee will usually return to their job role afterwards unless their role is made redundant
- Employees who get furloughed will not work at all during the period of furlough, but will remain on your payroll, being paid at 80% of their salary, capped at £2500. Employers can choose to top up the extra 20% but it is not mandatory.
- Employees will remain employed, and length of service will continue to accrue. It is not yet clear whether holiday entitlement, other benefits and pension contributions will continue to accrue.
- It will cover workers who have already been laid off or dismissed. Please contact Reality HR for advice if employees have already been laid off or made redundant.
- Employers will access the reimbursement scheme through an online portal (not yet available). You will be asked to provide details (earnings, employee’s NI number) of the affected furloughed employees online and submit the information to HMRC.
- The reimbursement is likely to start within the next few weeks, but there is not a confirmed date yet
There is another option if you need some or all your employees to work, but on reduced hours. Remember, furloughed employees cannot do any work for the organisation.
If your contracts of employment contain a layoff and short time working clause, you can require that employees work part time or flexible hours with a commensurate reduction in pay and benefit.
Where there is no layoff and short time working clause, you can consult with your staff to explain how the situation is impacting the business and propose they agree to a temporary reduction in working hours or part-time or flexible working arrangements to protect the future of the business and their employment. Such changes would have a commensurate reduction in pay and benefits.
If you decide to freeze pay, you’re temporarily stopping the increase in an employee’s pay for a period of time – this may help businesses avoid layoffs during this period of uncertainty. You need to consider how this may affect employee morale and communicate with them as to why the decision was made. It may help to think of other ways to compensate staff for their hard work, particularly if they are putting in extra hours at home.
Other Cost Saving Ideas
- Reducing overheads, for example using less electricity and renegotiating contracts with suppliers.
- Reducing or stopping giving work to employees on zero hours contracts.
- Reducing or stopping bonus payments for all or certain categories of employees.
- Reducing or stopping overtime payments for all or certain categories of employees.
If all measures have been exhausted, you may need to consider redundancy, however, the Government is strongly advising against making redundancies at this time, and encouraging employers to use the Coronavirus Job Retention Scheme (Furlough) instead. You should take specific advice if you wish to go ahead with redundancies for any reason.
If measures are put in place on a temporary basis, you will need to inform staff of the period during which the measures would apply, and review during this period whether or not they are still necessary. Our HR specialists can ensure compliance with employment law and protect your business from the potential fallout arising from a poorly handled process. Contact us at firstname.lastname@example.org or 01256 328 428