COVID-19: UK Government Guidance on Job Retention Measures

March 23, 2020

Update (Nov. 2): In response to the continuing COVID-19 crisis, the UK government on 31 October 2020 announced a new national lockdown for England, to run from 5 November 2020 until 2 December 2020, subject to extension. For additional details, please see our alert.

UK Job Retention Plan

The UK government has published guidance on various aspects of the package of measures announced on 20 March to support UK businesses and employees.

One of the most significant developments was the government’s plan to pay a proportion of the wages of employees who are unable to continue working because of the COVID-19 crisis and would otherwise be laid off or made redundant. It is currently intended that the scheme will run for a period of three months from 1 March 2020, but may be extended.

The plan requires an employer to designate employees as “furloughed employees.” It is to be administered through Her Majesty’s Revenue & Customs (HMRC) by using a portal to submit information about furloughed employees. The portal and the system of reimbursement have not yet been set up. The plan applies only to employees and not the self-employed.

This designation is “subject to employment law,” which means that it is a contractual matter that cannot be imposed on employees but must be agreed with them. The plan also raises the possibility that a proposed designation of 20 or more employees in a single establishment would trigger the collective consultation obligations under the Trade Union & Labour Relations Act 1992 (requiring a period of at least 30 days’ collective consultation), which may not have been the intention.

Under the plan the UK government will pay up to 80 percent of a furloughed employee’s wages, up to a cap of £2,500 per month (i.e., £30,000 per annum). The assumption is the £2,500 per month cap relates to the maximum sum the government will pay. An employer may elect to pay the balance of the employee’s wage but need not do so. However, to avoid claims for unauthorised deductions from wages, breach of contract or constructive dismissal, the employee would need to agree to the nonpayment of the balance of wages.

Therefore, subject to legislative clarification, designated employees would need to agree to be a furloughed employee and agree to any reduction in their total pay to the 80 percent proportion and/or the £2,500 per month cap. Given that the plan applies to employees who would face lay off or redundancy if the plan is not applied, it seems likely that in most cases employees will agree to both elements. It remains to be seen whether the government imposes any additional and more stringent evidential requirements to avoid abuse by employers.

Statutory Sick Pay (SSP) Measures

A further employment measure taken by the government includes allowing small and medium-sized companies (those with fewer than 250 employees as at 28 February) to reclaim up to 2 weeks’ SSP, currently £94.25 per week, from the government through a system of reimbursement. Proof of a COVID-19-related sickness absence does not require the usual GP fit note, but an isolation notice that can be obtained from NHS 111 online. Further, SSP will now be available in COVID-19-related cases from the first day of sickness absence (usually it is payable only from the fourth day of absence).

The plan for SSP rebates will come into force with the publication of regulations.

Self-Employed Workers

The UK government is coming under increasing pressure to take further measures to safeguard self-employed workers. Self-employed workers are currently not covered by the job retention plan and are not entitled to receive SSP.

Currently, self-employed workers have been granted an extension to pay income tax payments to HMRC from 30 June 2020 to 31 January 2021.

Self-employed workers who encounter hardship due to loss of earnings because of the COVID-19 crisis must rely on welfare payments.

McGuireWoods has published additional thought leadership related to how companies across various industries can address crucial COVID-19-related business and legal issues.