Since the Chancellor announced the Corona Virus Job Retention Scheme, it has been universally hailed by most
employers and seen as a key measure to ensure that their businesses will survive the current lockdown.
Following the announcement however, many have not read the guidance that has been issued providing (some) details and so are therefore not aware of the limitations. It is
really important that
employers understand what the scheme is and isn't - and make sure they comply with its rules, as otherwise they could find themselves in a worse position than they would have been without it.
At Macnabs we have been speaking to a number of employer clients to ensure that they are able to take full advantage of the scheme - and two key misunderstandings keep on emerging. These are misunderstandings that could be the difference between the business surviving or not.
1. The first is that the government
is not simply going to sweep in and pay 80% of the salary directly to
employees. Crucially, employers
must pay the salaries first (restricted to 80% or not) and then look to reclaim from the government via an online portal (which at the point of writing this is not yet open). Employers who haven't budgeted for that or put funding in place are in for a very unpleasant surprise as we do not currently know when the money is going to be reimbursed. One would hope it could be as soon as the end of April, but some rumours have it as late as into June. It is likely that many employers who have either very reduced or even nil income over that period will be unable to fund that. The governent recommends funding that via the Corona Virus Business Interruption Loan Scheme - but there are already articles surfacing in the mainstream news channels confirming that many of the banks who are approved by the government under that scheme are both seeking personal guarantees from business owners and offering very high interest rates.
In short, make sure you have realistic funding in place to pay salaries meantime.
2. The second is that many employers don't seem to understand that in order to qualify, a furloughed worker under the scheme
cannot do any work. It appears that some employers think that it could be good for their business to have
employees working from home and the government paying 80% of their salaries. Although it is not yet clear (like so many aspects of it) what checks will be carried out, it is likely that if the government becomes aware that an employee has been carrying out any work, they shall simply refuse to reimburse the 80% of salary that has been paid.
Again, in short, your employees who are furloughed should do no work for the business otherwise you run the risk of not getting the money back from the goverment - putting you in a worse position than you might have been.
Our earlier article shortly after the scheme was announced has other useful information regarding steps you should take - particularly if you plan on dropping your furloughed employees' salary to the 80% recoverable from the government and don't have a provision that lets you lay off / furlough the employee in the contract. You can view that
here.
If you need help with either implementing this scheme or indeed others that the Chancellor and the Scottish Government have announced to support businesses, please do get in touch with
employment specialist Garry Sutherland at
garrysutherland@macnabs-law.co.uk.
