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Thousands of employees who have started a new job after the 28 February 2020 will not be able to benefit from the Coronavirus Job Retention Scheme (CJRS) and may need to be laid off or sacked to help businesses cut costs.

To be eligible for the scheme, which covers 80 per cent of a furlough workers employment costs up to £2,500 per month, an employee must have been on their company’s payroll on 28 February.

The loophole in the Government’s much-lauded measure means that newly appointed staff members will not have their wage covered and will instead have to rely on their employer paying them.

As many companies are looking at ways to reduce their costs during this challenging period fears are growing that many will have no other option but to lay new employees off or terminate their employment, as long as they are allowed to do so under existing employment law.

Treasury guidance states that employers can re-hire staff that have already been made redundant and still claim the subsidy.

However, it is understood that the CJRS doesn’t apply if the worker has voluntarily left their post already.

A Treasury spokesperson said that those who are not eligible for the scheme “will be able to access a range of other support – including an increase in the Universal Credit allowance, income tax deferrals, £1bn more support for renters and access to three-month mortgage holidays”.

The Government has confirmed in its guidance for the operation of the Coronavirus Job Retention Scheme (CJRS) that employers will not be at risk of breaching minimum wage rules where they opt not to top-up the wages of furloughed employees.

The CJRS was announced by the Chancellor shortly before the Stay at Home rules came into effect and enables employers to apply for a grant in respect of 80 per cent of the normal wages of a ‘furloughed’ worker, plus the cost of Employer National Insurance Contributions (NICs) and employer’s minimum auto-enrolment pension contributions on this amount.

Where a furloughed employee is paid the relevant rate of the National Minimum Wage (NMW) or National Living Wage (NLW) or near to those rates, the Government has confirmed that you may still reduce their pay the 80 per cent rate, without breaching minimum wage rules.

The guidance states:

Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working.

Therefore, furloughed workers, who are not working, must be paid the lower of 80 per cent of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.

However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80 per cent of their wage that will be subsidised.

Complicating matters, the rates of the NLW and NMW change today (1 April 2020).

However, it is unclear whether this means that the value of the grant for workers on either NLW or NMW and who were furloughed in both March and April will vary in line with the increased rates.

The changes are as follows:

The Government has published new guidance for local authorities on the small business and retail sector grant schemes.

These are one of several measures introduced by the Government to help businesses that are most at risk of failure due to the actions taken to prevent the spread of the Coronavirus.

As previously discussed in our other updates, the Government has created two separate schemes the Small Business Grants Fund (SBGF) and the Retail, Hospitality and Leisure Grant Fund (RHLGF), which are now beginning to be delivered by local authorities.

The latest guidance states: “These grant schemes will offer a lifeline to businesses who are struggling to survive due to the Coronavirus shutdown. Local authorities should make payments as quickly as possible to support struggling businesses.”

The Small Business Grants Fund (SBGF)

All businesses in England in receipt of either small business rates relief (SBRR) or rural rates relief (RRR) in the business rates system will be eligible for a grant of £10,000.

Hereditaments included in this scheme are those which on the 11 March 2020 were eligible for relief, including those with a rateable value between £12,000 and £15,000 which usually receive tapered relief.

The Retail, Hospitality and Leisure Grant Fund (RHLGF)

Businesses in England that would have received the expanded retail discount on 11 March with a rateable value of less than £51,000 are eligible for cash grants for each property they own and operate from.

Those with a property that has a rateable value of up to £15,000 will receive a grant of £10,000, while those with a property that has a rateable value of between £15,000 and £51,000 will receive a grant of £25,000. Businesses with a rateable value over £51,000 are not eligible.

Charities 

Charities that otherwise would meet the necessary criteria but whose bill for 11 March was reduced to nil by a local discretionary award are still eligible for the RHLG, according to the guidance.

Exclusions

Hereditaments that are occupied for personal use, such as private stables, beach huts, moorings, car parks and parking spaces are excluded from both schemes.

Additionally, businesses that were in liquation or were dissolved as of the 11 March cannot apply for either scheme.

Applications 

Neither scheme has a mandatory application process. Instead, businesses should be contacted by their local authorities who will outline how they can claim a grant.

In some cases, where a business has an existing direct debit to pay business rates, local authorities can handle the application automatically or they may request additional details via an online form.

Fraud

The guidance from the Government makes it clear that these schemes are open to a risk of ‘deliberate manipulation and fraud’. As such, any business caught falsifying their records to gain additional grant money will be prosecuted and the funding provided will be reclaimed.

To assist local authorities, the Government Grants Management Function and Counter Fraud Function has made their digital assurance tool, Spotlight, available to councils to help prevent fraudulent claims.

Payments

The Government confirmed in its latest daily briefing that payments of grants would begin now and that some firms have already received funding automatically from their local authority.

It is recommended that you check your accounts to ensure the money has been deposited if you are expecting payments to be paid automatically.

If you have not been contacted by your local authority and believe you are eligible, we recommend that you speak to the relevant officer at your council to find out how the funding is being delivered in your area.