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Job Retention Scheme – example letter varying employee terms of employment

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With today’s announcement businesses will be carefully reviewing the Prime Minister’s advice and some will decide that their business is non-essential, can not be carried on via home-working and has been negatively impacted by the Coronavirus crisis to such an extent that some staff may need to be made redundant. An alternative to redundancy could be the new Coronavirus Job Retention Scheme (CJRS) where staff will continue to be employed but will be temporarily laid off with their wage cost partially supported by a Government grant.

Unfortunately officially published information outlining how the CJRS will operate is very limited. However, time is of the essence and many business owners will need to make decisions quickly, they can not wait for the full details to emerge. We have several clients in this position, desperately looking for advice and I suspect that several of you are also asking similar questions of your own advisers.

I’m happy to share with you a letter template which we will be sending to our own staff in another business which we operate. We’ve not been able to have it checked by a lawyer because as as I’ve said above the detail is not yet available – we like everyone else are operating somewhat in the dark.

Assuming that your existing employment contract does not allow for you to lay employees off, the first step will be to obtain their voluntary consent to the required changes to their terms of employment (this is the template below). The second step, when needed, will be to write to those employees who you wish to furlough, to tell them that you have decided that they will be furloughed from a particular date.

My understanding is that you will then need to payroll and pay the furloughed employees as normal, albeit at the lower voluntarily agreed salary level. Then at some stage in the future, once HMRC have their systems in place you will need to apply for reimbursement under the scheme. Unfortunately the time scale for reimbursement is not yet known so you will need to fund the payment to your employees before you get the money back.

You might decide to pay more than the 80% covered by the grant. The letter template below has been drafted on the basis of paying at the 80% level.

I trust that you will treat this article in the spirit with which it has been provided……. to help to small businesses in these difficult and uncertain times. Because of the lack of clarity and published information it is very much based on my own interpretation and as such involves many assumption, and to be frank a certain amount of guess work.

If you choose to read further you do so on the strict understanding that Mackenzies Accountants Limited and the author accept no responsibility or liability whatsoever for any action taken or not taken in relation to this article and we recommend that appropriate professional advice be taken having regard to your own particular circumstances.

The template which we will be using in one of our businesses is below, I hope that you will it and my notes above helpful.

 

Mark P Smith BA (Hons) BFP FCA
Mackenzies Chartered Accountants
1 Langley Court, Pyle Street, Newport, Isle of Wight, PO30 1LA

Telephone 01983 528139
Email mark@mkchartered.co.uk

 

Dear Employee,


Coronavirus Job Retention Scheme (CJRS)

Clearly we are concerned about what the future holds for our business and by implication for the jobs of our entire team. We need to take action now to give us the very best chance of finding a way through this.

I therefore need to ask you to voluntarily agree to a variation to the terms of your employment, which will allow us to use the new Coronavirus Job Retention Scheme as an alternative to redundancy should that become necessary.

I appreciate that this is a big ask, but if we are to reduce the risk of redundancies, we need as many of our colleagues as possible, to agree to do this.
We have decided to send this request to all employees including the directors. However, this does not mean that all employees will be furloughed (laid off), we just need to have the agreements in place to provide flexibility to use the scheme for selected employees as and when needed. So please continue to work as usual until we inform you otherwise.

If you do not voluntarily agree to these changes, and you are under no obligation to do so, then your current employment terms will continue to apply. Under your current terms, if we have no work for you, your job might be at risk of redundancy. In which case we would follow the required redundancy procedures and if your job were to be made redundant, you would be entitled to usual statutory (or if appropriate contractual) notice and redundancy pay.

If you agree to these changes, and we subsequently have no work for you, we may inform you in writing that we have classified you as a furloughed employee. You will then be temporarily laid off, during which time you must not carry out any work for us. The advantage of this route is that a large part of your pay may be protected by the Coronavirus Job Retention Scheme. When things return to normal the furloughed period will end and we would ask you to return to work.

How much of your pay will be protected and how much will you be paid if you are laid off?

The Government will provide a grant to cover up to 80% of your usual pay capped at £2,500 per month, your usual pay excludes any commission and bonuses. If your pay varies then it will be 80% of your average monthly pay so far this tax year (April 2019 to February 2020) or the same amount you were paid for the same month last year. If you started work for us after 1st April 2019, then it will be your average monthly pay to February 2020.

So as part of this voluntary agreement, if your current gross salary is £37,500 or more we are asking you to consent to your salary being reduced to £30,000. If your current salary is less than £37,500 then we are asking you to agree to it being reduced by 20%. These reductions only apply when and if you are furloughed.

What does this mean in terms of your take-home pay?

These examples assume that you are enrolled in our pension scheme and have standard personal tax allowances. These examples are for illustration only and your actual pay will be based on your own personal circumstances.

Current salary £40,000 – take home £2,448
Furloughed salary £30,000 – take home £1,910

Current salary £35,000  – take home £2,178
Furloughed salary £28,000 – take home £1,802

Current salary £30,000  – take home £1,910
Furloughed salary £24,000 – take home £1,587

Current salary £25,000  – take home £1,640
Furloughed salary £20,000 – take home £1,371

 

Current salary £20,000  – take home £1,371
Furloughed salary £16,000 – take home £1,156


We would like you to voluntarily agree to this amendment.

That we as your employer may at any time whilst the HM Government’s Coronavirus Job Retention Scheme, or any similar scheme launched in time of crisis, (the ”Scheme”) is in operation, inform you that you have been temporarily laid-off (often referred to as furloughed) employee. Your status as a laid-off (furloughed) employee may start as soon as the first normal working day following the day on which we inform you that you are to be laid-off (furloughed). Whilst you are laid-off (furloughed) you must not work or engage in any other paid employment or self employment unless you obtain our prior permission in writing. During the entire laid-off (furloughed) period you agree that your salary will be temporarily reduced, without compensation to you, to the amount at which your gross salary and other employment costs (employers national insurance and employers pension) are fully covered by the grant provided to us under the Scheme. Depending upon the amount of the grant available under the Scheme your salary could vary between zero and 100% of its current level, but as a minimum you would be entitled to statutory lay-off pay.

I thank you for your careful consideration of the information set out above, I would be grateful if you would complete the declaration below and return this letter to me. I enclose a second copy of this letter for you to keep.

If you have any questions please speak to your line manager who will arrange for you to have a discussion with me or another director.

If we do not receive your completed declaration by insert date, I will assume that you do not consent to the proposed variation.

Yours sincerely,

Joe Manager
Director of XYZ Limited
 
Declaration by employee 
 
Delete one paragraph below, sign and return one copy to Peter Peoples, XYZ Limited, XYZ House, Long Drive, Anytown, AB10 2XY or scan and email to peter@xyzlimited.co.uk
 
I AGREE to the variation of my terms of employment as set above. I have entered into this decision voluntarily and I understand that if I am furloughed that my salary will be reduced by at least 20%.
 
Or
 
I DO NOT AGREE to the variation of my terms of employment as set above. 
 
 
Print full name _________
 
Signature _____________
 
Date _________________

1 thought on “Job Retention Scheme – example letter varying employee terms of employment

  1. Hello Mark, your article / notes were brought to my attention by of one of my clients, Steve Waller MD of Waller Associates
    Thank you for your publication, it is very helpful and appreciated by Steve.
    These are challenging and unprecedented times, and I hope you keep well and safe.

Comments are closed.