Coronavirus Job Retention Scheme – the implications for the public sector and publicly funded organisations

This briefing note considers the impact of the Government scheme on public sector organisations or organisations/charities/businesses that receive a significant amount of funding from the public sector to operate services on its behalf.

What is the Coronavirus Job Retention Scheme?

In simple terms the main headlines of the scheme are:

• The scheme is intended to avoid redundancies and protect jobs.
• Employers will be reimbursed for 80% of wage costs, up to a cap of £2,500 per month, plus the associated employer’s national insurance contributions, and minimum automatic enrolment employer pension contributions on that reduced wage.
• The workers covered by the scheme are those who have been “furloughed” which is a leave of absence – their employment will continue during the furlough period
• Workers must be told about and consent to this change of status.
• Employers have to continue to pay the furloughed workers and the Government will reimburse the employer.
• Workers can’t undertake any work for the employer during the furlough period.

Many organisations in the private sector have already taken steps to furlough employees and take advantage of the scheme.

However, what does the scheme mean for the public sector or organisations that receive funding from the public sector to operate services? While the scheme itself might have been warmly received, the Government’s guidance on how it works in practical terms has been criticised, in particular in relation to whether organisations who receive public funding can furlough employees and access the scheme.

What limitations are there on who can be furloughed?

The Government guidance states that people in the following categories cannot be furloughed:

• Anyone who has been on unpaid leave except those who have been placed on unpaid leave since 28 February 2020.
• Anyone who was not hired before 28 February 2020

It also states that it is not envisaged that scheme should be used for:

• Public sector employees.
• Employees of businesses or organisations in receipt of public funding for staff costs.

The guidance from the Government in relation to private sector organisations is very different to the public sector and organisations that are in receipt of public funding. The guidance states:

“The Government expects that the scheme will not be used by many public sector organisations, as the majority of public sector employees are continuing to provide essential public services or contribute to the response to the coronavirus outbreak.

Where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them. This also applies to non-public sector employers who receive public funding for staff costs.

Organisations who are receiving public funding specifically to provide services necessary to respond to Covid-19 are not expected to furlough staff.”

This guidance isn’t particularly clear but it appears that there is a recognition that there are different types of organisations which could be caught by this:

• Organisations who will be required to provide frontline services during the Covid-19 response. It is interpreted that NHS organisations such as NHS Trusts will fall firmly into this category. Employees employed by such organisations are expected not to be furloughed and to continue to work and be paid their normal salary in the usual way.
• Organisations who receive public funding to provide services to respond to the Covid-19 crisis. These organisations are not expected to furlough their staff. The type of organisation that would fit into this category are those that have been commissioned to developing breathing apparatus or testing kits to meet the needs of healthcare sector during the peak of the pandemic.
• Organisations who receive public funds for staff costs to operate services. Employers are expected to continue to pay staff if the money to pay them is publicly funded. It is strongly inferred that this is irrespective of whether such staff have any work to perform. The type of organisation that is likely to fall into this category are GP practices, charities and private sector companies that have won contracts with the public sector.

It is not envisaged that there is going to be any controversy that employees employed by organisations falling into the first two categories set out above won’t be eligible for the job retention scheme. NHS Trusts for example are going to require their staff to being working at full capacity where possible.

However, some employers falling into the third group of organisations described above, could understandably feel aggrieved that on first reading of the guidance they are not able to furlough employees and rely on the Government scheme. Many publicly funded organisations that are not public sector employers, receive a package of public funding with little expectation on how that funding is used/applied, other than broadly for it to be used in providing the services it is contracted to do. In addition a number of publicly funded organisations have many different income streams and the element of funding that is received from the public purse can be only an element of their operating costs

Unfortunately there is still no clear guidance on when employers falling into the third category identified above can use the scheme. The only reference in the guidance on this states that where organisations are not “primarily funded” from the public purse and whose staff cannot be redeployed to assist with the coronavirus response, the scheme might be appropriate to be used for some staff. This seems to suggest that where an employing organisation is not wholly or mainly funded by public funding and staff cannot be redeployed to work in areas in the effort to combat coronavirus, then it would be appropriate for the employer to access the scheme.

Hopefully further guidance will provide additional clarification on this, but it is difficult to see how say a charity whose operations have been significantly curtailed because of the Covid-19 restrictions, cannot furlough employees and access the scheme, in particular where say they have a number of different income streams. The alternative would be pay the employees in this situation normally for them to essentially do very little. It might be prudent, where there are services that are publicly funded and employees working within those services cannot undertake their normal work, to consider if they can do different roles in particular to work to on Covid-19 activities. However, if there are no such work available then the guidance does appear to allow the furloughing of employees and such organisations to access the scheme.

However, in our experience the funding streams and work undertaken by the organisations that could fall into the third category identified above can be exceptionally diverse and we would strongly recommend that you take advice before making such decisions about furloughing employees.

For further information, please get in touch.