March 26, 2020
What is Furlough leave?
Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis by classifying them as a furloughed worker.
Essentially, in this context, “furlough” means laying off a member of staff for a period, without having to make them redundant. It does not currently have a legal meaning in the UK, but is a word more commonly used in the US.
The idea here is that an employee who has been furloughed will remain employed but will not be obliged to work, staying at home until the business situation improves sufficiently to allow them to return.
What steps need to be taken by the employer?
The current guidance states that the employer will need to determine which employees are to be subject to Furlough Leave (or, furloughed) and notify them of the same, taking into account the usual employment law measures that might be needed to change terms of employment.
This means, as we understand it, that there must be consultation and ideally agreement. It is likely that employees will agree to such measures as the alternative is being made redundant and therefore a loss of job.
You will need to consider contractual terms as they apply to your employees as you may already have a contractual right to withdraw work from them, albeit this is unlikely in many sectors.
Once designated and the employee is notified, a submission to HMRC will be required, confirming details of the employees on Furlough Leave and their pay arrangements.
As we understand it, the portal to do so is not yet set up.
Who can claim?
The Scheme applies to all UK employers in the private and charitable sectors. However, it is not entirely clear what the position will be with publicly funded organisations, where the government does not directly pay salaries, such as further education colleges. The Government has so far confirmed that the Education & Skills Funding Agency (ESFA) will continue to pay grant funded providers their scheduled monthly payments for the remainder of the year, although the position for activities not funded in this way is not yet clear.
What is the impact of Furlough on an employee?
HMRC will:
- Reimburse, by way of a grant, up to 80% of the employee’s wage for all employment costs
- Up to a cap of £2,500 per month
(Further clarification is required on how the £2,500 is to be applied / calculated.)
We understand that the system to enable reimbursement is not yet set-up.
What about the remaining 20% of the employee’s salary?
The guidance for employees’ currently states: “Your employer could choose to fund the differences between this payment and your salary, but does not have to.”
Therefore, it is the decision of the employer whether to pay the remaining 20%. This will be dependant on business ability and the cashflow available for payment of wages. Businesses which are closing completely for the three-month period may find themselves unable to pay the additional 20% of employee salaries.
How do we choose which employees are placed on furlough leave and which are required to carry on working?
The starting point is to consider business needs – which roles are critical to the business functioning during the next three months? Care must be taken to avoid direct or indirect discrimination in the selection process and, if you must select between staff doing identical business critical roles, you may wish to consider either asking for volunteers to work, or randomised selection. You may also wish to factor into your assessment what will happen if a member of staff who is required to carry on working later falls ill or has to self-isolate? Have you allowed yourself sufficient staff to cover their absence? It is not yet clear whether the furlough leave scheme will allow people to alternate periods of work, with periods of furlough leave.
What happens if an employer claims a reimbursement for an employee but allows them to continue to work?
We don’t know, but we assume that the Government will be putting measures in place with a view to avoiding abuse.
How long will the scheme last?
The Government say that it will last at least 3 months from 1 March 2020, but will extend it if necessary.
Will furloughed employees retain continuity of service and other benefits of being an employee?
The guidance states that furloughed employees will remain employees, and given that the rationale of the scheme is to avoid redundancies, we believe that continuity of service will be maintained.
As regards other benefits, we await further clarification.
What if an employee refuses to be furloughed because they want a redundancy payment?
In most cases, an employer will not have a contractual right to change an employee’s status and will, therefore, need to obtain the employee’s agreement before designating him or her as a furloughed worker. For some employees, generally older and longer serving, redundancy can be quite an attractive option and may be preferable to being furloughed.
Of course, an employee cannot themselves simply request a redundancy payment, but it remains to be seen whether there is a contingent of the workforce who decide not to agree to be furloughed as a result of the above.
Can we ask an employee to go on ‘partial’ furlough leave?
For example, an employer who only requires 50% of his workforce, could designate 50% of his workforce as furlough workers for week 1, and then designate the other 50% of his workforce as furlough workers for week 2, and then continue to alternate.
We do not have enough details at this stage about the furlough leave scheme to answer this with certainty at this stage.
Will the furlough leave scheme pay the wages of my staff who are still working?
No, the guidance for employees says: ‘To qualify for this scheme, you should not undertake work for [your employer] while you are furloughed’. This means the scheme will not subsidise payments to employees who remain actively working and we consider that this means even if they are working reduced hours.
I put my staff on short-time working last week – can I convert this to furlough leave?
If workers have already put staff on short-time working, you may be able to ‘unpick’ this by agreement with the staff so they can benefit from furlough leave. This would involve a change of contract (hopefully by agreement) and the process must be handled fairly (see above for guidance about changing contracts by consent). Specific advice should be sought.
I laid staff off last week – can I convert this to furlough leave?
The scheme will apply retrospectively from 1 March 2020
If workers have already laid off, you may be able to ‘unpick’ this by agreement with the staff so they can benefit from furlough leave. It is not yet known if the government will permit employers to reengage these laid off employees and then immediately designate them as “furloughed workers” so that they may benefit from the scheme although it certainly seems to be the government’s intention from public statements made about the scheme.
Specific advice should be sought.
If someone is self-isolating on SSP (particularly if for 12 weeks) can they now get 80% of their wages as furlough pay?
The scheme is intended to apply only to any employee who would otherwise have been laid off, i.e. (made redundant or provided with no work and no pay).
It is unknown how or if the government will require evidence in support of any claims made by employers against the scheme.
If I was thinking of sacking someone for gross misconduct do I now have to furlough instead?
No – follow the usual disciplinary process.
The scheme is intended to apply only to any employee who would otherwise have been laid off, i.e. (made redundant or provided with no work and no pay)
Can someone who is self-isolating be furloughed?
The scheme is intended to apply only to any employee who would otherwise have been laid off, i.e. (made redundant or provided with no work and no pay)
What about someone who has been medically suspended?
The scheme is intended to apply only to any employee who would otherwise have been laid off, i.e. (made redundant or provided with no work and no pay)
