The F Word – Furlough

Since the Government’s Coronavirus Job Retention Scheme was announced, we have been inundated with queries about furloughing employees, to qualify for the Scheme.

Furlough, itself, doesn’t mean anything in particular in UK employment law. It appears to be a turn of phrase which the Government has chosen to apply to this particular situation; when employees are off work, paid, but would (alternatively) be laid off or redundant, but remain employed in times of economic crisis. It is unclear whether HMRC intends to rely on this guidance only, or whether there will be actual legislation as yet but as soon as we know we will update this blog.

 

What is the Scheme?

The Government’s Coronavirus Job Retention Scheme was announced on Friday, with the intention of reducing the number of layoffs and redundancies. The Government’s aim is to get this scheme up and running before the end of April. The Scheme is open to all UK employers that had a PAYE scheme in place on 28 February. It will essentially pay some of the salaries for those members of staff who would have otherwise been redundant or laid off. Instead they are retained as employees, but 80% of the salary (up to £2,500) will be paid for, for 3 months, by the Government under this Scheme. Once furlough ends, they will go back to work as normal.

Any organisation with employees can apply, including charities, recruitment agencies and public authorities; however, the government does not expect public sector employers to use it as long as central government continues funding wage costs in the normal way.  With agency employees, the scheme is only available for agency employees who are not working.

Employers can reclaim up to 80% of wage costs up to a cap of £2,500 per month, plus (not including) the associated employer NICs and minimum auto-enrolment pension contributions on that wage. Fees, commissions and bonuses are not included.

An employer can choose to top up to 100%, but does not have to (subject to employment law and renegotiating any contractual entitlements).

The 80% of the employee’s salary is based on the higher of

(1)        The earnings in the same pay period in the previous tax year;

Or

(2)        The average earning the previous 12 months (or less, if they have worked for less).

For an employer to qualify for the payment under the scheme, the employee must have been furloughed for a minimum of three weeks solid. After this three week period the employee can come off furlough. Therefore, this means an employer cannot rotate staff between furlough and non-furlough.

It is a grant so is not repayable by the company. The current guidance is that all UK businesses will be eligible.

Dependent on the contract, it is likely that you will require the employee’s consent, as their status will change to a “furloughed” employee. We are recommending this is done in writing in case evidence is needed or a dispute arises down the line.

An employer will also be able to choose whether the employee only receives the Government subsidised 80%, or whether the employer meets the cost of the additional 100%. If the intention is for the employer to receive only 80% of their salary then you will, again, need to obtain their agreement to such a decrease in salary.

When agreeing changes in hours (and acceptance of 80% pay), assuming the contract does not already allow for that, normal employment law applies.  The employer must be careful not to discriminate in deciding who to offer furlough too.  My view is that prioritising vulnerable workers is unlikely to be discrimination, as prioritising the over 70s (direct age discrim against those under 70) is almost certainly justifiable, and those who do not suffer from serious health conditions are not a protected class.

At this point, we should add, that we are still awaiting further government guidance and potential draft legislation, so there are still some points that are still unclear and the advice below may be subject to change as the further information develops.

 

Who is furloughed?

As far as we understand, the Scheme will only reimburse the wage costs for employees who were paid through PAYE and employed on 28 February 2020 and would otherwise be laid off or made redundant. This means employees taken on after the 28 February 2020 are excluded from the scheme. However, employers will be able to re-employ people who have since been made redundant after the 28 February 2020 and furlough them. We are unsure of whether there will be any enforcement or method by which this is checked, but we would expect any draft legislation to include some kind of penalty or consequence for the abuse of the scheme.

This means that people can’t necessarily be furloughed just because they have (for example) child care commitments due to school closures or are vulnerable and therefore should self-isolate.

Employees on sickpay or self-isolating cannot be furloughed, but can be furloughed afterwards. Employees who are shielding (these are the high risk people) can be placed on furlough.

Employees on maternity (or similar) leave can continue to draw SMP (or similar) payments.  The guidance does not prohibit women on maternity leave agreeing to return to work early and then being furloughed, or electing to change to shared parental leave and then being furloughed.

Employees selected to be “furloughed workers” should be selected for furlough based on their job responsibilities and whether they would truly otherwise be laid off or redundant, and should ensure that they don’t consider any protected characteristics (eg. gender, disability, pregnancy and maternity) in the course of making such decisions, as this could be discriminatory.

Employees existing employment contracts will remain in force whilst employed, which means that they will also continue to accrue holiday and be able to access any contractual employment benefits, whilst furloughed.

An employee who is on furlough leave can choose to volunteer or do training so long as it does not generate any money for their employer.

Employers can only claim once every three weeks, ie they cannot get weekly reimbursement.  Claims can be backdated to 1 March 2020.

Can employees put themselves on furlough leave?

Essentially, no. Employees can suggest it may be a good solution or alternative to any threat of redundancy, but at the moment the guidance suggests that, to qualify for furlough leave, employers will have to show that those employees would otherwise be laid off or redundant, and not simply that they would be on unpaid leave. That is a threshold which only the employer can evidence.

Employees cannot simply place themselves on furlough leave; it has to be agreed with their employer.

Hundreds of thousands of businesses are having to make substantial adjustments in an effort to come out of the other side of Coronavirus, this is an especially tough undertaking given the uncertainty as to when this situation will come to an end or what the economy will face once we are able to emerge

Here at Thrive, we are providing support through our helpline at coronavirus@thrivelaw.co.uk and we are also offering specific advice and draft letters for employers to agree with their staff furlough leave, at a reduced fixed fee. Please do not hesitate to get in touch if we can be of any assistance.

 

Temporary workers

If you’ve been employed (or engaged by an employment business in the case of agency workers) for a full year, employers will claim for the higher of either:

  1. The amount you earned in the same month last year
  2. An average of your monthly earnings from the last year

If you’ve been employed for less than a year, employers will claim for an average of your monthly earnings since you started work. The same arrangements apply if your monthly pay varies such as if you are on a zero-hour contract.

If you started work in February 2020, your employer will pro-rata your earnings from that month.

Bonuses, commissions and fees are not included as part of your monthly earnings.

By the Thrive Tribe

Anything within article should not be taken as legal advice. Any information provided will be general advice and for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action. If you wish to obtain specific advice to your situation and your decisions, please contact us and we will thereafter be able to advise.

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