Furlough Leave

Due to the economic impact of Covid-19 (coronavirus) pandemic, the government has introduced a new scheme, called the Coronavirus Job Retention Scheme to help employers to pay for part of the wages of employees who are to be temporarily laid off or given what has now been called ‘furlough leave’.

Under the scheme, all UK employers, regardless of size or sector, can claim a grant from HMRC to cover 80% of the wage costs of employees who are not working but are kept on the payroll. There is a limit of up to £2,500 per calendar month for each employee or PAYE worker, plus the associated employer national insurance contributions on that wage.

This blog answers the frequently asked questions about the Coronavirus Job Retention Scheme. It also includes a FREE Furlough Agreement, which is provided to all employers who make an email request for it by contacting us at henry@doswell-law.com 

This is, however, quite complex and detailed legislation and employers are advised to seek professional advice to avoid any problems or costly disputes in the future.

FAQs

Who is covered by the scheme?

The scheme covers all employees and workers provided they were on the employer’s PAYE payroll on 28 February 2020. This includes full-time and part-time employees, employees on agency contracts and on flexible or zero-hour contracts.

What about employees who have already been made redundant or placed on unpaid furlough leave?

The scheme is backdated to 1 March 2020 so in theory any employees who were made redundant or placed on unpaid leave after 28 February 2020 can be put on to furlough leave by their employer instead of being made redundant. However, there is no obligation on an employer to do so.

Can an employer subsequently make employees on furlough leave redundant if the business is forced to close?

Whilst the government has put in place financial measures to help struggling businesses including this scheme there appears to be no guidance from the government preventing an employer from making employees who have been furloughed redundant where a business is forced to close. However, where the business is continuing, and it is possible to furlough them there is the potential for the dismissal to be unfair.

Are employers obliged to top up the remaining 20% of wages?

Employers are entitled to continue paying full wages during furlough leave, but they are not legally required to do so. If they do top up wages, they can only claim back employer national insurance contributions and minimum auto-enrolment payments up to the cap. Withholding 20% of an employee’s salary will amount to breach of contract and unlawful deduction of wages unless the employee gives their consent although it is expected that the vast majority of employees will agree to this change rather than be put at risk of redundancy.

Can an employer defer payment to furloughed employees until reimbursement is received from HMRC?

Some employers will not be able to continue to pay 80% of employees’ wages until the HMRC portal is up and running and reimbursement is received from HMRC. They therefore have the option of:

  • Making the employees redundant, although this will have its own associated costs and may amount to an unfair dismissal; or
  • Putting the employees on unpaid leave until the scheme is up and running; or
  • Reaching an agreement with the affected employees that they will be put onto furlough leave now but that payment of their salaries will be deferred until reimbursement is received from HMRC.

Can you put employees on long-term sick leave on furlough leave?

The government guidance suggests that employees on sick leave or self-isolating should receive statutory sick pay (SSP) but can be furloughed once they have recovered or are no longer self-isolating.

Can employees who are shielding be placed on furlough leave?

Yes, employees who are shielding in line with public health guidance can be placed on furlough leave.

Can employees who are on compassionate leave be required to return to work and be put on furlough leave?

If the compassionate leave began before 28 February 2020 and is unpaid then it appears that the employee cannot be put on furlough leave. If the compassionate leave is paid then it should be treated in the same way as sick leave, meaning the leave would need to be ended and the employee moved onto furlough leave. Any discussions with the employee about ending compassionate leave should be handled in a sensitive manner.

How is furlough leave to be implemented?

Employer will need to discuss the proposal with staff and make any required changes to the employment contract by agreement. It is a condition of the scheme and to obtain reimbursement that the furlough leave is confirmed to the affected employee in writing.

How should an employer decide who to put onto furlough leave?

An employer could initially ask for volunteers although it is likely that they will receive more volunteers than it wants to furlough given that it allows employees to receive 80% of wages for not working. The procedure to follow will depend on the current financial situation. If a decision has to be taken urgently to avoid closure of the business, then a limited selection procedure is likely to be ok. If there are no immediate financial concerns, then a comprehensive procedure may need to be followed. For example, an employer could prepare a matrix of objective criteria similar to that required for a redundancy selection process.

Employers certainly need to ensure that any selection for furlough leave is not based on discriminatory criteria. There may however be occasions where selection is discriminatory but can be legally justified. For example, it would be direct age discrimination for an employer to use age as a criteria and to select employees over 70 years old. However, this decision could be justified as a proportionate means of achieving the legitimate aim of protecting the health and safety of vulnerable employees.

Can an employer rotate furlough leave between its employees?

Yes, although the government guidance makes clear that employees must be furloughed for a minimum of 3 weeks which is in line with the current lockdown requirements for people to avoid leaving their homes.

Will employees continue to accrue holiday during furlough leave?

Yes, it is likely that all holiday continues to accrue during furlough leave. The government has also passed emergency legislation relaxing the restriction on carrying over the four weeks’ leave under the Working Time Regulations with effect from 26 March 2020. This means that employees are permitted to carry-over any untaken holiday where it was not reasonably practicable to take it in the leave year “as a result of the effects of the coronavirus (including on the worker, the employer or the wider economy or society)”.

Can holiday be taken during furlough leave?

Yes, it is likely that employees and workers can take holiday during the period of furlough leave. However, holiday may not be treated as furlough leave and so may not be reimbursed under the government scheme. Also, furlough leave needs to be taken in minimum blocks of 3 weeks so it arguably cannot be interrupted by holiday.

Can an employee work for another employer?

Yes, following further guidance from the government it is clear that employees can work for another employer whilst on furlough leave. However, employees cannot do work for the employer seeking the reimbursement of wages during furlough leave. Also, the employee’s employment contract will continue during furlough leave so any enforceable restrictions on working for another employer will apply. However, employers may consider waiving any such restrictions to allow employees to accept new roles with a non-competing business.

Will employers need to collectively consult if they intend to put 20 or more employees on furlough leave?

The duty to collectively consult arises where an employer intends to vary the contracts of 20 or more employees and intends to dismiss any employees who do not consent to the change in their terms within a period of 90 days or less. The duty to collectively consult employees does not therefore arise at the initial stage where consent is being sought to put them onto furlough leave.

However, the circumstances in which HMRC reimbursement can be claimed are not completely clear at this stage. As the scheme was put in place to help employers to avoid lay off or redundancy situations, it is likely that the intention to dismiss underpins the furlough leave proposal. It therefore follows that if an employer is offering furlough leave in connection with a proposal to make 20 or more employees redundant within 90 days then the duty on it to collectively consult has already been triggered. If this is the case, then an employer must inform and consult appropriate employee representatives and notify the Secretary of State using Form HR1.

For further information or advice on Furlough Leave or any other Coronavirus questions, call Henry Doswell of Doswell Law Solicitors on 01233 722942. Alternatively, email Henry at info@doswell-law.com 

Disclaimer: Whilst every reasonable effort is made to make the information and commentary contained in this blog accurate and up to date, Henry Doswell takes no responsibility for its accuracy and correctness, or for any consequences of relying on it. The information and commentary in this blog does not constitute legal advice to any person on a specific case or matter. You are strongly advised to obtain specific, personal advice from a lawyer about your case or matter.