Coronavirus: Furloughed Workers and the Job Retention Scheme
Frequently Asked Questions No 2 Covid-19 CORRECT AS AT 27 MARCH 2020 PART ONE
What does furlough mean?
Furloughed status is when an employee takes a temporary leave of absence. It is a term that has not been recently used in UK Employment Law previously however, in light of the current Covid-19 pandemic, it has been introduced by the Government to allow an employee’s employment to continue and for them to be paid whilst they are unable to attend work.
What is the Job Retention Scheme and which employers are eligible?
The Coronavirus Job Retention Scheme has been set up by the Government for all UK organisations including businesses, charities, recruitment agencies (agency workers paid through PAYE) and public authorities. The employer must have had a PAYE payroll scheme created and started on or before 28 February 2020. and is intended however, to help those struggling to cover staff overheads such as wages due to the coronavirus. The scheme will provide employers with access to support in order for them to be able to pay their employees’ wages whilst they are unable to attend work due to the economic impact caused by Coronavirus. Such employees will remain employed by the company and remain on their payroll, but their status will be changed to a furloughed status.
The scheme will enable businesses to recover 80% of the furloughed workers’ wages from HMRC capped at £2,500 per month. It is at the discretion of the employer and dependant on their financial abilities as to whether they choose to make up all or part of the remaining 20% or not. The scheme pays a grant not a loan to the employer. The HMRC portal will take time to build so businesses are advised to look to the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime.
When will the scheme be ready?
The Government announced that the scheme should be up and running by the end of April 2020 meaning, all being well, this will be in place for most employer’s next payroll. If your organisation has already furloughed workers prior to the scheme being in place, the payments can be backdated to 1 March 2020.
How long will the scheme exist?
It is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020
Who is eligible to be become a furloughed worker?
The scheme is designed to provide an alternative for employees who otherwise would be laid off or made redundant during the current crisis. Employees who are on, full time contracts, part time contracts, agency contracts (the employee on such a contract should not be working) and zero hour or flexible contracts will all be eligible for the scheme. However, they must have been on the employer’s payroll since 28 February 2020. March 2020 new starters are not therefore included.
An employee who has been made redundant since 28 February 2020 can also be eligible if they are rehired by the employer.
Are there any restrictions on what a furloughed employee can do ?
Any furloughed employees must not undertake any work on behalf of the organisation for the duration of the furloughed period. A furloughed employee can take part in volunteer work or training, as long as it does not provide services to , or generate revenue for , or on behalf of their employer ,
Which employees will NOT be eligible for the scheme?
If an employee is on unpaid leave or lay off then they then they will not be eligible for the job retention scheme unless they commenced the unpaid leave after 28 February 2020.
Also any employees who are working for reduced pay or working reduced hours and such employees should continue to be paid through the payroll with their salary being paid as per the terms agreed within the contract of employment.
Non executive directors are not normally considered as employees for these purposes.
Finally, as above, employees hired after 28 February 2020 will not be covered by the scheme applicable for the scheme.
Can I impose furloughed working?
Furloughed employment is to all extent and purposes a new concept. It is therefore highly unlikely that it will be included within an employees’ contract of employment. In the absence of an express contractual provision, furloughing cannot be imposed on an employee without their agreement. If the variation is imposed on the employee unilaterally, they will be entitled to pursue a redundancy pay claim, constructive dismissal claim or breach of contract claim. It is worth checking the contracts currently in place to see if there is a lay off provision included and if this can be interpreted as extending to being furloughed. If you are unsure whether this is something included in your contracts, it is important to seek legal advice before any further action is undertaken.
If there is no provision for staff to be laid off within the contracts, then you must consult with the employees who you are proposing be designate as furloughed workers and obtain their written agreement.
For those with 19 or fewer employees, you should speak with all members of staff you are proposing become furloughed workers. Explain the option of furloughed employment with them making the alternative options clear should they decline.
Any employers with 20 or more employees will need to ensure they undertake a collective consultation with all eligible employees. Again, the option of furloughed employment should be discussed however, when discussing this option with them highlight that if this not accepted by employees, then alternative solutions will need to be considered.
In situations where there are multiple members of staff who complete the same job, the decision as to whom should be considered to be a furloughed worker should be undertaken in a similar way to that in a redundancy situation. A pool of employees should be identified and thereafter, the individual employees chosen to designated as a furloughed worker should be selected using a fair and objective selection criteria.
Following discussions and once you have designated employees who will become furloughed workers, a letter of variation will need to be prepared to outline the changes to their contract of employment. This should be signed by the employee, dated and handed back to the employee’s manager or a member of HR.
Should you require any assistance in preparing a letter, please seek further advice.
It is vital that any furloughed employees are sent home and do not undertake any further work for the company during this period. They do however retain all their pre existing contractual and statutory employment rights such as statutory sick pay entitlement, maternity and other related rights, right to redundancy payments and protection against discrimination and unfair dismissal
What happens if employees do not agree?
It may be the case that some employees are unhappy to be furloughed, particularly if they earn in excess of the £2,500 cap per month and or the employer is not paying the extra 20% of the monthly wage.
Should employees not agree to become a furloughed worker, then the further options of layoff and redundancy can be considered. Again employers must bear in mind that they will be required to follow a lawful redundancy procedure and that the redundancy definition is met. Unilateral imposition remains an option but not one we would recommend given the risks identified above.
My employee has more than one employer as they have different jobs can I still claim?
Yes. If your employee has more than one employer they can be furloughed for each job. Each job is separate and the cap applies to each employer individually
If you have further questions on this particular matter, please do not hesitate to contact our employment team at email@example.com for any further advice. This general guidance is correct as at 27March 2020 but may be subject to change. We strongly recommend that specific advice is sought as needed.