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30-04-2020

sarah-rushton

What we know about Furlough leave so far

On Friday 20th March 2020, the Chancellor of the Exchequer announced the Coronavirus Job Retention Scheme.  It introduced an entirely new concept into UK employment law, Furlough Leave.  Rather than dismiss an employee or make them redundant, an employer can place the employee on furlough leave with part of their wages covered by the government in the form of a grant.  The idea is that it helps employers through the current crisis whilst ‘tying’ employees to their current employer and thus avoiding a rise in unemployment and redundancy.  It is envisaged that the scheme will run until 30 June 2020 (originally it ran to 31 May 2020), although it may be extended further.

 Broadly if an employee is placed on furlough leave:

  • They cannot do any work for their employer; but
  • They remain an employee on payroll and continue to accrue continuous service; and
  • HMRC will reimburse 80% of furloughed workers wage costs (capped at £2,500 per month per employee) plus employer’s NIC’s and minimum automatic enrolment employer pension contributions on that wage if the employer makes a claim.
  • The furlough scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020 and enrolled for PAYE online
  • The furloughed employee must have been on the employer’s PAYE payroll on or before 19 March 2020, and an RTI submission notifying payment in respect of that employee must have been made to HMRC on or before 19 March 2020.

As might be expected the scheme has thrown up some problems.

Can an Employer Impose Furlough Leave on an Employee?

This will depend on whether you intend to pay them in full or not.

Broadly there is no requirement for an employer to provide work, provided it continues to pay salary. Therefore, it is unlikely to be a breach of contract to place an employee on furlough leave (without their agreement) provided you pay them their full pay.  If however an employer proposes to pay less than full salary, then absent a term in the contract of employment permitting this (which is unlikely) unilaterally imposing furlough leave without the employee’s agreement is likely to be a breach of contract.

Can an Employee put themselves on Furlough Leave?

No.

Can an Employer partially Furlough an employee?

No, a furloughed employee must not undertake any work for their employer at all.  They may undertake voluntary work or work for another employer if their employer agrees, or it is permitted by their contract of employment                                                                                                                                                                               

Does the only other option have to be redundancy in order to furlough an employee?

No, whilst the scheme was clearly intended to help employers avoid redundancies, there is a considerable amount of discretion on the part of the Employer as businesses will be impacted by Covid 19 in different ways.

 

 

Can an Employer Keep some of the Furlough Grant?

The guidance makes clear that the entirety of the payment received by the employer to cover an employee’s subsidised furlough pay must be paid to the employee in the form of money and that no part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme. Unless something to the contrary is agreed with the employee benefits will have to be maintained by the employer during furlough. Employers that offer permanent health insurance or death-in-service benefits should check to see if cover changes because the employee is on furlough e.g. will death in service be calculated on the basis of normal pay or furlough pay?

Employers will have to pay back any grants back to HMRC immediately should they become unable to use it to pay the employee’s salary and employer national insurance contributions.

What evidence will an Employer need to make a claim under the scheme?

The current guidance states that to be eligible for the furlough grant employers must confirm in writing to their employee that they have been furloughed and that  “If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming through the scheme”.  There needs to be a written record, but the employee does not have to provide a written response.  A record of this communication must be kept for five years.   

How do you Choose who to furlough?

From a practical perspective an employer needs to consider what their business needs are likely to be over the next 3 months or so, factoring in possible ill health absences.  Employers need to have in mind that furlough leave does not negate other employment rights so care must be taken to avoid discrimination.  If staff are carrying out the same roles, consider either asking for volunteers, having a selection matrix in the same way you might if a redundancy process was carried out, or rotating staff on and off furlough so all staff are treated equally.

How Long Can you Furlough an Employee For?

Furlough leave must be for a period of at least 3 consecutive weeks and the scheme is currently expected to expire on 30 June 2020.

Can you rotate employees on and off furlough?

Yes so long as each employee’s period of furlough leave is at least 3 consecutive weeks.

Do we have to top up furlough leave to full pay full pay?

No, but see above re consent.

What about Adminstrators?

Where a company is in administration, the administrator will be able to access the Job Retention Scheme.  It remains to be seen administrators many will as there will be a concern that by doing so the administrators risk adopting the contracts of employment.  Guidance by Snowden J in the administration of Carluccio’s has indicated that adoption will take place when the administrators apply to the government for a grant under the Scheme or make payments to the employees under the furlough scheme.  The guidance also stated that funds paid to the employees may be paid in priority,  either using the funds received from the government under the Scheme or from funds of the company which would be reimbursed by the Government under the furlough scheme.

Can An Employer Re Hire Employees and put them on Furlough?

Employers can do this for employees who were employed on 28 February 2020, but who left before 19 March. However, there is no obligation to do so and there are legal implications for an employer who decides to take on a former employee.

Does an Employee continue to Accrue holiday Leave during Furlough?

Yes according to HMRC’s current guidance which states “Furloughed employees continue to accrue leave as per their employment contract”.   Earlier versions of the guidance was silent on the issue of holiday leave. 

This has caused questions in relation to the interactions between holiday leave and furlough leave and since opinion has been divided and the guidance has changed over time, employers are advised to look at the most current government guidance before making any decisions.   Below are just a few of the trickier issues around holiday and furlough:

  • What happens if an employee takes holiday leave during furlough?  e.g. does a period of holiday leave ‘break up’ a period of furlough leave?  Based on the current guidance, the answer is probably not. 
  • If an employee takes holiday leave what should they be paid? An employee should be paid in full for any period/s of holiday leave they take during furlough because of the operation of the Working Time Regulations.
  • What about Bank holidays? Where bank holidays are included in an employee's holiday entitlement under their contract, arguably employers should pay the employee in full for a bank holiday that falls during the period of furlough.  Where a furloughed employee is not entitled to bank holidays off under their contract, a bank holiday will have no effect on their pay during the furlough, or on their annual leave entitlement.
  • Can an employer make an Employee take holiday Leave? If the employer complies with the notice requirements under the Working Time Regulations, then yes.

Can an Employer make an Employee redundant whilst on Furlough Leave?

Yes, although from a practical perspective it may be difficult to carry out a redundancy consultation, especially if collective consultation is required. 

How does an Employer make a claim for a Furlough Grant?

Claims are made on line through a dedicated portal. Guidance states that it is up to the employer to decide on the length of each claim period, based on the frequency of payroll. Employers will need to make sure they include all of the employees they want to furlough for each claim period, because they will not be able to make another claim for the same period or one that overlaps with it. It is not currently possible to amend a claim once submitted.  The portal does not have a ‘save’ option so an employer needs to submit a claim all in one go.

This article is intended as general guidance only, employers and employees should refer to the government guidance at www.gov.uk.

Sarah Rushton is a partner and head of employment at Moon Beever LLP and can assist with all employment related matters you can contact her at srushton@moonbeever.com

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