If you, as an employer, are putting an employee on Furlough Leave you do need consent from the employee to comply with UK employment law. This is in addition to the requirements that need to be satisfied for the employer to receive the promised government grant. It is essential that the employee agrees in writing (which can be an email) not to do any work while on furlough.
We have set out below an example Furlough Agreement to help employers comply with the process.
It is vital that before submitting a furlough agreement to any employee, you ensure you have protected your business under general employment principles. Gannons are experienced at guiding businesses through tough times. We would be happy to advise and can act rapidly to ensure that your business is not exposed to claims such as constructive unfair dismissal or discrimination in the future.
To find out more about furlough and to assess the quality of our lawyers, you can watch our recent webinar on furlough here.
DRAFT AGREEMENT FOR FURLOUGH LEAVE
Employer Name: XXXX
Employee Name: XXXX
This is a variation to your contract of employment, designed to implement and take advantage of the government’s Coronavirus Job Retention Scheme.
1. We agree that from [DATE] you shall be [deemed to have been] on Furlough Leave. This means you cannot do any work for us, apart from undergoing training, although your contract of employment will continue and you will continue to accrue holiday. We will normally expect you to be on Furlough Leave for at least three weeks, as that is the minimum period which will allow us to reclaim 80% of your basic salary from HMRC.
2. We will pay you:- [PICK OPTION]
• 80% of your basic salary, excluding fees, commission and bonuses, calculated according to paragraph 3. You agree to waive entitlement to any further remuneration during your Furlough Leave;
• 80% of your basic salary, excluding fees, commission and bonuses, calculated according to paragraph 3, up to a maximum of £2,500 per month. You agree to waive entitlement to any further remuneration during your Furlough Leave;
• your normal salary.
Note: if choosing either of the first two options, you need to agree the reduction in salary with the employee. This wording achieves that, but you should explain it carefully so they know what they are signing.
3. Your salary is calculated as
[for salaried employees] your actual salary before tax as it stood on 19 March 2020 but disregarding anything which is not regular salary or wages.
- [for employees with irregular earnings who have been employed for a full 12 months] the higher of:
your same month’s earnings from the previous tax year; or,
- your average monthly earnings from the 2019-20 tax year.
[for employees with irregular earnings] The Higher of:
- the actual amount paid to you in the corresponding calendar period in the previous year but disregarding anything which is not regular salary or wages; or,
- the average monthly (or daily or other appropriate pro-rata) amount paid to you for the period comprising the tax year 2019-20 (or, if less, the period of employment) before the period of furlough began but disregarding anything which is not regular salary or wages.
This agreement will be interpreted in accordance with the government’s Coronavirus Job Retention Scheme.
4. Deductions for tax, national insurance contributions, [add any other deductions] and pension will continue to be made from your salary.
5. OPTIONAL: You agree to defer the salary set out at paragraph 2 until HMRC’s online portal enabling us to claim your salary under the government’s Coronavirus Job Retention Scheme has opened, and we have had a reasonable opportunity to put in a claim and receive the funds. However, if we decide to cancel your Furlough Leave and ask you back to work before you have been on Furlough Leave for three weeks, we will pay you the monies otherwise due under this agreement immediately.
6. If, for any reason, HMRC decides to reclaim any monies which it paid to us in connection with your salary, we are entitled to reclaim that from you (including by making deductions from future salary payments to you), and no further payments shall be due.
7. Your Furlough Leave shall end on the earliest of the following events:
(a) the government’s Coronavirus Job Retention Scheme ending
(b) either you or us ceasing to be eligible for funding under that scheme; or,
(c) us deciding to cancel Furlough Leave and asking you back to work.
8. EITHER: When on Furlough Leave, you may not do any work for any other employer or organisation, whether as an employee or on a self-employed basis, unless you already did that work before going on Furlough Leave; **
OR: If you work for any other organisation during your Furlough Leave, other than one you already worked for before going on Furlough Leave, you must tell us.
** It is currently unclear whether this is a condition of receiving salary contributions under the Job Retention Scheme. We are waiting for further guidance from the Government and will update the agreement as soon as we know more.
9. OPTIONAL – THIS ADDS A LAY-OFF CLAUSE IF ONE DID NOT PREVIOUSLY EXIST: When your Furlough Leave ends, while we will always endeavour to provide you with work, in the event of insufficient work being available you agree we are entitled to place you on short time or lay you off without any pay except for statutory guarantee payments.
10. OPTIONAL: During your Furlough Leave, we may require you to undertake [the following] training (which we will pay for) [insert training if known].
Signed: _________________ Date ___________
Signed: _________________ Date ___________