Employee Furlough

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We now have a framework from the Government for the Furlough Scheme (the Government’s Coronavirus Job Retention Scheme).  Take a look at a draft agreement for employers considering placing an employee under the Scheme – the Furlough Agreement. You can also watch our employee furlough guide webinar here.

If you need employment law advice on the implications of covid-19 and how to avoid employment law disputes or claims in this fast moving, high business risk situation please call us. We are experienced, able to move quickly and competitive on costs compared to larger commercial law practices.

The Government has extended the Coronavirus Job Retention Scheme (Furlough Scheme) until the end of October 2020.

New changes will come into effect on 1 August 2020. The Furlough Scheme will continue it its current form until 31 July 2020. This means the contribution of up to £2,500 per month employees made by the taxpayers continues.

From August 1 2020, employees currently on Furlough can be brought back on a part-time basis. Employers will however be required to make a contribution towards the salaries of their Furloughed staff.

Only employers who are already using the Furlough Scheme will be able to take advantage of the more flexible extension to the end of October 2020. As of yet, no details have been released concerning the contribution that the employers will be expected to make as of 1 August 2020. It is expected that the Government will release further guidance and details on the extension of the Furlough Scheme by the end of May 2020.

Cross over with redundancy

It was not clear from the start, but the Government’s message is now: if the job will no longer exist after furlough or there are reasonable prospects that the employee will not be retained the employee should be made redundant rather than kept on furlough. Employers will still be expected to follow a procedure before making an employee redundant to avoid claims for unfair dismissal. The practice of employers to deal with the redundancy by way of a settlement agreement is likely to continue despite the downturn to avoid the risk of employees sitting at home with nothing to do other than mount a claim in the Employment Tribunal.

Employee furlough due to covid-19

We explain below who can benefit from the Furlough Scheme and who does not based on what we know so far.  New details will emerge and we will update you.

Coronavirus Furlough Scheme

The full guidance on the Furlough Scheme issued by the Government is here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme.

A brief summary of some of the main points includes:

Employers must have created and started a PAYE scheme on or before 19 March 2020

The Furlough Scheme is open to all UK employers of any size in any sector so long as the employer had started a PAYE payroll scheme on or before 10 March 2020.

Any organisation can qualify

Any organisation with employees can apply, including charities, recruitment agencies and public authorities.  With agency employees, the Furlough Scheme is only available for agency employees who are not working.

Limit on amount of wages reclaimable

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 contribution on that wage.  Fees, commissions and bonuses are not included.  If paying less than the pay package before being sent home the employee’s consent must be obtained to avoid employment law claims down the line.

Higher earners

The cap is not earnings related.  Employers can still claim back up to £2,500 on highly paid employees but if the employer wants to keep them on their existing salary package it will have to top up out of its own reserves.

Normal employment law rules apply

When agreeing changes in hours (and acceptance of 80% pay) normal employment law applies.Employers cannot generally unilaterally furlough employees although some employment contracts do have clauses in which allow employers to require employees not to work, either on a paid or unpaid basis.

Care is therefore needed in dealing with furlough employment law issues. Getting it wrong could result in an constructive unfair dismissal or discrimination claim. We would be happy to help your business avoid employment law issues down the line.

The employer must be careful not to discriminate in deciding who to offer the Furlough Scheme to.  Prioritising vulnerable workers is unlikely to be discrimination. Prioritising the over 70s (direct age discrimination against those under 70) is very probably justifiable.  Those who do not suffer from serious health conditions are not a protected class meaning they would not establish discrimination if others are prioritised for furlough.

Sick pay or self isolating

Employees on sick pay or self-isolating cannot be furloughed, but can be furloughed afterwards.  Employees who are shielding can be placed on furlough.

Maternity

Employees on maternity (or similar) leave can continue to draw Statutory Maternity Pay (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.

Topping up employee furlough pay

An employer can choose to top up to 100% of pay and benefits, but does not have to.

For employees whose pay varies, the employer can claim for the higher of (i) the same month’s earning from the previous year (e.g earnings from March 2019); or (ii) average monthly earnings in the 2019-20 tax year (there are other rules for employees who started more recently).

Hours worked 

The employee must not be working at all.  If they work for even an hour (presumably during their entire three week furlough period), they are not eligible.  However, they are able to undertake training and do volunteer work, provided they do not provide services to or make any money for their employer.

Employees are only entitled to the national minimum wage for the hours worked. So if they are furloughed and do not work, and 80% of their normal earnings would take them below the minimum wage based on their normal working hours, they still only receive 80% as they are not working.  However, they are entitled to be paid NMW for any time spent training.

Blocks of 3 weeks as a minimum

Furlough leave must be taken in minimum blocks of three weeks to be eligible for funding. There is nothing in the guidance which prohibits rotating furlough leave amongst employees, provided employee is off for a period of at least three weeks.

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

Reinstating employees dismissed due to Covid-19

If you want to reinstate any employees who were employed on 28 February but subsequently dismissed, you can do so.  We can advise on this.  If an employee has been given notice but not yet terminated, the employer can agree with the employee that the notice will be rescinded and the employment will continue, and enter into a Furlough Agreement.

The government will issue further guidance on the mechanics of claiming the payment in due course.  It says it expects the scheme will be up and running by the end of April.

Please do call us on 0207 438 1060 to discuss questions or any UK employment law issues arising from the coronavirus pandemic, whether to furlough employees, implications of furlough and the impact of the pandemic on your business.