Coronavirus Job Retention Scheme (as at 23 March 2020)
The coronavirus picture continues to change daily, with renewed challenges for HR staff and business leaders alike. One of the biggest concerns for our clients has been how to continue to pay staff if the business is forced to close temporarily. This has been recognised by the government which has announced the introduction of “furlough leave”, a job retention scheme for those who would otherwise have been “laid off” as a result of the Coronavirus pandemic. While the announcement about furlough leave has created almost as many questions as it has answered, for many employers it will come as a welcome relief to know that they will be able to claim back 80% of an employee’s salary from the government, where that employee has been furloughed under the scheme.
We have tried to answer some of those questions…..
What does furlough actually mean? Essentially, in this context, “furlough” means laying off a member of staff for a period, without having to make them redundant. It does not currently have a legal meaning in the UK, but is a word more commonly used in the US.
The idea here is that an employee who has been furloughed will remain employed but will not be obliged to work, staying at home until the business situation improves sufficiently to allow them to return.
Who can claim? The Scheme applies to all UK employers in the private and charitable sectors. However, it is not entirely clear what the position will be with publicly funded organisations, where the government does not directly pay salaries, such as further education colleges. The Government has so far confirmed that the Education & Skills Funding Agency (ESFA) will continue to pay grant funded providers their scheduled monthly payments for the remainder of the year, although the position for activities not funded in this way is not yet clear.
What do I need to do to make a claim? In order to be able to claim employers must designate an employee as a furloughed employee and notify the employee of their change in status. You need to agree with an employee that they have been furloughed, since it is a change to their terms and conditions of employment (unless you already have a contractual right to lay off staff which is a rare clause in contracts of employment nowadays). Then the employee needs to agree that they will not undertake work while they are furloughed.
Once you have agreed with an employee that they will be furloughed you will need to submit the employee‘s information to HMRC. We understand that a portal is being set up for this but this may take a little time for HMRC to catch up.
In extreme circumstances it may be possible to enforce a change of conditions, subject to the usual employment law restrictions and the exact wording of the legislation. This could become necessary if, for example, making the staff redundant would be too expensive for the business and lead to insolvency. However, as it is not clear whether the furlough legislation will allow enforced furloughs, and given the risks involved in unilateral changes to contracts, we suggest further advice is sought before considering such action.
How much will the government pay? The government has said that it will pay 80% of an individual’s wages, up to £2,500 per month. At the moment we do not know if this will include pension contributions, national insurance contributions or other contractual benefits.
How long can an employee be furloughed? The government has said that it intends for the Coronavirus Job Retention Scheme to run for at least 3 months from 1 March 2020, but will extend if necessary
Which types of contracts will be covered? The Chancellor has indicated that the scheme will cover workers on the PAYE system, and that it may include some workers on zero-hours contracts, depending on their arrangements. We await confirmation that the scheme will extend to those on PAYE with “worker” status, not just those who meet the statutory definition of “employee”.
What about people who would be working one week on, one week off – are they eligible? To what extent? This situation has not been envisaged so far by the government. To be eligible for furlough leave and employee must agree to not work for their employer for the entirety of the leave period. Provided they do not work for another employer we consider for now that they will be eligible for furlough leave.
£2,500 furlough pay (or 80% if less) – is it gross or net, does it include employers’ NI? It is most likely to be gross but we await confirmation.
Can the system be abused? It is entirely possible that we will see unscrupulous employers who decide to notify HMRC of furloughed employees, take the 80% pay, and continue to require staff to work. However, the legislation may contain monitoring/penalty provisions to prevent such abuse.
What if I’ve already made someone redundant – can I claim for their wages? If the employee was made redundant after 1 March 2020 they will need to be reemployed to become eligible
What is the difference between being furloughed and being laid off and in what circumstances would each apply? Lay-off (in the legal sense) involves sending workers home with no pay during periods when there is no work for them but does not involve dismissing them. Being furloughed would also mean that they are sent home, but under the government scheme they are paid at least 80% of their salary.
Can employers ‘cherry pick’ those to be retained? Furloughed? Or laid off ? The scheme applies to workers who would otherwise have been “laid off” – but has not been made clear exactly what laid off means in this context. At this early stage our view is that those eligible for furlough are those who would otherwise have been made redundant suggesting you can use selection criteria as you would otherwise in a redundancy situation to select those to be furloughed.
How long does the furlough period last for and what are the rules? The government has said that it intends for the Coronavirus Job Retention Scheme to run for at least 3 months from 1 March 2020, but will extend if necessary
Can staff who are required to come into work ask to be furloughed? No, it’s up to you to decide that their roles could not continue due to the current crisis. Clearly you may have to handle disgruntlement from staff who are still required to come to work, if they see other staff being paid to stay at home, so it makes sense to have clear and transparent rationale for the various groups and different treatment.
If I was thinking of sacking someone for gross misconduct do I now have to furlough instead? No – follow the usual disciplinary process. Furlough only applies in a redundancy situation.
Can someone who is self-isolating be furloughed? Not unless they are in a redundancy situation.
What about someone who has been medically suspended? Not unless they are in a redundancy situation
What’s the interaction between SSP & being furloughed? They are entirely separate. SSP only applies to those who are sick and/or self-isolating
If someone is self-isolating on SSP (particularly if for 12 weeks) can they now get 80% of their wages as furlough pay? Not unless they are in a redundancy situation.
Do I have to top up pay for those earning more than £2,500 per month and/or pay the additional 20% to staff? You can top up salaries – but the government makes it clear that you don’t have to. If you do top up, but don’t do it for everyone you’ll need to provide a good, non-discriminatory explanation should anyone complain. However, as you can only furlough staff with their agreement, any top up may need to be subject to negotiation with the staff.