FURLOUGHING - WHAT IT MEANS AND HOW TO IMPLEMENT IT
1. WHAT IS THE SCHEME?
The Coronavirus Job Retention Scheme has been implemented to allow employers to access a grant to pay towards the employment costs of retaining employees who "would otherwise have been laid off during this crisis”. The scheme allows employers to place employees on furlough leave, to avoid redundancies. The scheme was announced on 20 March 2020 and has been backdated to 1 March 2020. We await guidance from the government and will update this document as necessary.
2. WHO IS ELIGIBLE?
The scheme is applicable to all PAYE employees who were on payroll on 28 February 2020 (including those on zero hours contracts) and all UK businesses are eligible. The Chancellor has on 26 March 2020 announced a similar scheme for self-employed people known as the Self-Employed Income Support Scheme (”SEISS”). We will provide a separate update shortly.
3. WHAT HAPPENS DURING FURLOUGH LEAVE?
a) The employee remains employed by the employer, but they cannot work for the employer. They should not attend the workplace or work remotely. The scheme is designed to pay staff who would otherwise have been laid off so they should not be directed to do any work during this time. If employees continue to answer emails and routine calls then HMRC may see this as abuse of the scheme and could well seek repayment from the employer of part or all of the funding. The employee should not engage with third parties e.g. clients.
b) The employee can however, volunteer or train, “provided that this does not involve the manufacture or creation of an item or part thereof that can yield revenue for the company, the provisions of services to the company, or the provision of any service that can yield revenue for the company”. The employer can require employees to undertake training from home, provided it meets the above.
4. CAN FURLOUGHED EMPLOYEES WORK FOR ANOTHER EMPLOYER?
Almost certainly not. We say that because this scheme is expressly designed to avoid redundancies, employees are not allowed to work and are being kept on the payroll. We expect that a furloughed employee taking alternative employment elsewhere would be seen as abuse of the scheme. We also expect the employee to be in breach of contract to their original employer if they do this surreptitiously. Employees may be asked to repay these earnings.
5. HOW LONG WILL THE SCHEME LAST?
The scheme is open for initial period of 3 months after which it may be extended. It is good practice to inform employees the scheme will be kept under review.
6. HOW IS IT IMPLEMENTED?
The guidance states that placing employees on this scheme "remain subject to existing employment law and, depending on the employment contract, may be subject to negotiation". Furlough leave must be seen as a change of status and will therefore require consent or a contractual right. As such, the employer should notify and agree the leave with the employee and confirm their new status in writing. Once the new portal is open (see 10, below), the employer will report this status to HMRC.
7. IS THERE A REQUIREMENT TO CONSULT WITH EMPLOYEES?
If the employee is proposing to furlough 20 or more employees in circumstances where they would have otherwise made redundancies, then the requirement to collectively consult seems likely to have been triggered. The special circumstances defence may be available to employers if there is insufficient scope to consult properly with employees, given these extraordinary times.
8. WHAT ABOUT NEW STARTERS AFTER 28 FEBRUARY 2020?
The scheme does not apply to them.
9. WHAT ABOUT THOSE ALREADY ON NOTICE?
The scheme was backdated to 1 March 2020 in order to provide for those who had been put on notice of redundancy due to the crisis. It also allows employers to rehire and furlough employees who were made redundant since 28 February 2020.
10. CAN EMPLOYEES REQUEST FURLOUGH LEAVE AS AN ALTERNATIVE TO REDUNDANCY?
An employee can ask to be placed on furlough leave but the employer does not have to agree. However, the purpose of the scheme is to avoid redundancies and we expect that many employers will see the scheme as preferable because, in the short term, it will avoid payments of notice, accrued holiday and any statutory redundancy entitlement payable in the event of redundancy and allow access to a grant.
11. WHAT CAN THE EMPLOYER CLAIM BACK AND HOW?
The employer will be able to claim a grant of up to 80%, of an employee’s regular wage (before tax) up to a cap of £2,500 per month. Fees, commission and bonuses should not be included within the regular wage. In addition, the employer will be able to claim the associated Employer NICs and minimum (3%) automatic enrolment employer pension contributions on that subsidised wage. Employees will be required to pay tax and NIC on payments received. Claims will be made via a HMRC portal which is being implemented and it is expected to be some weeks before this is up and running.
12. CAN THE EMPLOYER “TOP-UP?”
The employer may seek to pay only at the rate recoverable from HMRC. The employer may opt to top up the employee’s salary if the grant does not cover it in full, but this is not a requirement.
13. HOW IS THE 80% OF EMPLOYMENT COSTS CALCULATED FOR THOSE WITH IRREGULAR EARNINGS?
The 80% grant will be applied to the higher of: (1) earnings in the same month in the previous year; or (2) average monthly earnings in the 2019/2020 tax year. If the employee has worked for less than a year, the employer can claim for an average of their monthly earnings for the time that they have worked. If the employee only started work in February 2020, a pro rata of their earnings so far should be taken to support the claim.
14. WHAT IF 80% OF SALARY IS AN AMOUNT WHICH FALLS BELOW NATIONAL LIVING WAGE/NATIONAL MINIMUM WAGE?
Furloughed employees are not working therefore NLW and NMW do not apply.
15. CAN EMPLOYEES BE MOVED ON AND OFF FURLOUGH LEAVE (OR ROTATED)?
There is nothing in the guidance which prohibits this, but an employee must be furloughed for a minimum of 3 weeks for their employer to be eligible to claim under the scheme.
16. WHAT HAPPENS WITH ANNUAL LEAVE AND CONTINUITY OF SERVICE?
We have no confirmation, but we anticipate that this will continue to accrue. We are advising clients to hold the status quo on any leave which is already booked until we have clarity as to how this should be paid. Equally, employees coming up to two years’ service are likely now to accrue this length of service.
17. WHAT HAPPENS WITH FAMILY LEAVE?
Employees already on or due to go on any form of family leave (e.g. maternity leave) will remain on such leave and cannot be furloughed.
18. WHAT HAPPENS WITH SICK LEAVE?
Those already on sick leave or self-isolating remain on sick leave until they are fit to work or out of isolation and paid at the relevant rate (SSP or contractual sick pay). Once they return to work, they may then be furloughed. Employees who are shielding in line with public health guidance can be placed on furlough. If employees do report as sick during furlough leave employers may be required to pay them at the relevant rate. However, we would expect some employees are unlikely to report as sick so as to avoid payment at a lower rate.
19. WHAT ABOUT SPONSORED WORKERS UNDER TIERS 2 OR 5 OF THE POINTS BASED SYSTEM?
On this point guidance will also be needed from both the Home Office. The Home Office have strict rules as to minimum pay requirements for sponsored employees. If an employer elects to furlough sponsored employees, it should not reduce salaries below the minimum requirements unless the Home Office expressly permits this.
20. WHERE CAN I FIND MORE INFORMATION?
The government has created a new website www.businesssupport.gov.uk which we anticipate will be expanded as information becomes available.
Covid 19 employment law 17-point advice plan (updated March 27th)
1. WHEN IS SSP PAYABLE?
following an announcement in the Spring 2020 Budget, the SSP deemed incapacity rules have been extended and covers those:
(a) who have coronavirus;
(b) who have coronavirus symptoms;
(c) who have someone in their house with coronavirus; and potentially
(d) who self isolate in accordance with government guidelines (see 11, on next page).
2. FROM WHEN IS SSP PAYABLE?
The Coronavirus Act 2020 provides for SSP to be payable from the first day of sickness absence and that small employers (fewer than 250 employees) will be reimbursed for any SSP paid to employees in respect of the first 14 days of sickness related to COVID-19.
3. WHEN IS CONTRACTUAL SICK PAY PAYABLE?
In principle, for all the circumstances when SSP might be payable. Check the contract to see what is payable.
4. WHAT ABOUT CONTINGENT PAY ARRANGEMENTS E.G. SALES COMMISSION?
This will be paid according to the terms of the contract. In most cases, no sales=no commission. This may result in some financial hardship for certain employees.
5. WHAT “SICK NOTES” DO WORKERS NEED TO PRODUCE?
By law medical evidence is not required for the first 7 days of sickness. The government strongly suggest that employers currently use their discretion around the need for medical evidence. The Government has launched an isolation note portal (here) for those with symptoms of COVID-19 or living with those who do.
6. CAN AN EMPLOYER SEND AN EMPLOYEE HOME TO SELF-ISOLATE?
Yes (health & safety considerations/ wider duty of care).
7. AT WHAT POINT SHOULD AN EMPLOYER CLOSE THE WORKPLACE?
(a) With the exception of ‘non-essential shops and public venues’ the government has not asked other businesses to close. However, employees should work from home unless it is ‘impossible’ for them to do so. If employees are coming to work, employers must ensure that employees are able to follow Public Health England guidelines including, where possible, maintaining a 2 metre distance from others.
(b) Current ACAS guidance is that if someone with COVID-19 comes into the workplace, it does not have to close. In England, HPT will get in contact to discuss the case and carry out a risk assessment with the lead responsible person. This will likely include a “deep clean.” At present, most workplaces reopen.
8. IF AN EMPLOYER CLOSES A SITE/OFFICE, WHAT PAY ARE EMPLOYEES ENTITLED TO?
(a) In principle, there is an obligation to pay at the full contractual rate because the decision has been made by the employer, the employee is not choosing to self-isolate, and the employee is willing to work or can work remotely;
(b) Some employers have short term “lay off” policies governing pay & conditions. Some employers will take this risk, anyway;
(c) Some clients are consulting with employees and trade unions to try to agree a temporary reduction in pay and benefits for the duration of the crisis, to avoid closure and job losses.
9. WHEN DOES THE CORONAVIRUS JOB RETENTION SCHEME ALLOW US TO FURLOUGH WORKERS?
(a) The scheme is applicable to all employees on PAYE (including those on zero hours contracts) and all UK businesses are eligible. The scheme is intended to be applied to employees who “would otherwise have been laid off during this crisis”, and while on furlough leave employees cannot continue to work. Only employees employed pre 1 March 2020 are eligible. New arrangements may apply to the self employed (to be announced).
(b) The employer must notify and agree the leave with the employee and confirm the new status in writing. Once the new portal is open, the employer will report this status to HMRC.
(c) The employer will be able to claim a grant of up to 80%, “for all employment costs”, up to a cap of £2,500 per month. This could include additional costs such as pension contributions or other
benefits. The £2,500 is probably gross and inclusive of NICs (to be confirmed). The employer may opt to top up the employee’s salary if the grant does not cover it in full, but this is not a requirement.
10. WHAT ABOUT AN EMPLOYEE REFUSING TO ATTEND WORK OUT OF FEAR OF COVID-19?
(a) If possible, try to set them up working from home;
(b) If this is not possible, consider the current public health advice and whether it would be discriminatory to refuse home working;
(c) Ultimately, refuse pay (technically the employee will be on unauthorised sickness absence) and consider disciplinary action. (The alternatives may be: unpaid leave, holiday, SSP).
11. WHAT ABOUT SOCIAL DISTANCING AND VULNERABLE WORKERS?
The government has issued social distancing guidance for older and vulnerable people and Shielding guidance for extremely vulnerable people. To require these groups to work could amount to a breach of the employer’s duty of care to the employee and a breach of the implied term of mutual trust and confidence. These employees (who may be required to do social distancing for many months) are potentially entitled to SSP (or contractual sick pay) but SSP may not be affordable for employees in the long term. It is unclear if it is possible to furlough these employees.
12. WHAT ABOUT EMPLOYEES (OR FAMILY MEMBERS) WITH UNDERLYING HEALTH CONDITIONS?
The Equality Act 2010 (“EQA”) continues to apply. This means:
(a) certain employees may have a “qualifying disability” under the EQA;
(b) if so, an employer will need to make “reasonable adjustments” (e.g. around working from home);
(c) consider “associative discrimination” in respect of those employees with carer duties.
13. WHAT ABOUT EMPLOYEES ACTING IN BREACH OF GOVERNMENT OR EMPLOYER’S GUIDANCE?
Employers may wish to reinforce government guidance and could then potentially take disciplinary action against employees who act in breach.
14. WHAT ABOUT AGENCY WORKERS OR CASUAL EMPLOYEES BEING SENT HOME?
(a) Speak to/negotiate with the agency;
(b) generally most agency workers can be terminated “at will;”
(c) occupational sick pay for agency workers is excluded from definition of “pay” under AWR. The agency is typically responsible for sick pay (and PAYE obligations).
15. WHAT IF SICK PAY (AND OTHER) SCHEMES NEED AMENDING? The normal rules around variation of contract apply:
(a) seek consent;
(b) if no consent, consider dismissal and reengagement;
(c) unilateral imposition: but may lead to resignations and old contracts applying;
(d) consider collective consultation where 20+ employees affected.
16. WHAT GUIDANCE SHOULD EMPLOYERS BE ISSUING ABOUT WORKING FROM HOME?
The usual rules apply (in terms of policies and policies and procedures) but especially prevalent are adherence to:
(a) homeworking policies;
(b) IT and data protection policies;
(c) social media policies and (d) health & safety policies.
17. WHAT IS EMERGENCY VOLUNTEERING LEAVE?
The Coronavirus Act 2020 allows employees of businesses with 10 or more staff to take one period of leave (of 2, 3 or 4 weeks) during which they will leave their main job and volunteer temporarily in the NHS or social care sector. An employee must provide the employer with 3 working days’ notice and produce a certificate issued by an appropriate authority. There is no right to payment during this period but the employee is entitled to return to their job.
