9am, 23 March 2020
On Friday 20th March 2020, the Chancellor announced a Job Retention Scheme (“the Scheme”) which creates “furlough leave”. The purpose of the scheme is to actively try to stop or reduce the number of businesses making redundancies or lay-offs without pay.
We have very limited information about the Scheme at the moment and we are waiting for the Government to provide further details. As such, this guidance is only likely to be valid for a couple of days before it becomes out of date. Once we have further information, we will be able to provide more detailed guidance and also specific advice.
Furlough leave is not a concept we currently have in the UK and it is an American term. To be classed as furlough leave, the employee/worker must be sent home due to having no work available. It is not available to employers where an employee/worker continues to work, even on reduced or part time hours.
All employers, regardless of size, will be able to claim where this applies to their employees/workers, the individuals only have to be on the PAYE system.
If you do not have any work for an employee/worker or group of employees/worker, under the scheme, you will be able to claim 80% of their wages, up to a maximum of £2,500. It hasn’t been made explicitly clear what this includes but the Government’s employee guidance, as is stands currently, suggests that this includes pension contributions and national insurance contributions.
Claims under the scheme will be made by employers providing, directly to HMRC, the dates of furlough leave and details of salary, we await further details of how to make these claims.
The Chancellor announced that the scheme is likely to come into force by the end of April, but payments can be backdated to 1 March.
If you have a lay off clause within your contracts of employment, you do not need to obtain an employee’s explicit consent in order to lay them off. There may be additional obligations which you have to comply with and the Scheme details will hopefully provide guidance in this respect.
If your contracts of employment do not have a lay-off clause, then you would have to seek the consent of the employees/workers to a period of furlough leave (without pay but with the Government paying 80% of wages up to £2,500). If you do not seek their consent, the employees/workers would in theory have a claim for breach of contract (constructive unfair dismissal) or unlawful deduction from wages against you.
That said, most employees are likely to see the benefit of agreeing to a period of furlough leave as it means that they will continue to receive 80% of their wages (up to £2,500). For most employees, this will be more advantageous than being made redundant. There may, however, be some employees who have significant notice periods and statutory redundancy payments who may decide that redundancy is the better option for them, particularly if they are approaching retirement age.
It did not appear from the Chancellor’s announcement that there would be any obligation on the employer to top-up the payment to ensure the employee/worker receives 100% of salary. Indeed, it seems that would be at your discretion. As we do not know how long this may continue, you may wish to do so for a limited time with the ability to review as required.
Whatever the decision, this should be confirmed in writing to the employee/worker to ensure clarity.
Employees would remain employed during this period and their continuous service would e preserved. They would also continue to accrue holiday entitlement.
This Scheme is what we have been waiting for from the Government after a week of uncertainty. Whilst in the main it is positive, the one scenario which may cause some employee relations issues is when you are only laying off some employees, not all, particularly if they are working in the same role.
For example, you may have the situation where you have 2 administrators, one you wish to keep working, the other you wish to put on furlough leave. The one who works has to continue working every day as normal and have the risk of attending work which could make them more vulnerable to falling ill with COVID-19 and the other employee could be sat at home, self-isolating, but still receiving 80% pay (up to £2,500). Given the cap, this is likely to be an issue for lower paid workers only and may have to be addressed.
Where only some employees undertaking the same role are at risk of redundancy or being placed on furlough leave, you will have to go through a fair selection process to select the relevant employees using objective criteria.
If an employee refuses furlough leave (similar to if they refuse to being laid off or put on short time working where there is not a contractual ability to do so), the other option would be to undertake a redundancy process.
Please be aware that this is general guidance and is not specific advice. The situation is fluid and is being updating on a daily basis as such this guidance is subject to further guidance from the Government. However, hopefully this gives you an idea of what is to come.
The Government’s latest advice for employers and employees can be found below: