The Chancellor announced package of measures to help businesses on the 20th of March 2020. One of those being the Coronavirus Job Retention Scheme, part of which is the introduction of Furlough Leave.
What is Furlough Leave?
There is very little information to go on at present, and Furlough Leave is not currently recognised in UK Law as it is an American term. However, it has been introduced to allow UK employees to access financial pay support and means the government will continue to pay an employee’s salary/wages for those that would otherwise have been laid off (or made redundant). All UK businesses are eligible e.g. sole traders, limited companies, partnerships etc, as long as they have employees.
How do I put someone onto Furlough Leave?
Employees need to be designated as furloughed workers and notified. It will mean a change in status, which is still subject to current employment laws and may require negotiation. In some contracts there is a right to do this, but some don’t contain the relevant clauses and therefore agreement will need to be reached.
How do I claim the money for Furlough Leave?
Once you have designated an employee as a furloughed worker, you need to submit information to HMRC about them and their earnings through an online portal which is not yet set up. HMRC will reimburse 80% of the furloughed worker’s wage costs up to a cap of £2,500 per month. Whilst it is currently unclear, it is anticipated that £2,500 is 80% of £3,125 per month rather than the cap being on a salary of £2,500 per month and then paying 80% of that salary. The payment will come to the employer and not to the employee directly. The government are working quickly on getting the system up and running. The government will also make any contributions on the 80% such as pension and employer’s National Insurance.
Can I ask the employee to reply to emails and work a little whilst on Furlough Leave?
No, the Government specify in their guidance to employees that in order to qualify for the scheme, they should not undertake work for their employer while furloughed. We expect this principle applies for all work, and employees must not undertake other work and use the pay to subside their earnings. It should be clear to them that they are on furlough. It is not clear whether they would be allowed to work elsewhere to “top-up” the remaining 20% of their pay that they are not receiving and we will need to wait for the government to issue further guidance.
Do I have to pay 20% if the government is paying 80%?
Whilst the employer’s guide is silent on whether they have to pay 20% of the pay to top up to the employee’s normal level, the guide for employees says that the employer can choose to pay this but it does not have to. Therefore, it is anticipated that this will be voluntary. Employers need to ensure they have the contractual right to do this and will need the agreement of the employee to do so, otherwise they run the risk of a tribunal claim in the future.
What happens if an employee wants to be put onto Furlough Leave but I don’t want them to?
The employer still has to agree that the employee is on furlough leave and without agreement it won’t happen, they cannot just opt to stay at home as a preference.
Can I still make someone redundant rather than furlough them if I want to?
We don’t yet know the answer to this and need to wait for guidance, there is nothing to suggest that you can’t but there is also nothing yet published to say that you can!
If an employee has already been made redundant, can I change this to furlough?
This may be possible subject to any provisions the government makes to prevent abuse (e.g. ‘hiring’ family members for 80% salary at £2,500 per month) and the usual notice period. We do not have any further guidance on this though until the regulations are published. Although the government have said furlough can be backdated to the 1st of March, we don’t yet know if there is an effective from date e.g. you need to have been employed by XX date to be eligible to rescind your redundancy and change it into furlough leave.
How will it work for casual workers/zero hours workers?
The Chancellor said it would apply to anyone on PAYE and they would be paid an amount based on their average pay (but no details yet about the time-period it would be calculated over). We don’t yet know how they would calculate this for casual or zero hours workers, or whether any would be excluded. Based on the Chancellor’s comments about PAYE, it would suggest that they will be eligible, but we will need to wait for the official guidance.