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Furlough – what is it?

A furlough is “a temporary layoff from work.” People who get furloughed usually get to return to their job after a furlough.

Who is eligible?

All UK businesses regardless of industry or size.

The scheme is open to all UK employers that had a PAYE scheme in place on 28 February 2020.

Any organisation with employees can apply, including charities, recruitment agencies and public authorities; however, the government does not expect public sector employers to use it as long as central government continues funding wage costs in the normal way.  With agency employees, the scheme is only available for agency employees who are not working.

Will the government pay staff salaries?  

HMRC will reimburse 80% of furloughed workers salary costs, up to a cap of £2,500 per month through the Coronavirus Job Retention Scheme (backdated from 1 March 2020), plus (not including) the associated employer NICs and minimum auto-enrolment pension contributions on that wage.  Fees, commissions and bonuses are not included.

Currently, the scheme is intended to run for 12 weeks (this is tied in with the period they have recommended for social isolation), however, this may be extended if it becomes necessary. 

In terms of the remaining 20% of salaries employees may be entitled to claim state benefits if employers are unable to cover the costs.  An employer can choose to top up to 100%, but does not have to (subject to employment law and renegotiating any contractual entitlements)

What do businesses need to do?

You will need to:

  • Designate affected employees as ‘furloughed workers,’ and notify them of this status or change in status where lay-off or short time working has been implemented and
  • Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required).

Lay-off v’s furlough

The government have introduced the Coronavirus Job Retention Scheme to assist employers from having to terminate employment of its staff and thus reduce the costs to a business of hiring and firing staff, however, employers need to be aware that employees continue to accrue holiday during the furlough period and the purpose of being in ‘furlough’ is that the employee will return to work. 

Further Key Points

  • For employees whose pay varies, the employer can claim for the higher of (i) the same month’s earning from the previous year (eg earnings from March 2019); or (ii) average monthly earnings in the 2019-20 tax year
  • Individuals are only entitled to the minimum wage for the hours they work.  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.
  • To be eligible, the employee must have been on the payroll on 28 February 2020.  If they were hired later, they are not eligible.  Anybody who was on the payroll on 28 Feb and has since been made redundant can be rehired and put on the scheme
  • 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 each employee is off for a period of at least three weeks
  • 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.
  • When agreeing changes in hours (and acceptance of 80% pay), assuming the contract does not already allow for that, normal employment law applies.  The employer must be careful not to discriminate in deciding who to offer furlough too. 
  • Employees on sick pay or self-isolating cannot be furloughed but can be furloughed afterwards.  Employees who are shielding can be placed on furlough.
  • Employees on maternity (or similar) leave can continue to draw SMP (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.
  • Employers can only claim once every three weeks, ie they cannot get weekly reimbursement.  Claims can be backdated to 1 March 2020.
  • Employees can still be dismissed on grounds of redundancy post any furlough period and the usual legal process, and protection, for redundancy must be followed by employers.
  • 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.

More information can be found here:

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

http://employmentlawbulletins.com/wp-content/uploads/2020/03/Luke-Evans-MP.pdf?mc_cid=01a67c73e7&mc_eid=777a32f4b9

For the latest news and more detailed information on the virus visit; https://www.gov.uk/guidance/coronavirus-covid-19-information-for-the-public

Please contact SCE Solicitors, for any further guidance you may require regarding the Coronavirus and your employee policies and practices

Samira Cakali

Samira Cakali is a pragmatic and approachable solicitor advocate with extensive contentious and non-contentious experience in the fields of employment law as well as civil litigation, within a range of commercial businesses from SME’s to multinationals as well as senior executives.

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