The F Word – How to furlough employees and workers

Updated 24th March to reflect our current understanding. 

On Friday 20th March the government announced that it would be providing various measures to assist employers to continue to employ employees and workers (anyone paid through PAYE) rather than make them redundant, by ‘furloughing’ them.  This is in addition to other measures already announced including government business loans, business rate relief, 14 day SSP claim back for employers with less than 250 staff, VAT deferrals etc. – a full list of support available can be found here.

This article focuses on the CJRS – Coronavirus Job Retention Scheme (furloughing), or what we know about it so far in any case. Under the scheme employers of any size and sector will be able to lay workers off for a period as yet to be defined and will be able to continue paying them, claiming 80% of the furloughed workers employment costs to a maximum of £2,500 per month per worker. This cap is thought to include all employment costs including NI etc. and this could (and we think will) include employer’s NI. Employers will be able to access payments through HMRC, although at the time of writing (24th March) the HMRC portal had not yet appeared but has been promised by the end of April. Some businesses may need to make use of a short term loan to cover the gap.

The aim of the scheme (which will run for at least 3 months) is to persuade employers not to make employees who have no work to do (because of COVID-19) redundant. The employer can choose to top up the worker’s salary if they choose to, but they don’t have to. Whether ‘to up’ means top up to the £2,500 per month limit or top up to the actual normal pay is currently unclear.

The complicating factor is that at the moment unless the worker’s contract of employment enables the employer to lay the worker off without pay (a ‘lay off’ clause) the employer must gain the employee’s agreement to become a furloughed worker. If the employer is topping up wages then it’s hard to see why an employee wouldn’t agree and, frankly, even if they only receive 80% of wages up to £2,500 per month, they are still likely to agree if the alternative is redundancy.  Employers should be aware though that reducing an employee’s salary by 20% (or more if they are paid a higher salary) will be a breach of contract and if employees do not want to agree to becoming a furloughed worker, then the alternative would be lay off without pay (if the contract allows) or to make them redundant, following a fair procedure of course.

Not surprisingly myHRdept have had a myriad of questions from our clients and here is a breakdown of those questions and our answers:

 

Can I furlough employees and then have them do some work still?

No, it’s very clear from the guidance that employees must not do any work for the employer. We’re sure many employers will look to furlough and ask employees to do bit and pieces, but to be very clear this would amount to fraud, a criminal offence that could give rise to prison sentences. If there is some work to do but less than normal, a more appropriate route would be to agree with the employee to reduce their working week for a period. Our earlier article and another earlier article containing a template agreement to reduce hours covers various ways of achieving this.

I’ve already made redundancies because of COVID-19…can I reverse them and furlough employees under the CVRS instead?

Although detail is awaited our understanding is that employers can offer this to employees made redundant on or after 1st March.

Can I furlough employees under the CVRS if they have not started yet?

We think employees and workers will need to have started working on or after 1st March.

Can workers on maternity leave be furloughed? 

We think not, or at least not until maternity has ended.

Can I furlough employees I wasn’t planning to make redundant?

To an extent – if you were planning to lay workers off without pay for a period because of COVID-19 (i.e. a step short of making them redundant) the furlough route would seem a viable alternative. Obviously if you still have work to do then it is not.

Does the employer have to pay the other 20% of a furloughed employee’s wages up to the maximum £2,500?

No, but it might choose to. Whether the employer can choose to pay beyond the £2,500 monthly maximum (without breaching furlough rules) remains to be seen and any letters to employees in the interim will need to be vague on that point.

What does the £2,500 include and is it subject to deductions? 

It is subject to deductions and briefings issued so far indicate that it will include all employment costs, logically that could cover pension contributions, car allowances etc. It could also include (we don’t know for sure yet) employers NI costs of some 13.8% and if that is the case then workers might end up with proportionately less in their pockets than would ordinarily be the case under PAYE.

Does a furloughed employee continue to accrue holiday?

We will need further government guidance here, but in the absence of that it would be safest to assume that holiday will continue to accrue during furlough absence.

Will a zero hours worker be entitled to furlough?

Technically anyone paid through PAYE will be eligible but employers have the ability to simply not offer zero hours workers any work….our ‘BEWARE’ here is that many people classed as zero hours workers are in reality not that at all and might be able to bring a claim that they should be classified either as variable hours employees and/or as having a contractual right to a certain number of hours through custom and practice – i.e. that they have for a long period worked 35 hours per week for example. Further government guidance is awaited on how zero hours workers’ pay should be treated under a furlough arrangement – it may be for example that zero hours workers may be allowed furlough based on an average of 12 weeks earnings….or it may not be – we simply don’t know.

How do I select who to furlough (if it’s not everyone?)

Follow a similar exercise to redundancy – if you only need to furlough say 10 out of 20 drivers, then the selection criteria must be fair e.g. last in, first to furlough. Employees on maternity leave or with other special characteristics may have additional protections – take advice from myHRdept or your employment legal advisor.

Practically how do I put employees on furlough?

myHRdept have developed two template letters for this purpose: a) for situations where the employment contract has a lay off without pay clause and b) for cases when no such clause exists. The difference is that in a) you can get on and do it whereas in b) you’ll need to get the employee’s agreement (we’ve included an acceptance signature bar.) myHRdept clients can obtain this by emailing us, others might consider now to be a good time to secure some HR Outsource support (and can also email us or call on 01628 820515.)

I have employees self isolating on SSP – can I furlough them instead?

If they would have been laid off or made fairly redundant then our understanding is that furloughing can still be used in these circumstances.

In circumstances where the business damage is likely to take a very long time to recover is furloughing the answer?    

We know that furloughing will continue for at least 3 months, but we don’t yet know if it will be continued. Sometimes an event like COVID-19 requires a permanent or semi-permanent adjustment to business headcount and if that is the case then redundancy might still be the most appropriate option.

Are there any risks to furloughing employees?

The risks as we see them are far outweighed by the benefits, but here are our thoughts:

  • If an employee has just short of 2 years service when being furloughed, they could reach the 2 year point while on furlough. At 2 years UK employees acquire certain rights including the right to a redundancy payment and the right to claim unfair dismissal.
  • A furloughed employee who has had their earnings reduced may bring a breach of contract claim. This risk can be mitigated by a) having a contractual right to reduce pay or b) to obtain the employee’s agreement prior to furloughing them. Agreement is always best in employment law and employers may seek to gain agreement even if they have a contractual right to impose.

 

If you’re thinking of outsourcing your HR or employment law needs, why not contact myHRdept? Call us on 01628 820515 to discuss your requirements or contact us and we’ll call you back.

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