What Is Furlough Leave?

Coronavirus Job Retention Scheme
The Coronavirus Job Retention Scheme allows for 80% of wage costs to be recovered up to £2,500 per month per employee. Wage costs include wages, pension contributions and employer national insurance (NI) contributions.

Furlough leave is an entirely new concept and is a new class of indefinite leave where the Government will reimburse the employer for wage costs. Furlough leave has been introduced as an alternative for employers who might have otherwise implemented redundancies, lay-off, unpaid leave or other measures for their employees.

All UK businesses are eligible to claim under the Job Retention Scheme in respect of employees which they confirm are furloughed. Other workers such as casual staff, contractors and the self-employed are not covered by the scheme.

The government has announced that the scheme is available for at least three months from 1 March 2020 and will be extended if necessary.

What Is Furlough Leave?

A furloughed employee is an employee “on a leave of absence”. Furloughed leave is not a recognised term in UK employment law, but the intention is that employees who are furloughed will be placed on a period of leave as an alternative to redundancy. This means if your business has been affected by the Coronavirus crisis you will be able to keep your employees on your payroll and then be able to apply for a grant to recover 80% of the wages you pay to them.

Which Employees Will Be Eligible?

The scheme will potentially cover all staff paid through PAYE who have been on the payroll since 28 February 2020 on any type of contract including full-time and part time, fixed term and employees/workers on flexible or zero hours contracts.

If employees are working but on reduced hours or for reduced pay then they will not eligible to be furloughed.

Employers must take care to not discriminate when deciding which employees to place on ‘furlough leave’. However, it is not expected to be discriminatory to offer it to employees considered as ‘vulnerable’ as per government guidance. This is on the basis that offering ‘furlough leave’ to vulnerable individuals in line with the guidance is likely to be acceptable ‘means of achieving a legitimate aim’.

How Do We Designate Staff As Furloughed Workers?

Furloughed leave can not be enforced by either party and instead has to be mutually agreed, therefore the employer should formally notify the employee(s) that they wish to designate them as furloughed and request confirmation of their agreement to the new status. This should be straightforward because the financial protection on offer will no doubt be more attractive to employees than redundancy, lay off, unpaid leave or a reduction in pay.

The initial agreement can be made verbally and that should then be followed up in writing, by a letter or email, when they should formally agree to the change in employment status.

You may find that an employee who has not been offered furloughed leave may request it, for instance they may have an underlying illness which makes them vulnerable. In these circumstance you may chose to withdraw the furloughed leave offer from one employee to allow the vulnerable employee to be designated as furloughed instead. Remember if an employee requests furloughed leave you don’t have to agree to it.

If an employee does refuse consent you will need to consider how you will respond, for instance would they be at risk of redundancy or will you enforce an unpaid period of lay off?

TOP TIP
HMRC request you keep a copy of the correspondence you exchange with your employees in relation to the Job Retention Scheme and Furloughed Leave for a minimum period of 5 years.

Do Employers Have To Use Furlough Leave Instead Of Making Redundancies?

It is currently unclear whether it will be mandatory for employers to put employees on furlough leave instead of making redundancies. However, when considering redundancies employers should be following a fair procedure and this includes considering alternatives to redundancy. I would therefore advise that considering furloughed leave and the Coronavirus Job Retention Scheme would be a reasonable part of any redundancy process.

What About Employees That Have Already Been Dismissed Or Taken Unpaid Leave?

The scheme is backdated to 1 March 2020, so anyone who was made redundant on or after 1 March 2020 can be rehired and converted to furloughed leave. If you have commenced a redundancy consultation you will need to consider whether and how the availability of this scheme will alter your plans and the impact on any appeals against dismissals.

Likewise, with anyone who has been placed on unpaid leave on or after 1 March 2020 can be converted to furloughed leave.

How Does Furlough Leave Affect The Employment Status Of Employees?

An employee who agrees to a period of Furlough Leave will remain on the employer’s payroll and will continue to accrue holiday entitlement and length of service.

Can Employees On Sick Leave Be Designated As Furloughed?

Employees who are ‘shielding’ in line with public health guidance can be placed on ‘furlough leave’. Employees who are currently on sick leave or are self-isolating in line with government advice are entitled to Statutory Sick Pay (SSP) but once they return to work they can then be ‘furloughed’.

What About Employees On Family Friendly Leave?

The Government guidance is not currently clear on this subject.

It seems to say that statutory maternity, paternity, adoption and shared parental payments apply as normal. So if an employee on leave is furloughed and is entitled to statutory pay they will retain that entitlement until it expires and then transfer to furloughed pay.

Can Employees Carry Out Work While Furloughed?

No, employees should not carry out any work for their employer during this time. Employees can undertake volunteer work or training, but only so long as it does not entail providing services to or generating revenue for their employer i.e. what is envisaged here is that employees can volunteer, for example as an NHS volunteer or for a charity whilst on furlough. If staff are required to undertake training during furlough leave, they are entitled to be paid at least the applicable minimum wage rate for doing so, even if this exceeds the 80% which will be reimbursed by HMRC.

Can We Un-Furlough Employees To Carry Out Work And Then Re-Furlough Them?

There is currently no guidance on this issue.

However, as furloughed leave has been introduced to help employers manage their employers through the Coronavirus crisis consideration must have been given to what happens when a non-furloughed employee becomes ill or may need to self-isolate and the work still needs to be covered.

Many businesses are also looking at new or different revenue streams to keep their businesses afloat in these unpresidented times. In the early days of new business venture you may manage with a skeleton staff but as the venture takes off you will need to bring more staff back into the workplace.

Their will no doubt be many occasions when you want to bring a furloughed employee back into the workplace.

I therefore expect the Government will want to make the scheme as flexible as possible and allow some room for manouvere if requirements for work increase

Are There Any Problems To Be Aware Of?

Yes, the scheme may create resentment between employees as some will still be at work getting either full or reduced pay, while others will be on furlough leave getting paid at least 80% for doing nothing. However non-furloughed employees should be happy in the knowledge that they are considered to be essential to your business as that would suggest that if economic conditions remain difficult when the scheme has ended they are less likely to be selected for redundancy.

Also those who are off sick, due to illness or because they are self-isolating, may only be getting statutory sick pay (SSP) which at around £95 per week is likely to be less than 80% of full pay.

There will be an incentive for employees not to notify their employer if they become sick or need to self-isolate during furlough leave because of these adverse pay consequences.

From the employer perspective pay paid to an employee who has agreed to a period of furlough leave can be reclaimed indefinitely whilst SSP can only be reclaimed for 14 days.

What’s Next?

The government’s guidance is constantly being updated and I will review the content of these pages as more information becomes available.

CONTRACT OF EMPLOYMENT & EMPLOYEE HANDBOOK REVIEW

An hour of my time can save MANY hours of your time!
I can review your Contract of Employment and Employee Handbook for compliance with this new legislation that takes affect on 6 April 2020 and provide a written report detailing where your contract and employee handbook will need updating. You will receive your report within 5 working days of sending me your contract and employee handbook.

If you authorise me to make the changes I have suggested in my report there will be an additional fee. My written report will confirm the fees and anticipated timescales.

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Coronavirus and Furlough Leave