What Is Furlough Leave?
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.
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 initially announced that the scheme was available for at least three months from 1 March 2020 but was extended on 16 April to a fourth month. A further extension was announced on 12 May so the scheme now ends on 31 October 2020.
UPDATE: 1 November 2020
On 31 October 2020 at approximately 7pm the Prime Minister announced a National Lockdown that would start at 00:01 on Thursday 5 November 2020 and end on 4 December 2020, at the earliest. To support businesses through the national lockdown the Furlough scheme has been extended and will continue until the national lockdown ends and the country returns to the 3 tier system. The version of the Furlough Scheme described on this page has therefore closed and been replaced by the Extended Furlough Scheme, which currently will operate from 1 November 2020 through to 31 March 2021.
Updated guidance is released regularly and I will update this page as more details are announced.
This page was firstly published on 25 March 2020 and the last update was 8 July 2020.
Update 30 MAY 2020
Chancellor Rishi Sunak has announced reforms to the Coronavirus Job Retention Scheme and the introduction of the Flexible Furlough Scheme these are the headline points announced at his press conference:
- 10 June: last day that employers can place employees on furlough.
- 30 June: the scheme closes to new entrants. (The three-week furlough period must therefore start on or before 10 June). I read this as an employee who has not been placed on furlough previously, if you are rotating staff on and off furlough that should continue to be ok as they are not new entrants. The HMRC Guidance and Treasury Direction should clarify this point.
- 1 July: flexible furlough is being introduced, meaning employees will be able to work part-time and be furloughed part-time. Businesses will decide how that will work (in terms of the time split). When claiming the Coronavirus Job Retention Scheme grant for furloughed hours; you will need to report and claim for a minimum period of a week, for grants to be calculated accurately across working patterns.
- 1 August: employers will have to pay employee’s national insurance contributions and pension contributions, and can no longer reclaim them through the CJRS.
- 1 September: the government will reimburse 70% of salary (up to a maximum of £2,190). Employers will pay ER NICs and pension contributions and 10% of wages, to make up the 80% up to the cap of £2,190 (or more, depending on what the employer agreed with the employee).
- 1 October: the government will reimburse 60% of salary (up to a maximum of £1,875), and employers will continue topping up to 80% (or more, depending on what was agreed with the employee) plus ER NICs and pension contributions.
- 31 October: the furlough scheme will close.
Update 12 MAY 2020
Rishi Sunak has announced that the Coronavirus Job Retention Scheme has been extended from 30 June to 31 October 2020.
There will be no change to the operation of the scheme before 30 July. From 1 August part time furlough will be allowed, allowing businesses to bring employees back into work for part of the week and furlough them for the remainder of the week.
Full guidance on the new rules will be issued by the end of May and I will update you as soon as I have received and read the guidance.
What Is Furlough Leave?
A furloughed employee is taking a period of temporary leave from work, they stay employed by the business and you can bring them back to work when you need them. The Government will reimburse 80% of wages paid to a furloughed employee, up to a maximum of £2,500 per month.
Furloughed leave is a term for UK employment law, the intention initially was that the furlough scheme was an alternative to redundancy, lay-off or unemployment. Although the guidance for employees refers to furlough as applying when the employer is unable to operate or has no work for the employee to do, the guidance for employers says that all employers are eligible to claim under the scheme and that the government recognises that different businesses face different impacts from coronavirus.
However, the guidance makes clear that the scheme is “designed to help employers whose operations have been severely affected by coronavirus” and that employers that cannot maintain their current workforce because of this can make use of the scheme. The Treasury Direction says that the scheme applies to employees who are furloughed, “by reason of circumstances arising as a result of coronavirus or coronavirus disease”.
Which Employees Will Be Eligible?
The scheme covers all staff paid through PAYE who have been on the payroll since 19 March 2020 (previously 28 February 2020) on any type of contract including salaried Directors, full-time, part time and fixed term employees, apprentices and employees/workers on flexible or zero hours contracts.
Employees employed by individuals, provided they are paid through PAYE can also be furloughed which covers cleaners, nannies, gardeners, etc.
If you have employees who are in the vulnerable groups and you do not furlough them then you face potential claims of failure to provide a safe place of work.
UPDATED 16 APRIL 2020
Employers can now claim for furloughed employees who were employed and on their PAYE payroll on our before 19 March 2020.
If employees are working but on reduced hours or for reduced pay then they will not eligible to be furloughed.
Businesses who receive public funding specifically to provide essential services are not eligible to benefit from the scheme and should continue to use the funding to pay staff.
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’.
Can Company Directors Be Furloughed?
Company Directors and Office Holders can be furloughed under the Scheme. The Scheme is also applicable to PAYE salaried individuals who are directors of their own personal service company.
As in the case of a furloughed employee, a furloughed Director cannot carry out any work which generates commercial revenue or provides services to the company, even when carrying out reasonably necessary statutory duties.
It is important to note that Company Directors have statutory duties as set out in the Companies Act 2006. HMRC Guidance states that furloughed Directors may carry out duties to fulfil the statutory obligations they owe to the company, but they must not do any more than is reasonably necessary. The Treasury’s Direction (20 May 2020) states that work undertaken by a furloughed Director is limited to:
- Fulfilling a duty or other obligation arising by or under an Act of Parliament relating to the filing of company accounts or provision of other information relating to the administration of the Director’s company,
- Making a CJRS claim in respect of an employee of the director’s company, or
- Making a payment of salary or wages of an employee of the director’s company.
This is a very short list which would suggest that dealing with other tasks required to keep the business running, such as dealing with suppliers, landlords, insurance companies and answering customer enquiries are still not permitted.
If you are furloughed and are getting involved in more work than outlined in the Treasury Direction please get in touch with me for advice on how best to proceed.
Update 1 May 2020
Directors who pay themselves once a year (typically one-person businesses where most revenue is taken as dividends) are, subject to certain conditions, eligible to make a claim through the Coranavirus Job Retention Scheme.
How Do We Select Which Employees Should Be Furloughed?
Workers who cannot work from home and currently have no work will be the obvious candidates for furlough.
The guidance clearly says that you do not need to place all your employees on furlough, so if you have a group of employees who all do the same job and only need a proportion of them, then you will have to apply fair and objective selection criteria in deciding who stays and who is ‘furloughed’. This would have to be carried out quickly and probably based on what skills you will need in the short term. Bear in mind that decisions must not be discriminatory.
Otherwise you could consider asking for volunteers but that might leave you with a group of individuals who are not qualified or experienced enough to keep the job rolling.
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 the employee should formally agree to the change in employment status. See the update below, the employee must now sign a declaration that they agree to the change of employment status.
Employee Consent To Furlough
Where there is a change to terms and conditions of employment as a result of the furlough, for instance, a reduction in pay, the individual will need to agree to this change. The HMRC Guidance is silent on the issue of consent where the only change is the requirement not to work; i.e. where you are making up the remaining wages to 100% so the employee is not out of pocket, there is an argument that consent is not needed, although there is nevertheless a requirement that the employer and employee record, in writing, that the employee has been placed on furlough and is not required to work and that this is agreed.
There is some ambiguity between the latest HMRC guidance and the legally binding Treasury Direction. The latest HMRC guidance states that written consent from the employee is not necessary whereas the latest Treasury Direction, issued 20 May 2020, requires that there is agreement in writing between the employee and the employer and that the employee will stop all work for the employer whilst furloughed.
Evidence of Instructions to Cease Work During Furlough
The new Treasury Direction (20 May 2020) expands on the conditions that must be met to demonstrate that an employee has been instructed by you to cease all work in relation to their employment.
As we already new both employer and employee must have agreed that the employee will cease all work in relation to their employment.
The new Treasury Direction states that the agreement must:-
- Specify the main terms and conditions upon which the employee will cease all work in relation to their employment,
- Be incorporated (expressly or impliedly) in the employee’s contract, and
- Be made in writing or confirmed in writing by the employer (such agreement or confirmation may be in electronic form such as an email).
This new Treasury Direction also states that Coronavirus Job Retention Scheme claims made from the date of issue of the new Direction (20 May 2020) must comply with the Direction. This therefore suggests that claims made from this point forward could be rejected when express written consent of the employee to do no work is missing. Even if the online portal has not been updated to request this information HMRC will look for evidence that agreement was reached when they perform their audit.
Therefore, if you have not communicated clearly to your furloughed employees that a condition of furlough is that they do no work and obtained their agreement that they will do no work I strongly recommend that you:
- Contact them as a matter of urgency to obtain their consent retrospectively, and
- Delay submitting your next claim until you have received agreement from your employee(s).
Doing so will ensure your claim under the Coronavirus Job Retention Scheme is as robust as possible. Remember, HMRC WILL audit every company that makes a claim, they will look for any excuse to reclaim the monies they have paid out.
Remember, the Treasury Direction is legally binding whereas the HMRC guidance is just that, guidance. So where there is a difference I recommend ensuring you have complied with the Treasury Direction. If you do that you should have no problem with the claims you make under the Scheme.
I recommend drawing the attention of any furloughed employee to the fact that they must not carry out any work for instance anyone who could be doing some work from home even if it’s just answering emails or messages via their work mobile phone. It is important that they don’t do anything that could jeopardise your ability to claim the grant.
UPDATED 16 APRIL 2020
The Treasury Direction states that to claim furlough, the employer and employee must have agreed in writing that the employee will cease all work for the employer. This is a significant change as the HMRC guidance only required notification. The Treasury Direction requires Written Agreement between both parties.
UPDATED 23 APRIL 2020
The HMRC Guidance states that to be eligible for the grant employers must confirm in writing to their employee that they have been furloughed. It also states that as long as this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming the through the scheme.
How Can Contracts Be Varied?
An existing contract of employment can be varied only with the agreement of both parties. Changes may be agreed on an individual basis or through a collective agreement (ie: agreement between employer and employee or their representatives (trade unions or workforce representatives)). While the employees’ verbal consent to the change will be sufficient, the employer should obtain consent in writing wherever possible, to avoid uncertainty and potential disputes.
Therefore when agreeing changes in hours and acceptance of 80% pa) normal employment law applies. Which means you cannot unilaterally furlough employees. Care is therefore needed in dealing with furlough and employment law issues. Getting it wrong could result in constructive unfair dismissal or discrimination claims.
I strongly recommend that if you don’t have a written offer of furlough supported by the employees written agreement for each of your furloughed employees you do so as a matter of urgency. Doing so will ensure your claim under the Coronavirus Job Retention Scheme is as robust as possible. Remember, HMRC WILL audit every company that makes a claim, they will look for any excuse to reclaim the monies they have paid out.
Employee Refuses Consent
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?
The duty to collectively consult arises where you are proposing to dismiss 20 or more employees in a 90-day period. Therefore where a group of employees do not agree to be furloughed, and the alternative is to make them redundant or impose changes to terms and conditions by dismissing them and reengaging on new terms, the obligation would arise if the numbers threshold is met.
Employee Requests A Period Of Furlough Leave
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 and have been advised by their GP to shield for 12 weeks. 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. Government guidance states that employers should furlough shielding employees who are unable to work from home. Remember if an employee requests furloughed leave you don’t have to agree to it, so if an employee just fancies stopping at home and has no real reason you can say no.
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.
A copy of the furlough agreement should also be retained to protect against subsequent arguments that there has been an unlawful deduction of wages. It is unclear what, if any, declaration or other evidence may be needed to support a claim.
How Does Furlough Leave Affect The Employment Status Of Employees?
The employment relationship between an employer and an employee who agrees to a period of Furlough Leave will continue. This means length of service, statutory rights such as holiday entitlement and benefits will accrue in the usual way. Entitlements such as sick pay and family leave continue, and protection against unfair dismissal and the right to a redundancy payment remain, subject to normal eligibility principles. The guidance on 9 April explicitly says that benefits should continue to be provided in addition to wages.
Fixed Term Employees
The updated guidance confirms that workers on fixed-term contracts can be furloughed and that their contracts can be renewed or extended during the period of furlough without breaking the terms of the scheme.
Can Employees Carry Out Work While Furloughed?
No, employees should not carry out any work which generates income or provides a service to you either directly or indirectly or any linked or associated organisation whilst furloughed.
The Treasury Direction clearly states that to be eligible to make a claim under the Coronavirus Job Retention Scheme for an employee’s wage costs, the employer must have instructed the employee to cease all work in relation to their employment. The HMRC guidance provides that the employee cannot undertake work for, or on behalf of, the organisation (or any “linked or associated organisation”), it states that “this includes providing services or generating revenue”.
Employees can undertake volunteer work or training, but only so long as it does not entail providing any form of service to or generating revenue for their employer or any linked or associated company i.e. what is envisaged here is that employees can volunteer, for example as an NHS volunteer or for a charity whilst on furlough.
There is no provision for the equivalent of keeping-in-touch days for furloughed workers, and there is no guidance on what kind of contact the employer can have with the employee. An employer will need to keep in contact with furloughed employees to support their wellbeing and to inform them of developments such as the expected length of the furlough. However, it appears from the guidance that the employer should not ask employees to respond to emails or calls related to the operation of the business where this could involve “providing a service” or “generating income” for the employer.
HMRC states that it reserves the right to retrospectively audit claims made under the scheme. This could include checking that employees have not been required to continue working. However, it is not known how extensive these audits may be, or the approach that HMRC would take to minimal work-related contact.
It seems that permitting furloughed employees to carry out small administrative tasks, such as answering the occasional email could prevent you claiming reimbursement through the Coronavirus Job Retention Schemes.
Update 1 May 2020
The eighth update of the HMRC guidance made clear that “Whilst on furlough, employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers.” This answers a question many had been asking (not that there was much doubt) about it not being a breach of furlough to accompany a colleague during disciplinary or grievance meetings, or redundancy consultation.
Every few weeks send employees a letter or email (which is expressly permitted by the Treasury Direction) reiterating that they are not permitted to carry out any work while furloughed, and asking them to respond confirming that they have not done any work for the employer during the furlough period and will not do so.
Keep copies of your letters or emails and the employees responses, this helps you demonstrate ongoing compliance throughout the duration of the furlough period.
What About Training?
You can request that staff undertake online training during the period of furlough, if so 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.
The guidance issued on 4 April says that training should be encouraged, and that the employer can help to find volunteering opportunities.
What About Employees With Second Jobs?
If an employee has two jobs, they are treated separately. So if they are furloughed from one job but not the second, they can continue to work as usual in the second job. For instance an individual may have a part time job in a supermarket where work is continuing as normal but also has a part time job in factory which has closed due to the Coronavirus.
In the guidance issued on 4 April, it was confirmed that were a furloughed worker is contractually able to work for someone else they can do so. Therefore if your employment contract does not allow second jobs unless you have provided consent you will need to make a decision based on the circumstances. All employers taking on new staff have to complete a new starter checklist and Statement C must be completed to say if the employee has another job.
What about Volunteering Whilst Furloughed?
Employees can volunteer whilst they are furloughed but not for their employer either directly or indirectly or for any linked or associated organisation. The employer can try and find employees volunteer or new work with other organisations provided it is in line with public health guidance.
Update 23 April 2020
The latest guidance explains that employees and members of the public will be able to report suspected fraud through an online portal and warns employers that payments may be withheld in full or need to be repaid if the claim is based on dishonest or inaccurate information or found to be fraudulent. The guidance also adds that dishonest or deliberately fraudulent claims put essential public services and the protection of livelihoods at risk during these challenging times.
Can Employees Be Rotated On Furlough Where There Is Still Work, But Less Of It?
Some employers have work for some staff, but not enough work for all. One of the most pressing questions since the scheme was first announced was whether employees could be rotated on furlough or if they would have to choose some employees to be furloughed while others stayed at work.
The guidance states that employees can be furloughed multiple times. Each separate instance must be for a minimum period of three consecutive weeks (one period can follow straight after an existing furlough period) and when employees return to work, they must be taken off furlough. This indicates that employers can rotate employees on furlough, so long as each employee spends a minimum of three weeks on furlough.
As the lockdown restrictions are gradually lifted many employers will want to return business to usual but that will no doubt in many cases be a gradual rather than overnight return. This could mean you want to bring a furloughed employees back into the workplace for part of the working week and have them stay at home when there is no work. I therefore expect the Government will introduce more flexibility into the scheme as requirements for work increase.
I recommend including in your furlough agreement that you reserve the right to call employees back from furlough if trading conditions improve.
What About A Partial Furlough To Put Somebody On Reduced Hours?
Partial furlough is not allowed. When furloughed an employee can not do any work for you at all.
If you have some work for an individual, but not enough, you can still have a discussion with them about going down to a reduced working week. They will need to agree to this, except in the unlikely event you have reserved the right to put them on reduced pay for reduced work, and they will not be on the furlough scheme.
Can Employees Be Un-Furloughed To Carry Out Work And Then Re-Furloughed?
Yes, so long as each period of furlough is a minimum of three weeks.
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. There are also many employers who are attempting to establish new revenue streams for their business where the normal revenue streams have dried up, in the early days of a new business venture a business will probably manage with a skeleton staff but as the venture takes off the need for more staff will increase. So a business in these circumstances would probably furlough the majority of their workforce and as the venture takes off take employees off furlough leave and bring them back into the workplace.
Their will no doubt be many occasions when you want to bring a furloughed employee back into the workplace and these circumstances won’t neatly fall into three week periods.
I therefore expect the Government will want to make the scheme as flexible as possible and allow more room for manouvere if requirements for work increase.
Update 30 May 2020
From 1 July 2020, businesses will be given the flexibility to bring furloughed employees back part time. This is a month earlier than previously announced to help support people back to work. Individual firms will decide the hours and shift patterns their employees will work on their return, so that they can decide on the best approach for them – and will be responsible for paying their wages while in work.
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. If their period of unpaid leave pre-dated this, they cannot be furloughed under the Scheme until after the previously agreed return date.
What About Employees Who Resigned After 28 February 2020?
An employee who left your business on or after 28 February 2020 to start a new job may have found the job offer for the new job has been withdrawn. The updated guidance states that you may re-employ such individuals and designate them as furloughed but it doesn’t go so far as to encourage this practice.
Where an employee has resigned but is still working their notice you could allow them to rescind their notice, if they ask. But remember once notice is served and accepted it is a contractual agreement and you are under no obligation to agree to any changes.
Must We 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 and therefore any redundancy dismissal that did not consider furloughing is likely to be an unfair dismissal.
Can Employees On Sick Leave Be Designated As Furloughed?
The guidance makes clear that those who are shielding in line with guidance from Public Health England can be furloughed, as can those who are living with a person who is shielding. 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’.
Update 23 April 2020
The position in relation to sick leave and furlough remains unclear. The updated guidance still states that sick employees can be furloughed, so there continues to be an inconsistency with the Treasury Direction, which indicates that it isn’t possible to put someone on furlough until their SSP has ended. If you move an employee to SSP you forfeit the ability to claim under the Job Retention Scheme, although you could claim an SSP rebate for 14 days’ worth of SSP if you are eligible, alternatively you could continue with the period of furlough. The choice is the your’s and not the employee’s.
My article Coronavirus and Absence Due To Sickness provides more information about Self Isolation, Shielding and Statutory Sick Pay.
What About Employees With Caring Responsibilities?
The guidance clearly says that employees who are unable to work because they have caring responsibilities can be furloughed unless they can work from home.
Returning From Statutory Family Leave
If an employee is eligible for Statutory Maternity pay or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance. If you offer enhanced contractual pay for employees on maternity leave, this will be included as ‘wage costs’ that can be claimed for through the Scheme. The same principals apply to employees who qualify for contractual adoption, paternity or shared parental pay.
This seems to suggest that an employee on maternity leave can be furloughed but the guidance does not make this clear. An employee could choose to end their maternity leave early and agree to be furloughed instead. However, the employee should be warned this means they have returned to work and thus could be required to work at the end of their furlough leave and that might be earlier than they had originally planned to return.
The employees pay when furloughed should be calculated against their gross pay before their period of leave started and not the pay they received whilst on statutory leave.
My advice would be to keep the employee on statutory leave until it expires (52 weeks) or their Notified Date of Return is reached and then transfer to furloughed leave.
Update 10 June 2020
Yesterday, the government published a short news story which confirmed that parents on statutory maternity and paternity leave who return to work before 31 October 2020 will be eligible to be furloughed even after 10 June cut-off date. However, this will only apply where they work for an employer who has previously furloughed employees.
Although the press release only refers to ‘maternity and paternity leave’ we see no reason why this exemption won’t be applied to individuals who have elected to take shared parental leave and to those on adoption leave. Paternity leave is for a period of two weeks and therefore it’s odd the government has referenced that rather than these other forms of statutory leave. However, we’ll have to wait for further guidance.
Holiday Entitlement and Furlough Leave
The current government guidance on the Coronavirus Job Retention Scheme states employee rights are not affected by being on furlough leave and therefore holiday entitlement continues to accrue as normal.
HMRC Customer Support tweeted, on 8 April 2020, that it is possible to take annual leave when on furlough, and it must be paid at full pay. Employers are limited to claiming the 80% and will not be able to claim any additional top-up to full holiday pay through the furlough grant.
The government has also announced that workers who have been unable to take their four weeks of statutory annual leave entitlement due to Coronavirus will now be able to carry it over into the next two leave years. Furlough should not, in itself, prevent the leave from being taken so employers should consider the extent to which they still require leave to be taken this year. The requirement to pay annual leave at normal rates means that this will not all be recoverable under the Scheme.
Update 23 April 2020
At last, employers have some certainty on holidays. The updated guidance confirms that employees can be furloughed and on holiday at the same time. The guidance says that payment for statutory annual holiday should be paid at the employee’s usual holiday pay rate, requiring a top-up from the employer which cannot be recovered under the furlough scheme.
Read more information about Coronavirus and Annual Holiday Entitlement.
Employees who were on unpaid sabbaticals or any other period of unpaid leave as at 19 March 2020 where the intended period of that sabbatical or leave is still running or where the conditional reason for them taking the sabbatical or unpaid leave has not taken place cannot be furloughed and they must come back on the intended return date and then be furloughed.
The idea is that employees will be able to come back to work. The scheme is designed so that employers don’t need to make redundancies and then recruit a new workforce once the crisis is over – their existing workforce will be ready and waiting to resume work. But guaranteeing a return to work does not appear to be a condition of the Scheme.
However, if trading conditions have not improved sufficiently for you to take all the furloughed employees back when the scheme ends then you will be able to make them redundant, subject to the usual rules on redundancy. This is significant because other European countries that have similar schemes in place are imposing restrictions on employers making redundancies. No such conditions are being imposed in the UK.
The employee guidance says that “your employer can still make you redundant while you’re on furlough or afterwards”. Neither the guidance for employers nor for employees explicitly says that collective or individual redundancy consultation can be carried out during furlough or whether that would count as work – although, on the basis that it is not making money for the employer or providing services, we would hope that a sensible approach would be taken.
If the furloughed individual can return to work it may be necessary to terminate their employment by reason of redundancy. A fair and reasonable redundancy process will need carrying out at that time, with collective consultation if the threshold numbers are met, and a redundancy payment due to eligible employees. It is unclear whether termination and redundancy payments will be calculated on pre-furlough salary or on the reduced furlough rates; as furlough is temporary, a termination after that temporary period would infer a return to their previous terms, but this may need to be clarified.
The guidance is clear that the furlough grant cannot be used for redundancy pay.
£1k ‘bonus’ For Every Employee Brought Back From Furlough
On 8 July 2020 the Chancellor of the Exchequer, Rishi Sunak, announced during his summer statement that employers will receive a £1,000 “job retention bonus” for every worker they bring back from furlough and continue to employee until January 2021.
For every employee who:
- has been furloughed at some point during the lifespan of the scheme,
- remains employed by you between November 2020 and January 2021, and has
- must have earned at least the Lower Earnings Limit for national insurance (£520 per month) between November and January.
you will receive a bonus of £1,000 bonus from the Government.
The Government will retain the right to retrospectively audit all aspects of the Scheme, with the scope to claw back amounts claimed fraudulently or in error. It is vital therefore that you keep records of payments made and correspondence sent to employees in relation to furlough leave and the employees agreement to the period of leave. HMRC guidance states that records of communication sent to furlough employees, and their responses, and how you calculated the claim must be kept for five years.
Payments received by an employer under the Scheme must be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax. Employers can deduct employment costs as normal.
UPDATE 20 MAY 2020
The new Treasury Direction states that the written agreement must be retained until at least 30 June 2025, the previous version of Direction and the HMRC guidance have simply stated that evidence should be retained for at least five years.
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.
The legislation needs to be clearer on when the scheme can start and end. Businesses may wish to keep this scheme in reserve as a last option, but the rules are clear, the is only currently open for four months, starting from 1 March. This may mean that those who wait may be penalised for trying to continue on as usual, while those businesses that decide to furlough earlier could be better off. This area of guidance could do with clarification and possible amendment to make it fairer for all.
The government’s guidance is constantly being updated and I will review the content of these pages as more information becomes available.
If you have any questions please call me on 0114 360 0626 or simply email me at email@example.com.
Up-to-date information for individuals and employers on the spread of the coronavirus can be obtained from www.hpa.org.uk
Template Letter Offering A Period Of Furlough Leave
My Template Letter Offering A Period Of Furlough Leave sets out your plans to “furlough” staff as a result of the coronavirus (COVID-19) outbreak and pay them through funds from the Coronavirus Job Retention Scheme.
To download the Template Letter Offering A Period Of Furlough Leave complete your details below and an email containing the document will find it’s way to your inbox: