Here are some frequently asked questions to help you understand the Furlough status.
What is furlough? Furlough is not a term we use often in the UK, it’s an American term. It is a name for a temporary leave of absence from the workplace. The government has used it here where you might otherwise be having to make redundancies because of closing the business temporarily.
Why not lay off?
It is entirely separate from the lay-off clause the employer might have put in the contract of employment allowing them to send an employee home for all or part of the time on very limited guarantee pay. An employer may not be keen to invoke this because after 4 weeks the employee can trigger a redundancy by giving the employer notice – the employer than has to prove it has 13 weeks of uninterrupted work for the employee to do to avoid the redundancy.
How do we implement furlough status?
As it is highly unlikely that the right to furlough will be included in a contract of employment, you must get the employees agreement. Failure to do so, could result in a breach of contract claim. That said, it is highly unlikely that an employee would refuse furlough status as unpaid leave or lay off could be the alternative. Once furlough status has been agreed, it has to be confirmed in writing with the start date of furlough and preferably the anticipated end date.
Can staff make us furlough them? No. Staff don’t have the ‘right to be furloughed’ and if you have work that you need them to do, for example, because you can allow them to work from home, because they are key workers (as defined by the Government) or because you can create a safe working environment for them (following the Public Health guidance on this) then you may continue to work as normal. It is the employer's decision which employees to place on furlough leave, if any.
Does holiday continue through a furlough? Yes, the Working Time Regulations 1998 mean holiday continues to accrue, just like it does during a sabbatical. We suggest that before people return to work you require them to take some holiday if you wish. You can give people notice that you require them to take holiday. You must give double the notice of the period of leave. If you want them to take 1 weeks’ holiday you have to give 2 weeks’ notice, and for 1 days’ holiday 2 days’ notice.
Workers who have not taken all of their statutory annual leave entitlement due to COVID-19 will now be able to carry it over into the next 2 leave years.
What is the Coronavirus Job Retention Scheme?
The Government has set up a temporary scheme due to last for 3 months from 1st March 2020 to May 2020 under which it will pay employers a proportion of their costs. At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month.
An employer can also choose to top up an employee’s salary beyond this but is not obliged to.
The latest guidance uses the words ‘at least’ so it seems it is contemplated that this could be extended. Under this scheme the employer can claim money from government for the employees’ they furlough for 3 weeks or more. The scheme is intended to avoid redundancies by alleviating the pressure on employers to continue paying wages in full during the crisis period.
The employers who can claim will be:
• Recruitment agencies who are paying agency workers through PAYE
• Public authorities in exceptional cases (most will be working through the crisis).
They will have to have had a payroll registered with HMRC on or before 28 February 2020.
Who does the government scheme cover?
It covers employees on your payroll on 28 February 2020 so it will not cover new starters who have commenced employment in March or April or May. This includes: Full-time employees Part-time employees Employees of a recruitment agent where the agency has them on payroll and doesn’t have them out on placement Zero hours employees / those on flexible contracts
What about pensions and benefits?
Your pension obligations will continue through the furlough. Pension is included in the costs which can be claimed back from government but of course this is capped at £2500 per month per employee in total. All other benefits would continue to apply through a furlough.
What can we claim back from the government?
Under the scheme, UK employers, can claim 80% of the wage costs of employees who are not working but kept on the payroll under furlough status, up to £2,500 a calendar month for each employee. The government has created a new website www.businesssupport.gov.uk which has a section on the Coronavirus Job Retention Scheme .
The scheme applies in respect of employees who have been "furloughed", meaning that they have been put on a period of leave during which they are not required to work. On the basis of the information available, it appears that the scheme itself
Does the reimbursement limit include pension and employer's NICs?
Yes, as regards Employer’s NIC. The latest guidance is clear that government is intending to contribute towards auto-enrolment contributions but of course many employers make contractual contributions that are greater, that will find themselves having to cover
More guidance on this is promised before the scheme goes live.
Is £2,500 the net amount the employee receives or is it subject to tax and NI?
The latest guidance suggests £2,500 is the most you will receive from government for an employee. You will then have to tax that in the ordinary way before paying the employee.
Can we take people below the national minimum wage?
NMW only applies for the hours someone work, under furlough they may be taken below the NMW.
What about employees who have already been given notice of redundancy or placed on unpaid leave before furlough leave was announced?
The government has advised that, once up and running, the scheme will be backdated to 1 March 2020. It would therefore be possible, in theory, for an employer to propose to employees who are still employed, but have been given notice of redundancy or placed on unpaid leave, that they be put onto furlough leave instead.
Can we rehire someone we already made redundant?
Yes if you made the person redundant after 28th February and you wish to rehire them, the scheme encourages you to do this. You are not obliged to, however, but you will need to consider if you can justify having made their post redundant/defend an unfair dismissal claim in respect of their post.
Is the idea of furlough leave unfair on employees who have to continue working, particularly when many are going to have childcare difficulties?
It may seem unfair that some employees will be required to continue working, potentially increasing their risk of infection if they are unable to work from home, and others will be permitted to receive a substantial proportion of salary and not be required to do so. However, provided the employer has used appropriate, non-discriminatory criteria to choose who is granted furlough leave, it is possible for an employer to lawfully choose to furlough only part of the workforce. Some employees may look at this issue the other way and prefer to continue to receive full pay so the employer may find that seeking volunteers for furlough identifies the preferences of individual employees and avoids a feeling of unfairness.
How is salary calculated for employees returning from or just about to go on maternity or other types of family leave?
Being on furlough leave will not reduce or change any other employment rights. We expect that an employee who is due to go on family leave will retain their right to do so and be paid accordingly, although eligibility for and amount of statutory pay for that family leave may be based upon their temporarily reduced rate of pay depending on the timing. In some circumstances, employees may refrain from exercising their rights to family leave because they will be entitled to more pay, and have time off to care for their child, on furlough leave. For example, an employee on furlough leave who is due to go on paternity leave, may decide not to assert their right to do so because they will be financially better off on 80% of pay than they would be on statutory paternity pay. Furlough leave will not affect the two-week compulsory maternity period. In any event, most employees will prefer to take at least six weeks' maternity leave given that the first six weeks of statutory maternity pay is paid at 90% of normal weekly earnings.
When will that money flow from Government?
There is no clarity about this yet. We don’t even have legislation yet – that may take until mid-April. Beyond that HMRC have to build the system: employers may need to take out loans for cashflow purposes as the money is unlikely to be flowing quickly.
Can we furlough only some of the staff?
Yes. Think redundancy: it may affect just parts of the business or certain roles: the same is true of the furlough. You may have some roles that can be done from home in which case those staff will not be furloughed. For those whose role cannot be done, you may decide to furlough them. If you need to make a selection because some people are required to stay in work you need to have a fair way of selecting – a quick and dirty matrix may be needed to retain the skills you need most? Volunteers is unlikely to work because employees may be in favour of furlough rather than work. There will inevitably be people who want to be furloughed who are asked to stay work and Employers will need to think through the industrial relations issues that arise. Some employers are agreeing a bonus for those who agree to work, favourable treatment on redundancy selection (they go to the back of the queue) and extra holidays
Can someone on furlough do some work for the employer?
No, employees on furlough status are not allowed to carry out any work.
Can someone on furlough have a second job?
Subject to terms in the contract of employment, secondary employment is allowed, but employees may be subject to tax code changes. As furlough is a temporary status, the employee must be available to return to work when required without notice.
Can we rotate people?
Yes, but you must try and reduce the movement of people as much as possible to help combat the spread of coronavirus.
Can we make redundancies instead? It seems that it is also the employer's decision whether to place employees on furlough leave, or make them redundant. Potentially redundant employees do not have a right to require their employer to place them on furlough leave as an alternative to redundancy. However, it is hoped that many employers will see the new scheme as preferable to business closure and making redundancies.
Can redundancies arise during the furlough?
Yes as the business background changes there is no reason why redundancy couldn’t apply during the furlough although it might make consulting with staff a challenge. To avoid unfair dismissals and collective consultation related claims you would still have to follow normal redundancy law.
How do we make a claim under the government scheme? The guidance released so far says you will need:
• Your ePAYE reference number
• The number of employees being furloughed
• The claim period
• The amount claimed – you will have to calculate this and HMRC will reserve the right to audit your claim
• Bank account number and sort-code
• Contact name and phone number
Claims will be capable of being made every 3 weeks, at the time you run your payroll.