Furlough Leave - Overview and Q&A

Developments to date

On Friday 20th March, the government announced its plans for financial assistance to help organisations retain employees for an extended period of time, despite offering no work, and avoid lay-offs. It is called the Job Retention Scheme and, whilst little information has been published as to how it will work, I have tried to put something together to help you out.

What does furlough mean?

“Furlough” is an American term and has no prior meaning in UK employment law. In the US, it means to allow or force someone to be absent temporarily from work.

In this scenario, it means anyone asked to stop working during the coronavirus pandemic but who has not been made redundant.

What is the Coronavirus Jobs Retention Scheme (CJRS)?

Under the CJRS, employers can contact HMRC for a grant to cover 80% of the “wage costs” of “furloughed” workers up to a total of £2,500 per month. Employers can top up the remaining 20%, but there is no obligation to do so. The scheme will cover the cost of wages backdated to 1 March 2020 and will be open initially for 3 months. The Chancellor said in his announcement on 20 March 2020 that there will be no limit on funding available for the scheme. It is understood that this will be for anyone employed from 28th February 2020. This scheme is available for any business, of any size or type.

Importantly, the Government statement said that “changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.” Typically, this should only occur when you have the correct Lay Off clause within your employment contracts. If this is absent from your contracts you are able to write to each employee varying their contact terms by including a “lay off and short time working” clause.

How do you get the grant?

Guidance sets out that organisations will need to designate which of their workforce will be furloughed employees and then submit that information to HMRC, along with each employee’s earnings. A grant will then be received to cover the 80% wages. More information is awaited from the government on the online portal to be used to submit the information and what other information may be needed.

Chancellor Rishi Sunak has stated he hopes the first grants will be paid by the end of April 2020, and they will be backdated to 1st March 2020. The scheme is initially intended to run for 3 months but may be extended.

How do I select employees to be furloughed?

Really, any employee can be furloughed. They need to be on PAYE in order for you as a business to be able to claim the grant for their wages. Guidance states that the ability to furlough an employee depends on their contract. It is not likely that employee contracts will include a specific right to use furlough. However, contracts which contain a right to lay-off employees on no pay already gives organisations the right to send employees home and not pay them for a temporary period and so can likely be used to furlough employees.

The CJRS involves “furloughing” designated workers who would otherwise have been “laid off” in this crisis. There is no set procedure that needs to be followed, however, I would advise that if you are selecting specific employees, that you do this as you would select people for redundancy i.e. retain the skills you need to keep the business going.

Think about whose skills will continue to be in demand through this difficult period. Whilst it may be assumed that the best thing to do is furlough those employees labelled as high risk by the government, forcing them on to furlough without their input, and therefore forcing them onto 80% wages, may result in discrimination claims from those who allege they were made to do it because of their age, disability or pregnancy.

You can inform staff that you can furlough them, request they come back to work, and then furlough them again, depending on the business needs at the time. As furloughing goes back to temporarily needing employees to take a period of leave from a business.

I have already laid employees off – what do I do?

In this situation, an organisation can get in touch with those employees and agree to change their current status from lay-off to furlough. This would simply involve changing their pay arrangement from nothing (if no pay), to 80% wages, as they are already not working.

This also remains the same if you have recently made redundancies due to the current crisis. The government announcement talked about staff being bought back into the workforce so it would seem possible that you can therefore re-employ and then furlough.

What about agency staff and zero hours workers?

There is no current explicit confirmation, but it is expected that the CJRS will be applicable to all employees.

Will annual leave continue to accrue for furloughed workers?

Annual leave will continue to accrue as they still remain employees of the company as opposed to being made redundant.

To manage this with your staff, you could agree with people that they take annual leave instead of furlough leave, but there may be little incentive to do so for some employees.

What happens if I had new starters join after 28th February or started in February but added on Payroll in March, will they still be entitled to the 80%?

The scheme is backdated until 1st March 2020 and appears to be available for employees, with no restriction on start date. We do still wait further guidance however.

If employees are placed on furlough leave, can there be a rotation of furlough leave between members of staff?

It is not clear what the stance on this is, but at the moment there is no reason to say this can’t happen.

As business needs may change, it would appear sensible for rotation to be allowed but we are yet to be told otherwise.

I have employees that are off long term i.e. maternity leave – what happens to them?

There would be no change to status for employees on maternity or paternity leave.

Can an employee be forced by their employer to take furlough leave?

If a contractual clause exists which permits the employer to either lay off, or bring in short time working, an employer can insist on furlough leave without consent.

Is it possible for an employee to ask their employer that they be placed on furlough leave?

Yes, but there is no obligation for an employer to agree to do this.

Whilst this is a very uncertain time for all affected by this, please do get in touch if you need any further guidance on furloughing staff or anything relating to the coronavirus pandemic and work.