Who can be furloughed? Employment lawyer addresses main queries on job retention scheme

The Government is expected to publish guidance on the much-anticipated Coronavirus Job Retention Scheme tomorrow with the system set to go live in April.

We already know the scheme will allow employers to claim a grant of up to 80% of wages for all employment costs, up to a cap of £2,500 per month, but there are still plenty of questions.

John Macaulay, partner and head of employment at law firm Greenwoods GRM, hosted a webinar yesterday that aimed to address some of the key questions for all businesses and employers.

We have reproduced the key queries below with his answers. We hope readers find it useful, as we know how key this issue is to many agents, but as always, please take your own advice.

How will payments work?

I understand the payment system  will be up and running in April and has been referred to as a reimbursement, so employers may have to pay their employees now and get the figure back later.

Hopefully the guidance, which I understand is due on Friday, will give us some indication of exactly how much you can recover.

What does the 80% of salary relate to?

We will have to wait for the guidance – I have seen an indication that it may be based on pay during February – but this is not yet clear

There will obviously be different calculations for those who are paid over different periods or work different hours.

There is also uncertainty whether the sum is 80% of salary up to £2,500 or 80% of £2,500.

My best guess is that it will be taxable.

Do employers have to ‘top-up’ the remaining 20% of salary?

There is no requirement to do this.

However, there could be a discrimination angle if employers top-up for some parts of the workforce and not others.

What does it mean for employees let go before the job retention scheme was announced?

The scheme only applies to current employees who would otherwise be laid off as a result of the coronavirus crisis. Anybody who has already had their employment terminated is probably not eligible.

Consider whether you may be able to rescind a notice period so someone can remain employed.

Can you switch employees on and off furlough?

I think you will be able to switch it on and off in theory, but in practice it would depend if HMRC’s system allowed this.

Do staff still accrue annual leave and other benefits whilst furloughed?

All normal employment laws apply so annual leave will continue to accrue and employers would still have to make any pension and maternity leave contributions.

Another option is to get staff to agree to take annual leave. There may be something in your company handbook that allows this.

The statutory position is that you can require employees  to take annual leave, but you must give them notice.  The amount of notice required depends on the amount of leave employees are required to take.

What if an employee doesn’t agree to being furloughed?

Some employees may have a lay-off provision in their contract.  If so, one option is to invoke the lay-off provision, which normally guarantees some form of salary for a period of time.  If there is no realistic prospect of the work returning in a reasonable time, the employee could claim redundancy.  Query how many individuals would view that as a viable option at this time.

If an employee does not have a lay-off provision, it is a breach of contract to furlough them without their consent.  An option here would be to consider a redundancy process.

The alternative for an employee may be to resign and claim constructive dismissal. Again, that doesn’t seem so attractive at the moment as not many employers are taking people on.

What if someone is on a probationary period?

Assuming the employment contract doesn’t allow you to extend it, you would do that by agreement.

pefully this would be something the employee would understand.

Can a staff member who is self-isolating be furloughed?

My own view initially is that if somebody is on sick leave they may continue to be entitled to the statutory sick pay element.

It would be when they come back that you put them on furlough.

What if you are already in a redundancy process that is separate to the coronavirus issue?

It probably wouldn’t be appropriate to put those employees onto furlough leave.

The scheme is only if people would be laid off as a result of this crisis; if there is a different business reason for them already being part of a redundancy process, then they are not furloughed workers.

What happens if you can’t afford to pay them now and wait for the scheme?

If you have a lay-off provision in your contracts then that may entitle you to put staff on unpaid leave, but there is usually a guaranteed paid period first.

You could then wait to recover the furlough pay.

You have to make sure your communication is clear and check how that works; the indication is that HMRC reimburses you for what you have already paid.

There may be many employees without the right to lay-off in their employment contract.

These people may be even more reluctant and it will be a question of reaching an agreement with them if you can and communicating effectively to say you intend to use the scheme but can’t make the payment upfront. That is a tricky discussion and the employee may have a breach of contract argument.

How do you choose staff for furlough?

There may be situations where you have work for some employees, but not everyone.

It is worth doing a brief redundancy-type selection process with basic criteria.

Make it quick and as easy as possible, but be aware of discrimination angles if people have protected characteristics.

You could also ask staff to volunteer as, for example, there may be some who need to be home for children.

Can employees on long-term sick announce they want to return to work and become furloughed?

Employees who are on long term sick and on half or nil-pay may want to take advantage of better pay terms if they become a furloughed worker.

The system could be open to abuse: that is a question for you and your organisation to manage.

Can you ask for company property to be returned?

That will be something for discussion between employer and employee.

The employee’s employment continues, so you would normally expect company property they have to remain with them. If, for example, they have a company phone or car that they also have for personal use they would have to keep those type of things as they get a benefit from them.

Can you terminate a furlough period?

There is nothing in the guidance so far that suggests an employer could not end a furlough period.

It is up to the employer when they designate someone as a furloughed worker so also up to them when you cease that.

Employees should consider the level of work available to the employee when they return for duties. You have to consider what you do with them when they come back.


*This story was updated in 30th March 2020


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One Comment

  1. Woodentop

    Doesn’t work for Directors?


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