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Furlough Leave Provisions – Key facts for Employers and Employees

3 Apr 2020

 

 

One of the highest profile announcements from the Government in response to the COVID-19 health crisis has been their promise to pay 80% of the wages any employees during this period who would otherwise have been laid off – otherwise known as the “Coronavirus Job Retention Scheme”.

 

Although as at the time of writing we’re still awaiting the actual legislation to make this promise a reality, at the end of last week the government published guidance to let us know what the provisions will entail.

 

The Scheme

 

The furlough leave scheme is designed exclusively to relate to employees – self-employed individuals will be covered through a separate scheme and without seeing the legislation, we must assume it does not apply to those with worker status.

 

The scheme will provide 80% of the wages of “furloughed employees” and, once implemented will act retrospectively to 1 March 2020.  Therefore – if anyone was not employed by 29 February 2020 then they will not be covered by this scheme.

 

Employees who are furloughed will receive the lower of either 80% of their wages or £2,500 per month (plus National Insurance contributions, and the minimum automatic enrolment employer pension contribution).  Although it is currently unclear how this will impact employer National Insurance contributions, the government has promised further guidance in the near future.

 

Although the scheme will be able to backdate payments to 1 March – the government’s new portal through which this scheme will operate is not planned to be online until the end of April.  Therefore, if any employers do want to furlough their employees before this point they will have to pay 80% of their wages until such a point that the government takes over payments, at which point they will be able to be reimbursed.

 

What happens when employees are on furlough leave?

 

A period of furlough leave does not have a maximum length, and in theory an employer will be able to furlough employees for as long as the scheme operates.  At present the government has confirmed that the scheme is intended to operate until the end of May 2020, however, this is subject to review, and will be extended further if necessary.

 

A period of furlough leave will, however, last for a minimum of three weeks.

 

Employees can be rotated on and off furlough leave should it be necessary and it appears possible that employers will be able to rotate their staff across furlough-leave if that proves necessary.

 

What can furloughed employees do?

 

An employee who is furloughed should not be at work.  According to the government guidance this means that they should not be engaging in any work for or on behalf of their employer, including any revenue generation or any service provision.

 

However, employees who are furloughed can still perform volunteer work or undertake additional training – as long as the volunteering or training undertaken does not generate revenue or constitute as the provision of a service for, or on behalf of, their employers.

 

What do the Employers have to do?

 

The scheme outlines that the government will pay 80% of the wages of any employees on furlough leave, and although employers are able to top up the remaining 20% of wages if they choose to, there is no obligation to do so.

 

Once the employers have made any selections of who they want to place on furlough leave, they need to use an online portal to supply details to HMRC.  At the time of writing the portal is not up and running: when it is it is likely that the employer will need to supply:

  • PAYE reference numbers;

  • The number of employees being furloughed;

  • The start and end date of the claim;

  • The amount claimed;

  • Bank details;

  • Contact details.

     

     

     

     

     

     

     

     

     

Selection for Furlough

 

It appears from the guidance that the Equality Act provisions will not be suspended regardless of the current public health crisis.  Therefore, it is key for employers to avoid either direct or indirect discrimination when selecting employees to be placed on furlough leave.

 

However, it is likely that if any employers do prioritise vulnerable employees (for example pregnant or elderly employees) to be furloughed that this will be considered justifiable and therefore will not result in a successful discrimination claim.

 

In order to avoid a potential discrimination claim, employers should be careful in selecting employees for furloughing.  Employees are able to volunteer to furlough, but failing that the selection process should essentially resemble a redundancy selection process.

 

Objective and non-discriminatory criteria should be used in order to select furlough candidates.

 

Once the employer has selected its candidates it needs to notify the selected employees, carry out any necessary consultations and obtain the agreement of any employees to be furloughed.

 

It should be highlighted that without the contractual right to do so, employers will not be able to lawfully unilaterally change the employment terms of their employees.  In practice, however, when faced with the choice of being furloughed or being made redundant, it seems reasonable to expect that most employees will opt for a reduced salary in order to preserve their job in the long-term.

 

Changing the status of any employees, as a matter of course should always be evidenced and confirmed in writing.

 

The final steps necessary are to inform HMRC of the furloughed employees through their online portal.

 

As mentioned above, this online portal is not yet available and is expected to be online by the end of April.

 

The legislation

 

Although this guidance does appear extensive, there are still a number of gaps in our understanding that will undoubtedly not be filled until the full legislation is published by the government.  Even then, it is clear that there is potential for a number of claims as a result of employers furloughing their employees without taking proper precautions.

 

Further to that, employees should be mindful of the fact that despite the ongoing public health crisis their employment rights are, as of yet, still in effect.  Their right to not be dismissed unfairly and their rights both statutory and contractual are, until further notice, still effective.

 

If any employers or employees need advice regarding the impacts of coronavirus our dedicated employment team is available to take enquiries. 

 

From all of us at Short, Richardson & Forth please stay safe.

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Short Richardson & Forth, 4 Mosley Street, Newcastle upon Tyne, NE1 1DE

Tel: +44 (0)191 232 0283  ·  Email: info@srflegal.co.uk

 

Short Richardson and Forth Solicitors Limited is a private limited company registered in England and Wales under company number 10572065, authorised and regulated by the Solicitors Regulation Authority No 637150.

Short Richardson and Forth Solicitors Limited is a private limited company constituted and run in accordance with the provisions of the Companies Act 2006. The term “partner” has been used to denote individual senior solicitors employed by Short Richardson and Forth Solicitors Limited.