All UK businesses are eligible to use the scheme, regardless of size, and will apply to “furloughed workers. Furlough leave is a brand new legal concept.
Under the newly created Coronavirus Job Retention Scheme, an employer will be able to agree that a worker, who would otherwise have been made redundant during this crisis, can be designated as a ‘furloughed worker’. That is, once the current crisis is ended, to continue with their employment.
All UK businesses are eligible to use the scheme, regardless of size, and will apply to “furloughed workers”.
What is a “furloughed worker”?
Furlough leave is a brand new legal concept. The newly created Coronavirus Job Retention Scheme aims to help employers avoid redundancies and lay-offs, and instead to ‘lay people off’ whilst retaining them in the business i.e. as ‘furloughed workers’. Employees needed to have been employed and on the businesses PAYE system as at 28th February 2020.
Does the worker have to agree to be furloughed?
Yes, this would appear to be the case. However, the other options for a worker of redundancy/reduced hours/reduced pay etc. are unlikely to be very attractive in the current climate, and the employer may not have the available funds to meet the redundancy costs in any event.
If the employer has a contractual right to lay off workers, then it will not need to obtain the workers agreement to be placed on furlough leave. This is unlikely to present an issue in most situations if the worker is aware that the alternative is redundancy or a period without pay (lay-off).
Employees on maternity leave
The normal rules apply, and employees will be entitled to claim up to 39 weeks of statutory pay or allowance.
If they qualify for SMP, they will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). If they start maternity leave coming off a period of furlough then this could affect their SMP as the 90% will be applied to their earnings during the previous “relevant period”.
If on maternity leave as at 28th February then SMP will continue as normal. Employers may choose to furlough employees returning from maternity leave.
Employees made redundant after 28th February
Employers may choose to re-employ redundant employees and immediately furlough them.
Employees working their notice
Employees who leave their employer after 28th February will find that their new employer will not be able to furlough them. Their current employer may in such circumstances choose to extend the employees period of notice until the scheme ends or as such other time as agreed.
Can a worker insist that they are furloughed?
It may be an attractive option for some employees to sit at home and not work and take 80% pay but the decision to propose Furloughed Leave lies with the employer. It is they alone who would propose and registers this course of action with HMRC.
Should the employer increase pay for the furloughed worker by a further 20%?
If the employer is in a position to act with generosity then this may initially seem an attractive option. However, if only a portion of the workforce is to be furloughed, consideration needs to be given to the impact on those who continue to work for their pay.
The scheme is an ambitious and comprehensive proposal to encourage employers to retain staff for as long as possible during this crisis. It is hoped that it will avoid bruising wide scale redundancies which would make it difficult for a business, and the economy as a whole to bounce back in the near future.
Furloughed employees will still accrue holiday at their normal rate. New regulations will allow up to four weeks of unused leave to be carried over into the next two years, in order to ease the strain on recovering businesses.
How will the scheme operate?
- The employer will designate affected employees as ‘furloughed workers’ and notify them of this change. The early guidance suggests that this may require consultation (unless there is a lay-off clause in the contract).
- The employer will then submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal.
- Further guidance will be given by HMRC as to the information the employer will have to provide.
- HMRC will then give the employer a grant to reimburse 80% of all furloughed workers wage costs, up to a cap of £2500 per month. There is lots of uncertainty around this and we are still awaiting further information from the Government, but it is likely that the 80% will be on the basic salary, (excluding bonuses, commissions etc), with the normal deductions and it will be backdated to 1 March 2020.
- There is no obligation on the employer to make up the remaining 20% wages “but they may choose to do so”.
- HMRC are working urgently to set up a system to reimburse these monies as the current systems are not set up to facilitate payments to employers. At the press conference the Chancellor indicated that he hoped the first grants would be paid before the end of April. He also stated that claims could be made for wages lost since 1 March.
The scheme is intended to run for three months but the Chancellor said that he would not hesitate to extend this period if necessary. For further information on this go direct to the Government website COVID-19: Support for Businesses
Furlough Agreement template from BLM – an insurance risk and commercial law firm
For your client’s businesses who would like to make use of the Government’s introduction of the Coronavirus Job Retention Scheme, employment lawyers BLM have created a template “Furlough Agreement” businesses can use. BLM is an independent commercial law firm and work across many areas of law.
To access the template, please get in touch with one of their team, where they are offering to talk you through the best way to implement the agreement with your client’s employees on a free one hour call / video conference.
For more information about their offer, please contact the BLM team here