Partner Sue Dowling, head of Blandy & Blandy Solicitors’ leading Employment Law team, explains the Government’s Coronavirus Job Retention Scheme and the process of furloughing staff.
Under the Scheme, currently due to run until at least 30 June 2020 (extended from 31 May 2020) and operated by HM Revenue & Customs (HMRC), employers can place designated workers (with their consent) on furlough leave ( a period of paid temporary leave) for a minimum of three consecutive weeks.
The Government’s aim is to protect jobs by helping employers to retain and continue to pay staff who otherwise may be laid off as a result of the COVID-19 pandemic.
Furloughed staff will:
- remain part of their employer’s workforce
- remain on their employer’s payroll
- continue to accrue continuous service
To be classed as being on “furlough leave”, a worker must be sent home and is not permitted to carry out any work for the employer. It is consequently not available to workers who continue to work (e.g. from home). Furloughed employees can undertake training or volunteer work. Employees may be able to work for a second employer while furloughed providing that their current employment contract does not prohibit this.
Employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.
Which employers can claim?
Any employer can apply under the Scheme, including businesses, charities and partnerships, providing that they:
- had a PAYE scheme in operation as of 19 March 2020
- have enrolled for PAYE online (or do so now, allowing up to 10 days)
- have a UK bank account
Which staff can be placed on furlough leave?
To be eligible for furlough leave, an employee must have been on their employer’s PAYE payroll on 19 March 2020 (changed from the original date of 28 February 2020). Employers can claim under the Scheme for employees who are:
- on agency contracts
- on flexible/zero hour contracts
It is unlikely that an individual’s employment contract will contain a specific right for their employer to furlough them. As a result, employees cannot be made to take furlough leave and must agree to do so in discussion with their employer.
Employees made redundant after 19 March 2020 are also eligible for furlough leave, if they are allowed to re-join their employer’s workforce instead of being laid off.
Any employees newly hired after this date are ineligible under the Scheme. Employers may seek to defer planned start dates for new hires or to reconsider or cancel job offers. When considering such steps, we would advise seeking legal advice to safeguard against a potential claim against the Employer for example for breach of contract/wrongful dismissal.
A separate scheme (the Self-Employed Income Support Scheme) exists for self-employed individuals who meet the eligibility criteria set out. The Government will pay a grant for 80% of an individual’s normal monthly profits, up to £2,500. The next self-assessment payments will also be deferred until January 2021.
Making a claim
Under the Scheme employers can claim for:
- 80% of employees’ wages, up to a cap of £2,500 (gross) per month
- any regular payments they are contractually obliged to pay an employee in addition to their normal pay, including past overtime, fees and compulsory commission payments (but not for discretionary bonuses, tips, benefits in kind or non-compulsory commission payments)
- minimum automatic enrolment employer pension contributions on the subsidised wage
- statutory National Insurance Contributions (NICs) (excluding the difference if an employer has opted to top up an employee’s salary)
Employers should seek their employees’ agreement to go on Furlough and to accept 80% of their salary/£2,500 gross earnings. Payments remain liable to income tax and Employee NICs. The Scheme will be backdated to 1 March 2020, for a period of three months, although the Government has said that the Scheme may be extended if necessary.
Claims should be made from the date that an employee stops working and starts furlough leave, not at the point a decision is made or when they are written to confirming their furloughed status.
If an individual has been employed for under 12 months, their employer can claim for 80% of their average monthly earnings.
Might the Scheme be extended further?
The Scheme is now due to expire on 30 June 2020, having already been extended from 31 May 2020, and the Government could decide to extend it further. Employers may face difficult decisions whenever the Scheme ends depending on the organisation’s circumstances at that time.
The current guidance does not go into this but of course, to avoid possible claims of unfair dismissal and/or unlawful discrimination, a careful, objective and fair process would need to be undertaken before any redundancies are implemented to minimise the risk of any claims being brought against the employer. This is something our specialist Employment Law team can advise on.