All guidance has been provided from Government official guidelines as of 23 March 2020 and is for general information only. Specific advice should be taken prior to implementing.
What does furlough mean?
A furlough is “a temporary lay-off from work.” People who get furloughed usually get to return to their job after a furlough.
Which businesses are able to use furlough leave and reclaim the 80% from the Government Scheme?
All UK employers are covered – “small or large, charitable or non-profit”.
How does the scheme work?
There is only limited information about the scheme currently, where we are waiting to hear more from the government. However, from what we do know, where a business is unable to provide work to their staff either due to a down turn in work or a business closure, where that employee would otherwise be placed on short term lay-off or made redundant, employers can now place employees on furlough leave. This would mean the business do not require employees to perform any work during the period of furlough leave, where they would remain on the payroll. At which point there is work available furlough leave would end and the employee would return to their role.
What benefit does this scheme offer?
The scheme encourages employers to keep roles open and staff employed even though there is currently no work to offer. It provides support for employers to continue paying part of their employees’ salary for those employees that would otherwise have been “laid off” during this crisis (ie made redundant or laid off under the terms of their employment contract).
The government will reimburse up to 80% of the wage cost of furloughed workers up to a cap of £2,500 per month. Employers can, but are not obliged to, make up the 20% difference.
Can a furlough employee perform a period of work where we may need them to and then go back to being furloughed?
There is limited information around this, yet as it stands today, employees must not be performing any work for their employer where they are furloughed. The intention of the government is that furlough leave is a direct alternative to redundancy, so the expectation is that the employer has no work to give furloughed workers. There does not appear to be a half-way house that allows some work to be performed.
When does the scheme take effect?
The scheme was confirmed to take effect from 1 March 2020 and is expected to apply for three months, so until the end of May 2020. Employers can implement furlough leave immediately where there is a need. Employers may also transfer employees that may have already been made redundant/laid off (from 1st March) to a furloughed status.
Do we require employees’ consent to put them on furlough leave?
Where it does not state in the employment contract a right to place an employee on short-time working or a period of lay-off, you will be required to obtain employees’ written consent to a variation of contract as per the usual regulations governed by current employment law. (We are supporting a number of businesses in this so please do contact us if you believe you are required to place employees on lay-off/ furlough or short-time working)
What if I do have work available, can an employee insist on going onto furlough leave?
No. It is the employer’s decision and they can choose whether or not to implement furlough leave and, if implemented, which employees it will apply to, where again usual regulations apply in terms of a selection process around this.
What is the timescale for reimbursement of salaries using the scheme?
HMRC are working urgently to set up a system for reimbursement and the current expectation is that the portal will be live in about 2 to 3 weeks, so applications can be made then. However, there is likely to be further delay before payments are actually made so the current best estimate is that payments will come through at the end of April 2020.
Staff in probation periods
If you are having to furlough staff who are still on probation, it is advisable to confirm that you will be extending their probation period until they are able to resume work. This will give you an opportunity to fully assess their suitability when they are back in and will also prevent employees from automatically passing their probation period by default.
Doesn’t a lack of work mean the employees are redundant, can I just make the employee redundant?
In normal circumstances, a reduction in work or closure of the workplace would result in redundancy. But in the current situation, that is an unattractive route for most employers to take. Presumably, most employers want staff to stay employed with reduced pay/hours so that they have relevant staff levels when things start to return to normality. Furlough seems to be the best option than making redundancies now and then having to recruit new staff when business picks up again.
We see no alternative but to make redundancies. Do normal rules apply?
Employees with less than 2 years’ service cannot claim unfair dismissal and no legal action can result if they are made redundant immediately (subject to discrimination claims.) For employees with 2 years’ service or more, in essence, normal rules do apply, but consultation periods can be reduced.
NOTE: Given the lack of details and ability to claim for the reimbursement for furloughed employees currently, where possible you may wish to hold off on utilising the furlough option, unless in cases where there is no work at all or your workplace has to close. Some of the things that we don’t yet know that all businesses should consider:
- Is the £2,500 per month on a net or gross basis?
- Do employment costs include pension contributions and employer NICs?
- How quickly will the refunds be made?