2 weeks ago
Furlough Leave 26th March 2020
This is an update on 26th March, updating our original post of Saturday 21st March 2020. This update will also quickly become out of date. We will endeavour to update it as soon as information becomes available.
On, 20th March 2020, the Government announced a series of measures to assist employers and employees in the coming months during the current Covid-19 crisis. There is still very little detail available but it has been confirmed that the measures outlined below will be backdated to 1st March 2020.
What is Furlough Leave?
Furlough is an American word used as we might use “leave”, or “sabbatical”.
To be classed as on Furlough, the employee must be sent home without work, it is not available to employers where the employee continues to work or simply works from home instead of their normal place of work.
Which employers can claim it?
Any employer, whether a sole trader, partnership, limited company or limited liability partnership can claim the benefit. The only criteria is that you have employees paid through PAYE, and you send them home without work. As the guidance states that “all UK businesses” are eligible it appears that local authorities may not be eligible but this has not been officially confirmed one way or another.
Can an employer insist on putting someone on Furlough?
If the employer has a clause in the contract which allows for the employer to either introduce lay off, or short time working, then the answer is Yes. No consent is required.
If the employer has no lay off clause in the contract, technically consent will be needed. However, if an employee refuses to consent to be sent home on Furlough, then they risk being made redundant. The employer could make an employee redundant if they refuse, provided they have selected the employee for redundancy fairly.
How do you select for Furlough?
We advise that you use a shortened version of a redundancy selection criteria (i.e. some form of objective selection criteria). It might be from productivity records, or previous appraisals, or managers completing a score matrix based on relevant skills.
The reason for this, is that if an employee refuses Furlough, the employer could then select them for redundancy and the basis would already be on a fair footing.
It could be argued that placing someone on furlough is a reasonable adjustment if they have a disability which makes them vulnerable. Selecting older employees, particularly any over the age of 70, could mean younger employees argue that they have been discriminated against based on their age, although it seems to us that it is likely to be a legitimate aim of the employer to follow government advice and so be able to justify any age discrimination.
Can we put people on Furlough part time, and have them work Part time?
At the time of writing, we simply don’t know but it seems unlikely given an employee must be sent home and not available to employers.
Does the employer have to top up the 80% wage to 100% for a Furloughed employee?
No. It can choose to do so but is not compelled.
However, there is a future risk of a claim for deduction of wages. We think that the risk is small, and the chance of the employer losing such a claim also small, but to avoid the risk, the employer should attempt to get written consent from an employee to the terms of the Furlough. We suspect it won’t be hard, given the alternative will be redundancy.
If an employee refuses Furlough can we make them redundant?
Yes, providing that a fair selection and a fair procedure has been applied. See above.
What will be the process for getting the money back?
The government are setting up a portal. It is not up and running yet but we suggest the following as a general process:
- Select your employee for Furlough;
- Gain written consent to 80% pay;
- Send the employee home without work;
- Register for the Furlough Pay using the online registration portal (when up and running).
Are there other limits?
Furlough pay will be 80% of normal wages.
There will be a cap of £2500 per month, which is the figure being paid to the employee, not the normal wage.
The cap will include pension and NI contributions.
How do I work out someone’s pay where their hours vary week to week?
For pay before 6 April 2020, take an average of their last 12 weeks’ pay. For pay on or after 6 April 2020, take an average of their last 52 weeks’ pay.
Can we place someone on long term sick leave on furlough?
As the reason for absence is the employee’s ill health, and not the fact the employer has no work for them to do, they should remain on sick leave. If the employee is confirmed as fit to return to work, they can then be placed on furlough.
Can we place someone on maternity leave on furlough?
If the employee gives notice to bring their maternity leave to an end, they can be placed on furlough. However you cannot change their leave to furlough and then change it back to maternity leave.
Can we place someone who is self-isolating due to being in a vulnerable category on furlough?
As with cases of long term sick leave, where the reason for absence is due to self-isolating, as opposed to the fact the employer has no work for them to do, they should not be placed on furlough, and would then be entitled to sick pay. Only those self-isolating in accordance with the advice of Public Health England are entitled to sick pay. The current advice is that this covers those showing symptoms or a member in their household is showing symptoms but this may change.
What if paying 80% of normal wages takes someone below the National Minimum Wage?
Given the absolute requirement to pay the National Minimum Wage it would seem as though the employer would need to top up the wages so that the employee is receiving at least the National Minimum Wage. However, we will not know the position for certain until legislation has been passed.
Can we take someone off furlough for a period and place them onto furlough again?
This has been suggested by some employers to allow them to rotate the staff who are working. Until further guidance or legislation is published we don’t know but this would appear to undermine guidance to stay at home, so we would not be surprised if this was prohibited.
Can someone get another job or volunteer whilst on furlough?
We are not aware of any restrictions although getting another job could cause problems where HMRC identify staff are being paid through PAYE. This could be prohibited and treated as gross misconduct. If so, this should be communicated to staff.
Do employees on Furlough accrue holiday?
Yes, and holiday that is taken during Furlough should be paid at 100% and not 80%. However, an employer can give notice to an employee of compulsory taking holiday during Furlough provided the written notice is twice as long as the period the employee is required to take.
What if an employee gets difficult?
Call one of the solicitors at Sherbornes.
We expect there to be stringent anti-fraud measures and we warn all business owners that in the event of abuse of the system, they should expect public naming and shaming for what will be, after all, a form of illegal profiteering from a national crisis. We expect heavy penalties to follow for those who abuse this benefit.