Furlough Update

Furlough Update

This is the best idea we have of the situation as at 6^th April 2020. The situation continues to change rapidly.

The government issued new and further guidance over the weekend on furlough leave. Much is as we expect, but there remains a lack of clarity on holidays.

Holidays

The question often asked is whether people can take holiday during furlough leave, and the guidance issued so far is silent on the point. ACAS have one view, other notable authors have a different view.  We cannot say with any certainty at this precise moment what the answer is.

Allowing holiday during furlough comes with a risk. The previous guidance states that each furlough period must be a minimum of 3 weeks at a time. Presumably if the furlough period is 2 weeks and 4 days, for example, the employer will not be able to claim back the furlough pay. If an employer allows holiday and pays holiday pay for a day in the middle of furlough, it MIGHT prevent the employer claiming back the furlough pay allowance.

We understand why some employees might want holiday, because it’s a period of 100% wage, and why employers might want to pay holiday, to stop too much accruing. However, this practice has a risk at this point, and certainly more risk than not allowing holiday during furlough.

Who can be furloughed?

Directors’ positions have now been clarified, and we can furlough directors, who ARE allowed to perform their statutory duties as directors without risking furlough pay. Statutory duties might include checking the bank account, signing off auditor’s activities etc. It should not include actual business activity, for example sales.

The updated guidance also confirms that workers, salaried members of LLPs and agency workers can also be furloughed, provided they are paid through a PAYE scheme.

Shielding employees (those individuals who are at high risk of developing severe illness from coronavirus), or those who are in the same household as someone who is shielding, can be furloughed where they cannot work from home and would otherwise be made redundant. This applies where they are shielding in line with official guidance: https://www.gov.uk/government/publications/guidance-on-shielding-and-protecting-extremely-vulnerable-persons-from-covid-19/guidance-on-shielding-and-protecting-extremely-vulnerable-persons-from-covid-19#what-is-shielding

Employees who are unable to work due to caring responsibilities (for example caring for children due to school closure) can be furloughed.

It remains the case that those who are ill or who are choosing to self-isolate (as opposed to shielding described above) cannot be furloughed.

What can be claimed?

The employer can reclaim 80% of the wage cost of a furloughed employee. Previous guidance had said that bonus or commission was not included. The updated guidance says that the wage cost can include overtime, fees and compulsory commission where you are obliged to make these payments and where they are regular payments. Discretionary bonuses and commission and non-cash benefits, such as the value of a company car, are NOT included.

Employees who left employment after 28 February

The updated guidance states that anyone who ceased employment on or after 28 February, whether due to redundancy or any other reason, can be rehired and furloughed by their previous employer. However there is no obligation to do so.

Paid work for others

It is also now clear that employees who are furloughed CAN do paid work for others, as long as they are not working for the employer who has furloughed them and as long as the contract does not contain an exclusivity clause.

Records

In terms of records, further clarity has been achieved in terms of the duty to keep the written notification to employees of their furlough for 5 years minimum.  It seems the government may well be auditing furlough and seeking to catch out those who abuse the assistance for a considerable period of time after the current crisis has ended.

The actual government guidance can be read here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme?mc_cid=177bacbc11&mc_eid=97cb96874a