Please note that this note was produced on Monday 23 March and is likely to become out dated with ever changing Government measures and guidance. Please check with your Accountant and against Government guidelines when looking to adopt Furlough Leave.
On Friday 20 March, the Government announced a job retention scheme rescue package to support employers and employees through these unprecedented times. At the moment the details are sparse and the HMRC portal to claim ‘wage’ support is not up and running, but it is outlined that financial support could be backdated to 1 March for businesses who have already had to send employees home.
So what is ‘Furlough Leave’?
Furlough Leave isn’t a UK Employment Law phrase and is a new phrase adopted from an American word used in situations where we would say “leave from work”, or “sabbatical”.
For the avoidance of doubt, in order for an employee and employer to qualify for Furlough Leave, the employee must be sent home, it is not available to employers where the employee continues to work.
It is intended to be a job retention scheme to pay employees who would otherwise be laid off [or made redundant].
Can every employer claim it?
If you employ employees and you send them home, then yes. So, that’s any employer, whether they are a sole trader, partnership, Ltd Company or LLP.
Can an employer enforce an employee to go on Furlough Leave?
Yes, if an employer has a clause in the contract of employment which specifically allows for it to either introduce lay off or short time working. In this case no written consent is required from the employee.
No contractual clause to lay off or short time working: If the employer has no lay off or short time working clause in the contract of employment, then it is understood that consent will be needed. However, if given the Government is enforcing closure of some business areas then it is likely this will be necessary. If an employee refuses to consent to be sent home on Furlough Leave, then they risk being made redundant (subject to fair selection).
In practical terms, be clear with employees at this time, there options are:
- Agree to Furlough Leave; or
- Be at risk of being made redundant.
Can an employee work part time and the other part on Furlough Leave?
It is not clear, it would seem a logical next step. However, the Government has not confirmed this so at the moment do not presume you can (doesn’t seem to be what has been said at the moment). We all know it would be good for morale, but we’ll have to wait and see.
How does an employer select for Furlough Leave?
There are currently no guidelines regarding this issue and if a business has not been closed through Government measures then it would be sensible to adopt a selection criteria similar to that when selecting for redundancy. This should be based on objective criteria such as appraisal records, business specific skills, productivity records, dual process trained etc.
Unfortunately, there may be some employees who aren’t thinking of the greater good. So, the basic scoring gives you a fair basis for selecting people for redundancy if they don’t agree to Furlough.
You always have to be careful of discrimination, but there may be some parents or carers who would welcome Furlough Leave due to caring for children or others they have responsibility for.
If an employee is selected for Furlough, then you should notify an employee of their selection, if through their agreement or where you have had to negotiate it.
Does the employer have to top up the 80% wage to 100% for a Furloughed Leave employees?
No. It can choose to do so but is not compelled. It would in our view be sensible to get written consent not to top up the 80% to 100%. Who knows there could be a risk of employees’ making claims for unlawful deduction of wages. One would hope that employees wouldn’t be successful given the state of society at the moment, but who knows!
If not topping up, getting written express consent, could help down the line.
If an employee refuses Furlough can we make them redundant.
Yes, subject to ordinary fair redundancy processes and selection.
How does an employer get the subsidised wages back from the Government?
The Government is setting up an online HMRC portal, but we don’t know when it will be live. We understand the outline process to be (again this may change):
- Select your employee(s) for Furlough Leave
- Gain written consent from employees to 80% pay or the cap of £2500 per month (presuming gross)
- Confirm in writing to employees being placed on Furlough Leave
- Send all Furloughed Leave employees home and stop them carrying out any work
- Complete application for Furlough Pay for all affected employees using HMRC Portal (when ready….)
- Remain in contact with employees on Furlough Leave
- Continuously review Government updates on Furlough Leave employees to understand changing picture (this advice will out date daily we suspect!).
Furlough Leave pay will be 80% of normal wages. However, there will be a cap of £2500 per month (anticipate gross), which is the figure being paid to the employee, not the normal wage.
The cap will include pension and NI contributions.
Those awkward employees
Seek advice and consult to get agreement as a basic guideline.
Note: employers think carefully about your use of the scheme, any abuse is likely to result in high sanctions which could end your business anyway!