On Friday 20 March 2020 the government implemented a new Coronavirus Job Retention Scheme to combat the economic effects of the Coronavirus and prevent businesses from being forced to make redundancies. It will be implemented for an initial period of 3 months backdated from 1 March. The government has not ruled out extending the period of cover.
All UK business can access the scheme by applying to HMRC for a grant which would pay up to 80% of the wages for employees who are not working but kept on the payroll (“furloughed workers”). The government have capped the payment at £2500 but for the vast majority of people, this cap is more than sufficient. Currently, this scheme is not available for gig economy workers or those employed on a Zero hours contracts.
There is no legal definition of what being a furloughed worker means however the government guidance is that a furloughed worker is someone who remains employed by the business but will not be undertaking any work for them during the relevant period. So the worker will not be ‘laid-off’ but will just not be required to attend work.
Not surprisingly the government has indicated that it will seek to audit the scheme to prevent any abuse of the system.
If, in spite of the implementation of this new scheme, the business needs to make redundancies then employers should clearly lay out why redundancies are required and why the employees at risk are unable to be furloughed in order to try and avoid disputes. Redundancies should be a last resort after all other options have been exhausted. Employers need to be mindful of possible Collective Consultation obligations if 20 or more redundancies are proposed at one establishment within 90 days.
There are still many unanswered questions which may come to light in the upcoming days or weeks. Potential scenarios that may arise include the following:
How do we choose which employees for furlough leave?
An employer cannot simply require an employee to not work if the contract of employment doesn’t allow for the employer to force the employee to take paid or unpaid leave, as will be the case with most employment contracts. The employer will therefore have to get the written agreement of the worker before designating them as furloughed.
An employer will need to take care to ensure a fair and objective selection process is applied and not tainted by direct or indirect discrimination. Roles that are critical are likely to be low down on the list or even exempt. An employer may even wish to consider asking for volunteers in the case of staff doing the same or roles that are critical.
Can an employee on furlough leave get other employment?
An employee on furlough leave continues to remain bound by all the terms of his employment contract. Many contracts will prohibit second employment. In the absence of such a clause, what of the argument for employees who are put to financial hardship by the 20% drop in income? Taking into account the guidance which states that employees should not undertake work for their employer while they are on furlough leave, it seems highly unlikely that it will be possible for secondary employment with another employer.
What about annual leave for employees on furlough employee leave?
Employees on furlough leave will continue to accrue annual leave and also be entitled to receive all contractual benefits under their contract, unless the employee expressly agrees to waive them. Since annual leave continues to accrue during furlough leave employees could in fact take annual leave during furlough leave to top up on their pay. One days holiday per week is equivalent to approximately 20% pay of a full-time employee and this would effectively cover the shortfall. Also, from the employer’s perspective it would help to avoid too many employees seeking to take leave at the same time later in the year when things return to normal.
My employees’ pay fluctuates from week to week. How do I calculate the 80% entitlement?
The indications are that the scheme will be based on the last pay received in February 2020. The alternative viewpoint is to apply a 12 week average. This will no doubt be cleared up once the finer details are published by the government.
If furlough leave was available last week I would not have dismissed staff but put them on furlough. Can I now revisit the dismissals?
It will still be within time to appeal the dismissal so the employees should submit an appeal. A successful appeal will preserve continuity as if the dismissal never took place. Following reinstatement affected employees could then be offered to be placed on furlough leave. However, if P45s had been issued then HMRC may take a different view. It is hoped that common sense would prevail because the intention behind the scheme is to preserve jobs.
If you are a business or an employee who wants further advice on the scheme and what this means for you, or if you are an employer looking for advice on how to mitigate the impact the coronavirus has on your business give our expert Yunus Lunat a call on 0113 284 5020 or email email@example.com. Yunus has been featured on many major news platforms providing specialist insight on employment law.