The Government’s Coronavirus Job Retention Scheme portal is expected to open towards the end of April 2020 meaning that employers will soon be able to claim back furloughed employees’ wages. With this in mind, we thought we’d clarify the current position on some of the FAQs we are being asked by employers:
What is covered?/ What can I reclaim? Employers can reclaim up to 80% of their Furloughed employees’ gross salaries up to a limit of £2,500 plus employer NI contributions and minimum auto-enrolment pension contributions. This 80% does not include non-monetary benefits i.e. health insurance.
Which businesses are eligible for support? All UK business can apply, although the business must have a PAYE scheme which was started on or before 28th February 2020 and the business must have a UK bank account.
Which employees can be Furloughed? All employees who were employed by the business on or before 28th February 2020 and who are paid through PAYE are eligible for Furlough. When making decisions on who to Furlough, employers must be mindful of discrimination and equality legislation. Employers must notify employees of their Furlough status in writing.
Can an employee object to being Furloughed? Yes, especially if the employer is not willing to pay the 20% top up. Placing an employee on Furlough and not topping up their salary is actually covered by unlawful deduction legislation unless there is an express clause within the employee’s contract of employment allowing for the deduction. It is for this reason that an employee must agree to being Furloughed. However, it is unlikely that an employee would object, given that the alternative would be redundancy.
Does Furlough have to be considered as an alternative to redundancy? According to government advice, Furlough does not currently have to be considered as an alternative to redundancy however practically we believe it should be. The purpose behind redundancy consultation is to look at ways of avoiding redundancies- therefore a failure to consider Furlough might well be considered unfair in any future proceedings. By the same stretch, it would also be unfair not to re-employ someone who was made redundant after 28th February 2020, especially in light of an appeal.
Can Directors be Furloughed? Directors can be Furloughed so long as they are also employees and paid through the PAYE scheme. Only the director’s PAYE pay can be recovered through Furlough, not their dividends. Given that under the Furlough rules, Furloughed employees cannot complete any work, there is some uncertainty as to where this leaves Directors who are under a statutory obligation to complete certain duties required to continue the business. The government have started to draw a distinction between statutory obligation and general employee duties however Furloughed directors will need to tread carefully to ensure they are not falling foul of the rules as each case will be judged on its own facts. If it is decided that directors are not employees for Furlough purposes once Furlough payments have started to be made, there is very little clarity at the moment as to how Furlough payments would be recouped or on what basis.
Furlough and sick pay? The employers guide suggests that if an employee is sick or in self-isolation they should receive Statutory Sick Pay (SSP) and then be Furloughed after this.
Can you Furlough an employee who has handed in their notice? Yes, provided that they were an employee prior to 28th February 2020. If their notice period runs out on a specific date, you can simply Furlough them until that date. Something to bear in mind however is that the minimum level of Furlough relief is 3 weeks, therefore for an employee who gives shorter notice, they would be ineligible. However, an employee who is working their notice may dig their heels in and object to being Furloughed as they are entitled to receive full pay whilst working their notice. An alternative would be to mutually agree that the employer will top-up the Furlough. On current advice, an employee who has resigned on or after 28th February 2020 should be allowed to revoke their resignation and then be Furloughed.
TUPE: Does a Furloughed employee transfer pursuant to the regulations? We believe that in principle, they could do, but it will depend on whether the employee is assigned or not to that part of the undertaking that transfers. Under the normal principles, if an employee is absent from work it does not mean that they cease to be assigned to that area of the business, suggesting the circumstances should not be any different with Furlough. There is some ambiguity surrounding this area, especially regarding employees who TUPE into a business after 28th February 2020.
Can Furloughed employees seek alternative employment elsewhere? Yes, an employee can in principle be furloughed and receive 80% of their wage underwritten by the government and obtain alternative employment elsewhere. In most cases however this will be prevented by contractual restrictions from the original employment.
Can an employer rotate staff on and off Furlough depending on business needs? The treasury have suggested that this would be acceptable but only on the basis that it is in keeping with the Furlough minimum of three weeks. This may also assist with any indirect discrimination issues.
Can employers require employees to take their holiday leave whilst on Furlough? In short, yes. This is a sensible approach given that employees accrue holiday whilst on Furlough. It is also beneficial to employers to reduce the amount of leave still to be taken when work resumes and to get the government to underwrite 80% of the annual leave payment.
This blog is only intended as a guide until further clarification is provided by the government.
If you want to discuss Furlough arrangements with one of our solicitors call 01524 237145.