The legal landscape in relation to employment law is changing on an almost daily basis with new schemes being invented rapidly by the government to deal with the coronavirus crisis.
With such changes being made, there has been a lot of confusion, so we have put together a list of the most frequently asked questions our employment team is receiving about furlough in the hope that this will help answer some of your questions.
The employment guidance for business portal
In addition to the Q&A’s, we are pleased to announce that the Ashtons Legal Online HR Portal, which contains all manner of HR documents such as policies, contracts, invitations to disciplinary hearings, amongst other things, now also contains a Furlough Leave Agreement.
All of these materials will be updated as the COVID-19 crisis continues and the government issues further guidance, schemes, and updates.
If you would like unlimited one-year access to this portal, we are charging £125 plus VAT. Please get in touch by emailing our Trainee Solicitor, Natasha Adams at Natasha.Adams@ashtonslegal.co.uk.
Your questions answered
The legal infrastructure around furlough is changing on a daily basis. The content of these answers have been sourced from the government’s update on 4 April 2020 and may continue to change. Please contact a member of the team for bespoke legal advice.
1. What is furlough leave?
Furlough leave is a type of paid leave which the government announced on 20 March 2020 to help businesses retain their staff during the coronavirus crisis. It is a scheme where the business can opt to send their staff home and whilst they are not working, recover 80% of wages (up to a maximum of £2,500 per month) from the government’s Coronavirus Job Retention Scheme (“Scheme”).
Employers can top up to 100% or agree with staff to accept the lesser rate.
The business must furlough staff for a minimum of 3 weeks. The 80% (or £2,500 cap) is paid by businesses and then will be refunded by HMRC once their portal goes live, which is expected to be by the end of April.
2. How do I furlough someone?
Employers should seek the agreement of their staff to make the temporary variation of the contract required to place someone on furlough. To be eligible for the grant employers must confirm in writing to their staff members that they have been furloughed and keep a record of this for five years.
3. When does the scheme run until?
The Scheme is to be backdated to 1 March 2020, for any staff already on lay off or made redundant as a result of the crisis. The scheme is currently intended to last until 31 May 2020.
4. Who is entitled to furlough?
Full-time employees, part-time employees, employees on agency contracts, employees on fixed-term contracts and employees on flexible or zero-hour contracts, that were on the payroll as of 28 February 2020.
Apprentices can also be furloughed but must be paid at least the Apprenticeship Minimum Wage, National Minimum Wage or National Living Wage (as applicable) and so the employer must make up any shortfall.
For the purposes of this note “employee” covers all these individuals.
5. I am an employer in the public sector – can I furlough staff?
The government expects most public sector organisations to not require furlough for staff as they continue to provide essential public services. Where employers receive public funding for staff costs and that funding continues, they should use that money to pay staff in the normal fashion and not furlough them.
6. What can individuals do whilst furloughed?
Individuals cannot perform any work for the organisation that has furloughed them. They can, however, complete training or voluntary work for the organisation, so long as it does not provide services or generate revenue for the organisation.
Individuals can continue to work other jobs (as each organisation has its own responsibility to furlough if necessary) and can volunteer for other organisations.
If contractually allowed by the furloughing employer, the individual can take on another job during the furlough period. If you are taking on new staff that has been furloughed from elsewhere they should complete Statement C of the new starter checklist.
7. What is the 80% (or £2,500 cap) comprised of?
As of 26 March 2020 the 80% will be based on the employee’s regular salary plus their associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on the subsidised wage.
The government has confirmed that you can claim for any regular payments you are obliged to pay your employees.
Discretionary bonuses (including tips), discretionary commissions, non-cash payments, and non-monetary benefits should not be included, however, the compulsory commission can be reclaimed from HMRC as well as basic salary, overtime, and fees. The amount of compulsory commission paid should be backdated to past sales as furloughed employees cannot be completing new sales when on furlough. Benefits provided through salary sacrifice schemes should not be included in the reference salary.
The calculation is based on an employee’s actual monthly wage, before tax. If the employee has variable earnings then:
· for those employed for 12 months prior to the claim – the claim is for the higher of either the same month’s earnings last year, or the average monthly earnings for the 2019/20 tax year;
· for those employed for less than 12 months – the claim is an average of monthly earnings of their period of work.
Employees are only entitled to National Minimum or Living Wage if they are working. If the 80% will drop them below that threshold you can pay the lower rate if they are not working. However, if they are required to complete any training (including online training) during this period they will have to be paid NMW / NLW even if that includes the employer topping up. The current rates and rates applicable from 6 April 2020 are here.
8. What about deductions?
The employee will still pay income tax, National Insurance and (if applicable) pension contributions on the reduced salary. The employer will be able to recover the employer’s National Insurance contributions and pension contributions at the auto-enrolment minimum through the Scheme.
Apprenticeship Levy and Student Loans should continue to be paid as usual.
9. When will my business be reimbursed for the wages paid during furlough?
You should pay wages as usual and then reclaim them (unless you have the contractual agreement with staff not to do so). HMRC hopes to have their online portal available by the end of April.
It is not clear what their response times will be but given the present situation with COVID-19 it could take a while after the online portal opens for payments to be made.
10. Can I reclaim for wages if I have asked staff to take a pay cut or work fewer hours, but carry on working?
No – the Scheme is only for staff that are not working.
11. What if someone is working their notice period right now, can I furlough them?
An employee who is working their notice period is still an employee, therefore, they can be furloughed along with the rest of staff.
12. Can I rotate staff on furlough, for example, one week normal working, one week furlough?
Employees must be furloughed for a minimum of a three week period.
As of 6 April 2020, the government confirmed that employees can be furloughed multiple times and can be rotated as long as each furlough period lasts for a minimum period of three weeks.
13. What about staff who are on unpaid leave, maternity leave, sick leave, parental leave, etc?
Staff currently on sick leave and in receipt of sick pay should remain on sick leave until the end of that period, and can then be furloughed if agreed.
If employees are shielding pursuant to public health guidance, or are living with someone who is shielding, they are able to be furloughed if they are unable to work from home and you would otherwise have to make them redundant.
Staff on unpaid leave since 1 March 2020 can be furloughed. If staff are unable to work due to caring responsibilities (e.g. childcare) they are eligible for furlough even if their job is not otherwise redundant.
For staff on maternity leave, adoption leave, shared parental leave or paternity leave, the usual rules for statutory payments apply.
14. How should I deal with someone on maternity or paternity leave who now wishes to return to my business to claim 80% (or £2,500) furlough pay?
Women on maternity leave must take the minimum maternity leave period off work (two or four weeks as relevant) following the birth of their child. Following this if they wish to return to work they can do so in line with the usual notice periods.
15. Can I make staff redundant whilst they are on furlough leave?
The usual processes and procedures regarding redundancy remain in place. Therefore, a redundancy process can run alongside furlough leave.
The government has confirmed that furlough leave will only be available until 1 June and at that point your business must make a decision as to whether you bring back furloughed employees, implement another form of leave that you may have the contractual right to engage (e.g. unpaid lay off), or make them redundant.
If you are making 20+ staff redundant please take legal advice on collective consultation requirements.
16. I am a director. Can I be furloughed?
Yes, you can be furloughed if you are a PAYE director. You will not be able to do any work except where you are complying with your statutory duties.
We would recommend that sole directors, in particular, take specific legal advice on their obligations and ability to work if they are considering furloughing themselves.
Further information For specific advice for your business, please get in touch with our specialist Employment Law team through this website or by calling 0330 404 0778. For all of our COVID-19 (Coronavirus) advice, please visit https://www.ashtonslegal.co.uk/coronavirus/
This information is correct at 11.30am on 6 April 2020 2020.