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‘Furlough’ – Employment law’s new ‘F word’

Posted
April 8, 2020
Employment Law

It’s fair to say that the word ‘furlough’ has experienced a meteoric rise to prominence over the last couple of weeks. So what does it mean and how does the Government’s new Coronavirus Job Retention Scheme work (CJRS)?

What is the CJRS and what is furlough?

In simple terms, the CJRS provides a government-funded means by which employers can place their employees and workers on temporary paid leave, whilst we navigate the challenges posed by the coronavirus pandemic. Currently, the scheme is available from 1 March 2020 to 31 May 2020. It remains to be seen whether it will be extended beyond this date.

The expression ‘furlough’ (which basically means a leave of absence) is being used to describe the temporary status of those employees covered by the scheme.

How does it all work?

In most cases, employers will need to agree with their employees that they are going to be designated as ‘furloughed workers’. Employees placed on furlough will remain employed and enjoy continuous service, but they will not be required to undertake (and should not undertake) any work for their employer. A period of furlough must last at least 3 weeks, after which the employee can be brought back to work and then conceivably furloughed again (for a minimum of 3 weeks), if the circumstances require it.

Who can be furloughed?

Anyone who was on the payroll on or before 28 February 2020 can potentially be ‘furloughed’. 

As a result, the scheme covers full-time and part-time employees, as well as many types of workers (including those on zero-hours contracts).

Are those on furlough entitled to all their normal pay and benefits?

This very much depends on what employers agree with their staff. The Government has promised to reimburse employers for their furloughed workers’ wage costs as follows:

·      80% of their wages (up to a maximum of £2,500 per month);

·      the cost of the relevant employer’s NICs; and

·      the cost of minimum statutory employer pension contributions.

It’s worth bearing in mind that this simply establishes how much money businesses can claim from the government in respect of their furloughed workers’ wage costs. 

It does not limit or directly influence the amount employers should pay to their staff. Employers will need to clearly agree with their staff IN WRITING how much they will receive during furlough. Does the employer want to ask its staff to accept a temporary reduction in pay? Is the employer prepared to top up its employees’ pay to normal levels, meeting the additional cost itself? Very careful thought needs to be given to the wording of any correspondence or written agreements used to document the furlough arrangement.

HMRC are currently devising the precise mechanism by which employers will be able to make claims under the scheme. Employers will need to consider whether they can cover the initial wage costs themselves, whilst they await receipt of the government grant.

What about those on sick leave?  What about those due to take holiday?

There are some potentially difficult issues which have yet to be fully hammered out about how furlough interacts with other types of leave. Currently, if someone is signed off sick, they should remain on sick leave (and sick pay) until they are well again. However, they can potentially be furloughed once they are otherwise ready to return to work.

Workers will continue to accrue holiday during a period of furlough. However, whether staff can take (or indeed be required to take) holiday during furlough is currently unclear. What is also unclear is how much businesses would have to pay their employees during a period of such annual leave. We very much hope the government will quickly provide additional guidance on this particular issue, given the concerns that many are currently experiencing.

How can we find out more?

New and updated government guidance and information on the CJRS is being issued every few days at the moment. So it’s worth keeping your eyes peeled and your ears to the ground. Of course, if you need specific advice and guidance on using the CJRS within your business, please contact James Willis (Head of Employment Law) on 07917 712257.

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