Guidance on Furlough
Guidance Notes on Furlough – ‘Coronavirus Job Retention Scheme’ – 23 March 2020
[Note: given the rapidly evolving nature of this crisis this is advice given on circumstances that have not arisen before. Please speak to your Adviser at Tamar on your individual business situation.]
The scheme was announced by the Chancellor on Friday. There is limited information about it from the Government at the moment. The only official information we have identified is at:
Go to the section on furloughed workers – this is guidance for employees. Click on the hyperlink beginning ‘access to’ for a further headline paragraph relating to employers.
- The Scheme is intended to run for 3 months from 1 March and be extended “if necessary”– so its application can be backdated to 1 March and then run for April and May currently;
- It will apply to all UK businesses – companies, un-incorporated, LLP etc.;
- You need to decide which employees will be on furlough and notify them;
- You are changing their status and this is subject to employment law;
- What this means is that if you have a lay off clause in the employment contract you can move them to furlough without further agreement (you already have the contractual right);
- If you do not have a lay off clause in your employment contracts (or a right not to provide work – this would be unusual) you need the agreement of an employee to go on furlough. A right to work is implied into employment contracts but you will find guidance below on the reality of the current situation: it is obviously highly likely that you will have agreement;
- The Chancellor has said that the Scheme will be ready to be accessed & payments made by the end of April;
- Claims will made via an HMRC portal that is being worked on currently.
- The term ‘furlough’ is new in a UK context, there is nothing special about the word – essentially it means still being employed but not working
- The limited guidance referred to above states that an employee on furlough: “shouldn’t do any work”.
- The funding of pay for those furloughed will be “80% of your wage” – up to £2,500 per month.
- Govt guidance states of 80% of your wage “” – this implies that employers pension and employers national insurance contributions are covered by the funding.
What is the right process to follow to put people on Furlough?
Having in mind social distancing guidance, wherever possible by phone call – or email/text followed by phone call.
Explain in the call:
- The situation of your business;
- The Government scheme announced on Friday;
- This pays 80% of wage to those on ‘furlough’;
- It will run initially to the end of May but may be extended;
- Full details have not been published as yet by the Government;
- A decision about who goes on furlough has had to be made quickly and a core team remain at work whom you believe can best help to provide business continuity OR all employees will be on furlough;
- Identify any delays to pay timings due to cash-flow issues – the Government has stated the scheme will be up and running by the end of April – but if you cannot pay now because there is no cash, explain that you will do so as soon as you can access Government (and/or other funds/loan);
- If you cannot pay 80% wage but can do something in the interim before Government funds are accessed then explain what you will do in the interim (e.g. you might be in a position to pay at SSP rate as an interim step or a percentage of pay).
Follow this up with a letter sent by email where possible (or hardcopy in post for those without email). We are currently drafting templates.
If someone does not wish to be on furlough explain that the alternative is lay off without pay or a redundancy situation which the company cannot currently finance (unless you can and wish to make the individual redundant – in which case please speak to your Adviser about how to do so). Note that putting someone on lay off without the contractual right to do so risks an unfair deduction of wages, breach of contract and unfair dismissal claims unless the Government changes legislation.
I don’t have a contractual right to lay off in my employment contracts and you say I need agreement – what if an employee does not agree?
This may happen but the choice for employees is: agree and get 80% of wage (subject to £2,500 per month cap), or be laid off with no wage, or redundancy. If it’s a redundancy where the business ceases, it may be months down the line before redundancy pay, notice pay and holiday accrued but not taken, is received from the National Insurance Fund. Alternatively, if you stay in business the claim to an Employment Tribunal will take months (likely over a year) and you will be aware of the claim within around three months so can forward plan your response.
Its causing resentment amongst those whom I am asking to stay at work?
If your core team continue to be paid 100% then they at least have 20% more income then those on furlough. It is also a clear statement of their value and the skillset and motivation that they bring to the business that they are part of your core team providing business continuity. This crisis will re-shape almost all businesses and on a long-term perspective being part of that core team is the better place to be.
Questions to which we simply do not know the answer at this point but which will need to be covered by Government guidance on the Coronavirus Job Retention Scheme.
- If someone is self-isolating can they switch from SSP to furlough?
- Is there a minimum period that someone must have been employed before they can be put on furlough?
- Can we alternate members of staff on furlough – so that some are on furlough at one point and then others later on – i.e. rotate those on furlough?
- Does holiday continue to accrue during a period of furlough and can it be booked and taken during furlough? It is highly likely that it will continue to accrue during furlough but taking holiday during this period is a separate issue.
I have already laid people off or made them redundant can I now reverse that decision and put them on furlough?
The Job Retention scheme funding is backdated to 1 March presumably with the direct intention to enable employers who have laid people off to transfer them to furlough funded at 80%.
If you are in consultation about redundancies then you can decide not to proceed with the redundancy and move to furlough instead.
If you have issued notice of redundancy (and have not paid in lieu of notice) and that notice has not yet expired (i.e. the employment is still continuing albeit in a notice period) then you have the option to move quickly to retract the redundancy decision and move to furlough instead. However, in this circumstance please talk to your Adviser especially if an employee states that they wish their redundancy to proceed.
If you have made redundancies since 1 March, then unless Government guidance comes out to say that those decisions can be reversed and those individuals are moved to furlough then it would appear at this point that those redundancies stand.
What risks do I run putting people on furlough when I have no or very limited cash?
Aside from your overall business considerations about viability etc. that when the details of the scheme are published in full there are terms in it which affect who is eligible. No doubts you will have or are exploring the other financial measures introduced by the Government intended to ease pressures on cash-flow including business interruption loans.
Tamar HR Ltd.