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Furloughed Workers and the Coronavirus Job Retention Scheme

In March, the government announced the Coronavirus Job Retention Scheme (CJRS), introducing the policy of furloughing workers. But what exactly is furlough and exactly what do employers and employees need to do in order legally facilitate furlough leave allowing access to the relief under the CJRS? I have set out below some of the main provisions that both employers and employees should be aware of regarding the relevant scheme.

What is ‘Furlough’?

A furloughed worker is an employee who takes a period of temporary leave from work due to the current pandemic but whose employment remains ongoing throughout the period, during which they are not provided with work. The provisions are very similar to those of the statutory lay off system which was provided for under the terms of the s.147 of the Employment Rights Act 1996, however under the recently announced CJRS the supported remuneration throughout the period without work is more substantive. Until the end of June 2020, employers can furlough an employee and then  recover either 80% of their usual salary per month or £2500.00 per month, whichever is the lower, plus the associated Employer National Insurance contributions and pension contributions (up to the level of the minimum automatic enrolment employer pension contribution) on that subsidised furlough pay.

What can furloughed workers do whilst furloughed?

Whilst furloughed it is a requirement that the employee undertake no work at all generating revenue for, or on behalf of, the employer or any linked or associated organisation. Accordingly, furlough will not be an appropriate recourse where an employer still requires an employee to undertake work in order to facilitate the operation of the business (i.e. attempting to reduce hours). If an employee works multiple jobs with different employers and is furloughed in one, but not in the other, they can continue to undertake the second job without concern that this would negatively impact upon their employer’s right to claim relief.

A furloughed employee can undertake volunteer work and training, again as long as in undertaking this does not provide services to, or generate revenue for, or on behalf of their organisation or a linked or associated organisation.

What employers can furlough?

Recent Government guidance sets out that in order to Furlough an employee and claim relief under the CJRS an employer must have:

  1. started a PAYE payroll scheme on or before 19th March 2020;
  2. enrolled for PAYE online; and
  3. a UK bank account.

The scheme covers businesses, charities, recruitment agencies that pay agency workers through PAYE and public authorities, and essentially seeks to cover all potential employers within the UK. Aside from the above criteria, there are almost no other restrictions on an employer’s ability to claim relief, provided the correct procedural steps (as set out below) are followed.

Who is eligible to be furloughed?

Almost any employee can be furloughed provided that the correct steps are followed.   The only criteria are that an employee must have been employed by the employer, and on their PAYE payroll, as of 19th March 2020. Even staff who have been made redundant, or stopped working for you, on or after 28th February 2020 can be reemployed by employers and then subsequently furloughed at no cost to the business. The intention behind this policy is to provide relief to those businesses who took swift action after the scale of the pandemic became apparent, but before this government support was available.

What steps must be followed to furlough an employee?

Furlough leave can only be instigated (and relief through the CJRS claimed) by an employer with the agreement of the employee. Accordingly prior to any decision to furlough an employer must:

1 Consider what staff can/should be furloughed

There is no specific process relating to this and this will undoubtedly vary greatly from business to business. However employers should remember that all equality and underlying employment law provisions remain in force so selection should not be discriminatory etc

2 Obtain staff consent to the furlough leave and then provide written confirmation to an employee of the furlough

There are no specific provisions for what should be contained within the written confirmation of furlough except that the employee should also confirm their agreement in writing.  In addition, ideally this would confirm the date furlough started, the salary provisions during any period of furlough, confirmation that this proposal is temporary, and, if practicable, any anticipated date for the termination of furlough, However, if a date for the termination of furlough is given, this may require additional discussion and written confirmation to extend the furlough should that date no longer be achievable.

What about staff on Statutory Sick Pay (SSP)?

Any staff on SSP should continue to receive the same whilst they remain unfit for work. However, should they subsequently become fit for work, and meet the above criteria, it would be possible for furlough to be agreed.

What about those on Maternity leave?

If an employee is on statutory maternity leave and entitled to statutory maternity pay, they should continue to receive this as normal with no change. However if an employee receives enhanced (earning related) maternity pay, then this can be claimed through the scheme for employees who qualify.

For employees that are eligible for statutory maternity pay and are furloughed, then start maternity leave on or after 25th April 2020 , the calculation of their average weekly earnings must be based on the earnings they would have received from the employer had they not been on furlough.

If an employee is furloughed is their salary automatically reduced to the sum claimed under the CJRS?

Only if the written agreement between the parties explicitly states this. It is important to note that simply furloughing an employee does not automatically reduce their salary for the period of furlough. The written agreement between the parties must expressly state what reduction (if any) is being applied for during the period of furlough. Unless a reduction is agreed there is a risk that employers would remain liable for the 20% of salaries for furloughed staff that the government will not cover.

This has served as a relatively brief overview of some urgent emergency provisions put in place by the government, however if you have any specific questions and wish to discuss furlough further please don’t hesitate to contact Michael Tait on 0117 904 7723

Posted on May 4th, 2020 by Lyons Davidson

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