Posted: 24th March 2020
Furlough leave – The Coronavirus Job Retention Scheme
To the relief of many employers, on 20 March 2020 the UK government introduced the Coronavirus Job Retention Scheme.
The government’s new scheme, will permit all UK employers to claim a grant from HMRC which will cover 80% of the wage costs for employees who are not working but who kept on the payroll as opposed to being dismissed (known as being "furloughed").
The scheme will cover up to £2,500 a calendar month for each affected employee.
When will the scheme be operational and how long will it last for?
The government has confirmed that the scheme will hopefully be up and running in the next few weeks (with payments being backdated to 1 March 2020). The UK government envisages that the scheme will be open for at least three months.
We are currently waiting for the UK government’s official; scheme guidance to be published. However, basic details of the scheme can be accessed here.
The scheme will apply to all employees on PAYE (including those on zero-hours contracts). This means that the scheme will cover a significant proportion of workers as well as employees.
How do we introduce furlough leave?
As a first step, employers will need to:
- decide which employees are going to be designated as furloughed employees; and
- notify those employees of the proposed change.
Will we need to consult with our employees?
Pending any conflicting rules and/or guidance from the government, It’s important for employers to be aware that if they intend to vary the contracts of 20 or more employees in order to reduce their pay to the 80% which can be reclaimed via the new government scheme, and to dismiss any employees who do not consent to the change being made then those employees will be treated as having been dismissed by reason of redundancy. Employers in these circumstances will also have a duty to inform and consult appropriate employee representatives and notify the Secretary of State using form HR1.
Even if collective consultation rules are not engaged, most employers will still need to agree the change with the employees that it is seeking to furlough. This is because most employment contracts simply do not permit the employer to reduce pay without agreement. It is to be hoped of course that when faced with the alternative options (e.g. lay-off, or redundancy) most employees are likely to agree to be placed on furlough leave and receive 80% of their normal pay.
Is there anything else that we need to do?
Yes, one consultation has taken place and/or the necessary agreements have been obtained, employers should confirm the employees' new status in writing. Ideally, employers should advise how long the furlough leave period will be expected to continue. However, employers may prefer at this stage to stipulate an initial furlough period that will then periodically be subject to review.
Employers taking advantage of the scheme will also need to:
Submit relevant earnings-related information to HMRC via a new online portal.
Ensure that the furloughed employees do not carry out any further work for them while they are furloughed.
Will we be obliged to top up the remaining 20%?
The COVID-19: guidance for employees states that "your employer could choose to fund the differences between this payment and your salary, but does not have to". Employers do need to be aware however that withholding 20% of an employee's salary, will amount to a breach of contract and an unlawful deduction of wages in circumstances where the employee has not previously agreed to the reduction. As stated above, it seems likely that most employees will consent given the potential negative and more financially hard-hitting outcomes if they fail to do so.
Can our employees ask to be put on furlough leave?
The short answer is yes. However, employers cannot be compelled or forced to put their employees on furlough leave. Ultimately, it’s is the employer's decision.
The government’s hope is that many employers who would otherwise have been forced to make largescale redundancies will now be able to avoid having to take that decision.
Please contact us if you’d like more information about the issues raised in this article and/or or to find out more about the various Employment Law and HR related policies, procedures, guidance and training that we provide.
Disclaimer: the information set out above does not constitute legal advice and it is provided for general information purposes only. No warranty, whether express or implied is given and neither the author or North Yorkshire Law shall be liable for any technical, editorial, typographical or other errors or omissions within the information provided.