Furlough Leave – Coronavirus Job Retention Scheme

This information is provided on 23rd March 2020 but is subject to change in line with fast moving government updates.

The Chancellor announced on Friday 20 March 2020, that the government would introduce a new form of leave called Furlough Leave. This scheme is known as the Coronavirus Job Retention Scheme (the “Scheme”). This is a major new initiative which is unprecedented and will assist many employers.

Very little detail has been provided about the Scheme at this stage. We set out are current understanding of what has been announced.

The Scheme will grant employers 80% of the wages of furloughed employees. There is a cap of £2,500 per month per employee. The Scheme will run for an initial three-month period which is back dated to start on 1 March 2020. The Chancellor has said the Scheme will be extended if necessary.

The Scheme applies to all employers whether sole traders, companies, partnerships and to all employees who are paid through the PAYE system. It appears that it will apply only to those employees who are, or have been, sent home by their employer because they have no work or could not be paid. It is a mechanism to try to keep work forces intact and to avoid mass redundancies and mass unemployment

Furloughed employees are those employees who will not be required to work as a result of Coronavirus and may otherwise be made redundant.

Our assumption is that the cap will include pension payments and national insurance contributions. An employee’s wage will be based on what their earnings were in February 2020.

The government is intending to launch an on-line registration portal. It is envisaged that this will be working by the end of April. It is therefore unlikely that there will be any support prior to then.

Employers must discuss with employees if they are to be furloughed. Best practice for employers will be to get written consent from the employee to be furloughed and be paid 80% of their salary (up to a cap of £2,5000) once they have volunteered or been selected.

The guidance is clear that all normal employment laws must be applied when implementing the Scheme. As a result, it will be important that companies do use specific and clear selection criteria in the event that only some of the workforce is required to work and the employer needs to select people.

Points to Note:

The Scheme only applies to employees and not the self-employed or those on zero hours contracts.

Employees who have already been made redundant can discuss with their former employer whether they might be prepared to reinstate the employee and place them on furlough leave but there appears to be no specific obligation for them to do so.

The Scheme does not apply to employees who are working. It only applies to those who are sent home by the employer due to lack of work or because it is not feasible for them to work from home. If an employee can work reduced hours but not full hours, it appears that the Scheme will not apply. The current government advice says that the Scheme does not apply to employees who are working.

The Scheme does not apply to employees who are sick or self-isolating who would fall under sick pay provisions.

If there is a lay off or short working provision in a contract, employers can generally rely on these provisions. It would appear that employers with that provision can implement furlough leave rather than rely on this provision. If employers do lay off or implement short-leave, the employer should use fair and transparent criteria for selection and obtain consent where possible, particularly if they are not intending to pay full pay and wish to avoid potential claims for unlawful deduction from wages.

If an employee refuses to be sent home on furlough leave when requested to do so, they could be placing themselves at risk of being made redundant if there is no work available for them to do.

Employers will need to exercise care in selecting employees to be placed on furlough leave in much the same way as they select for redundancy.

Do please watch out for government updates and announcements as things may change on a daily basis.

We will keep you updated as quickly as possible with developments.

For further information, please contact our Employment Law team by calling Gill Brown on 01256 854605 or Jack Gardener on 01256 854665,

Alternatively, send an email to gill.brown@phillips-law.co.uk  or jack.gardener@phillips-law.co.uk