Many of you will have heard of the introduction of furlough leave on Friday evening (20th March). There is little guidance at the moment on the detail of the scheme but what we know currently is as follows:
- The Government will pay up to 80% of an employee’s salary (based on February earnings) up to a cap of £2,500 a month (including pension and NIC), for those who are placed on furlough leave rather than being dismissed.
- Furlough leave, technically, amounts to a change in status for the employee and as such remains subject to existing employment law and the employment contract; if therefore there is a right in the contract to lay off then it is something that can be imposed by the employer but absent that, the consent of the employee to be on furlough leave will be required. In practice, employees who face the alternative of dismissal, will agree it. If they refuse it however, the employer would still have to go through a fair redundancy selection process using objective criteria etc and consultation before it could fairly dismiss for redundancy. ‘Refusing to agree furlough leave’ would not amount to a fair reason for redundancy selection.
- It can only apply to those who are sent home without work and it cannot be claimed for those employees who continue to work.
- Any employer, sole trader, partnership, LLP or limited company can claim the benefit.
- There is no obligation for the employer to make up the balance of the 20% (or balance of salary if the employee earns over the median salary which is covered by this scheme) but if that is the case, the employee must be told that when the employer is setting out the furlough leave ‘offer’, so that the employee is clear as to what is being agreed. Explicit agreement to the furlough leave on clear terms should be recorded in writing to avoid any claim for unlawful deduction of wages in the future.
- Once there is agreement with the employee, they are effectively kept on the books on furlough leave and the employer claims the relevant amount back from the Government through the online portal which is being established for that purpose.
- It applies to employees on the payroll as at 1 March 2020 and payments are due at the end of April, backdated to 1 March.
We will be monitoring the scheme and will provide updates as the situation evolves. If you have any questions about this, or any other employment matters, please contact Linky Trott or any member of the Edwin Coe Employment team.
For an update on all the legal implications relating to Coronavirus please see here.
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