Blog - 27/03/2020
Covid-19 – Furlough Leave: Further Information
Since our first blog on furlough leave earlier this week, further guidance on the Coronavirus Job Retention Scheme has been released by the government. The full guidance can be found here but the key points are as follows:
- Employers can reclaim up to 80% of wage costs up to a cap of £2,500 per month plus the associated employer NICs and minimum automatic enrolment pension contributions on that wage. Fees, commissions and bonuses are not included.
- The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020. Any organisation with employees can apply, including charities, recruitment agencies and public authorities; however, the government does not expect public sector employers to use the scheme as long as central government continues to fund wage costs in the normal way.
- Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with the scheme.
- Employers can choose to top up the furlough payment to 100% but they do not have to (subject to employment law and renegotiating any contractual entitlements).
- As long as they are on PAYE, furloughed employees can be on any type of contract, including agency contracts and zero-hour contracts. The scheme also covers those employees who have been made redundant since 28 February 2020, if they are rehired by their employer.
- For those employees whose pay varies, the employer can claim for the higher of (i) the same month’s earnings from the previous year; or (ii) average monthly earnings in the 2019-2020 tax year.
- Employees are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working. Therefore, furloughed employees must be paid the lower of 80% of their salary, or £2,500 per month even if, based on their usual working hours, this would be below NLW/NMW. However, if employees are required to complete online training courses whilst furloughed, they must be paid at least the NLW/NMW for the time spent training, even if this is more than 80% of their wage that will be subsidised.
- Employees cannot undertake work while on furlough leave. However, they are able to undertake training and do volunteering work, provided they do not provide services or generate revenue on behalf of their organisation.
- Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February 2020. Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.
- Employees with more than one employer can be furloughed for each job. Each job will be kept separate, and the cap applies to each employer individually.
- The question of whether or not the collective consultation duties are engaged when putting employees on furlough leave remains outstanding and we await further clarification. If however, the underlying rational of the scheme is to avoid redundancies, it may be that where there are 20 or more employees being furloughed who would otherwise have been made redundant, the collective consultation obligations will be triggered. However, putting employees on furlough leave requires their consent (save where there is a contractual right to lay off) so employers cannot know at the time that consent is sought, that redundancies may be the outcome. A pragmatic way forward in these circumstances could be to file an HR1 form together with a covering letter stating that the proposal was to seek agreement to furlough rather than to compel redundancies and that it was not at that stage proposed to make redundant any employee who agrees to be furloughed. If there are existing employee representatives, it seems prudent to undertake some consultation albeit with a truncated consultation period given what is surely ‘special circumstances’. There are many differing views on this point and the government guidance does not provide any clarity at this stage but we shall keep this under careful review.
- Employees can only submit one claim for payment at least every 3 weeks, which is the minimum length an employee can be furloughed for.
The scheme is expected to be up and running by the end of April 2020. We will be monitoring this 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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Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.
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