Expert employment advice

What is Furlough leave?

Furlough leave is a period of agreed leave from your employment, where both you as an employee and your employer agree that you will leave work on either a defined period of leave, for three weeks for example, or an undefined period of leave. In both cases you will remain on the company’s payroll as an employee throughout that period.

Essentially, to be furlough, is to be laid off from work, you are still employed by your employer and as such are still accruing things such as holiday entitlement, but you are not being paid for this period of leave by your employer. Think of it as being granted a period of absence from work, there are some conditions that you must follow we’ll explain those in more details below.

Furloughing wasn’t a word that was particularly recognised in the UK, but it soon became a popular word with HR departments across the nation.

Wosskow Brown’s Employment Solicitor, Jamie Brown takes a look at common questions about the scheme.

Coronavirus Job Retention Scheme

As soon as the Coronavirus pandemic started to affect business, people started to lose their jobs. Many were made redundant by employers recognising that their businesses couldn’t support their entire workforce when business income was going to be wiped out.

The UK Government created a scheme known as the Coronavirus Job Retention Scheme as a measure to help employers retain their staff and manage their business throughout the Coronavirus pandemic, without the need to make people redundant.

This Government scheme is a grant that will enable employers to recover up to 80% of the wages of a furloughed member of staff.  Employees will continue to be paid through the PAYE system as normal by their employer, but this amount will only be for either 80% of your salary or if you earn more than £3,125 per month this will be limited to a maximum of £2,500. This amount will still be subject to tax and national insurance as normal and your employer will still pay into your automatic pension entitlement to the value of the statutory minimum.

12 May 2020 Update

Chancellor Rishi Sunak announced on 12 May 2020 that the Coronavirus Job Retention Scheme will be extended for a further four months until 31 October 2020.

In a boost to millions of jobs and businesses, furloughed workers throughout the UK will continue to receive 80% of their current salary, up to £2,500.

Mr Sunak announced outline plans to support businesses in bringing employees back to work. From the beginning of August, employers will be able to bring staff back part-time while they pay a percentage towards their salaries. The payments made by the employer will substitute the contribution that the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month.

The scheme which is currently supporting 7.5 million workers will continue to run in its current form until the end of July 2020. The changes to allow more flexibility will come in from the start of August. Further clarification of the implementation is expected by the end of May.

How does the Coronavirus Job Retention Scheme work?

Once you have been furloughed, your employer will be able to recover 80% of your wage in the form of a grant from the Coronavirus Job Retention Scheme, subject to an upper limit of £2,500.

Your pay will still be received as normal under PAYE and it will be your employer that actually pays this amount. However, your employer will have the ability to recover this amount back from the government under the scheme.

  1. An employer would first have to establish who can be furloughed.
    When choosing who can be furloughed your employer must still ensure that they are fair in choosing who can be furloughed and should not discriminate against anyone.
  2. The employer must have agreement from the employee to them being furloughed.
    This agreement should be in writing and you can accept this change by signing the furlough agreement or accepting by way of email to ensure social distancing measure are maintained and employees are not made to make non-essential trips.
  3. At the point of furlough leave starting, the employee must stop working for the employer in any capacity.
    Employees are still permitted to participate in training while being furlough subject to their wage being above the National Minimum Wage or National Living Wage depending on which applies to you.
  4. The employer pays the employee a minimum of 80% of their regular wage, up to a maximum of £2,500.
  5. The employer claims for up to 80% of the wage costs back from the Coronavirus Job Retention Scheme.
  6. The employee must be furlough for a minimum period of 3 weeks.
  7. The Employer will still maintain your auto enrolment contribution to the statutory minimum (should you have not opted out), however, should your contract of employment provide you with a greater contribution then that set by the statutory minimum of 3%, then any additional amount will not be covered by this scheme.

How does furlough work if staff don’t agree?

It is widely expected that staff will agree as 80% is better than 0%. If they did refuse, an employer could make them redundant. Work out why they will not agree and make an assessment from there. If there is no work, as a last resort, the employer may have no option but to end their employment.

Who can be furloughed?

All employees who are paid through PAYE can be furloughed. This includes employees on zero hour contacts and agency staff.

An employee must have received a wage through PAYE prior to 19 March 2020 to be eligible for the Coronavirus Job Retention Scheme.

If an employee is already on leave, they cannot be furloughed at the same time. Different types of leave cannot be overlapped. For example, if an employee is on sick leave, they cannot be furloughed at the same time.

If an employee returns after a period of Leave, such as sick or maternity you can then furlough then should the business require this to happen and the employee is agreeable to the same.

Public sector employees that are working on projects that are paid for by public money may not be eligible if their funding is still on going.

Can we furlough a sole trader?

No, they should look at self-employment scheme.

Can we furlough a casual worker or someone on a zero hr contract?

Yes, as long as they are on your PAYE payroll. Their allowance will be 80% of their average wage over a 12 month period. If they have been employed for less than a year their 80% will be calculated on either their last three months wage (12 weeks) or a average of their last few weeks salary if they have not worked a full 12 weeks yet.

If only a portion of our workforce is to be furloughed, do we ask the staff, or do we decide?

The employer decides who the business needs to furlough based on the needs of the business, but they must seek agreement from the employees they wish to furlough. The employer should ensure that their selection process is fair to all staff at all times.

If an employer has a layoff clause in their contract, does an employee still need to agree?

Yes, forget the layoff clause. Staff are likely to benefit more from being furloughed and the employer can claim back 80% of the employees’ salary through the grant.

Can pregnant staff be furloughed? Or staff with childcare issues?

Each situation needs to be looked at individually. New guidance from the Government now says that those who cannot work for childcare reasons can be furloughed. If they are worried about being in workplace, self-isolating or shielding – then they would be eligible to sick pay. A pregnant employee would be entitled to maternity pay, and they can be furloughed when their maternity leave ends.

If employee has been given 3 months’ notice of redundancy, can they be furloughed in the mean time?

No reason why not. If they were made redundant after 19 March 2020, an employer can re-employ them and furlough. Be aware that if you re-employ a redundant member of staff, that any accrued holiday entitlement will still need to be paid for.

Can a company director be furloughed?

Furloughed employees are not allowed to work for their employer while furloughed. A director is only allowed to perform directory duties while furloughed. If they do go on furlough leave, they will only be able to obtain a grant towards any salary paid by PAYE, not dividends.

What is reimbursed through the scheme grants?

The Coronavirus Job Retention Scheme will grant an employer 80% of an employees’ usual wage, subject to usual deductions. The wage is capped at £2,500, plus National Insurance and minimum Auto Enrolment pension contributions.

The minimum period for a furlough claim is 3 weeks.

An employer is welcome to top up an employees’ wage to 100%, but the extra 20% cannot be claimed back from the scheme. The employer will also be responsibly for the difference in tax and National insurance contributions that the employer would normally have to make.

What evidence will be needed to claim?

A high level list is available on the Government website. We don’t know how claims will be made just yet. But we understand that the HMRC will know exactly how much someone has earned since records began through PAYE.

80% could be below National Minimum Wage, is that a problem?

If undertaking training while on furlough leave, then an employer must make sure National Minimum Wage is paid. National minimum wage will not apply if no training is being undertaken as the employee is not working.

Is there clear definition of what would be covered?

There is info on the website. We are not aware of any category not covered, as long as the employee is on PAYE payroll. Charity employees paid through public funding could be expected to be still paid through charity funds.

Will the Coronavirus Job Retention Scheme cover commission?

New guidance says that compulsory commission will now be included.  Additional payment or compensation such as bonuses, commission or overtime will not be covered by the scheme.

What can an employee do while they are furloughed?

While furloughed, an employee must not provide services or generate income for their employer.

They are welcome to volunteer, as long as they do not provide services or income for their employer. They cannot volunteer for a supplier for example.

Employees can undertake training. An employer can request that training is completed during furlough leave. If an employee is to take part in any training, their wage during this time must meet National Minimum Wage requirements. If 80% doesn’t cover National Minimum Wage, their wage must be topped up for the time taken to do training.

While furloughed from one job, an employee can continue their employment with other employers.  A person can also be furloughed by multiple employers.

If an employees’ contract allows, they can take up employment with another employer, subject to that employment not breaching the current terms of their employment. Whilst this might sound great for topping up earnings, an employee should be aware that their contracts with new employers are likely to include notice periods. If stay-at-home measures are lifted as quickly as they were put in, this could leave an employee with an obligation to their new, temporary employer when their original employer requires them back at work. We would also suggest that the employee must consider the morale aspect of this and whether this should be done whilst still claiming the benefit of the Coronavirus Job retention scheme. Currently the government has not set restriction on getting a second job while claiming under the scheme but we do expect this to change in the coming days.

Can an employer bring an employee back from furlough if work picks up?

Yes, if they have been on furlough for 3 weeks the employer will receive the grant, if they haven’t been furloughed for 3 weeks, they would lose the grant.

Can a colleague answer questions while furloughed?

No, this would be classed as a service.

Can students still study?

Yes, this would be classed as training.

Can we force employees to do training?

Yes, as long as their 80% covers national minimum wage.

Can you rotate furloughed staff, 3 weeks on 3 weeks off?

Yes, you can rotate. The needs of the business should dictate. However this should be three weeks solid blocks and not three weeks work spread of six.

What about holidays?

While furloughed, an employee still accrues holiday entitlement. Once the furloughed period has ended, an employee should be allowed to take holiday in the normal way.

With recognition that the period of stay-at-home measures could continue for a number of months, measures have been introduced that will allow an employee to carry holiday entitlement over for two years immediately following the year in which it is accrued.

These changes will ensure that companies are not left short on skills or workforce once the stay-at-home measures are lifted and everyone rushes to book in their annual leave entitlement. New Working Time Regulations are coming out to cover this.

Can employees take annual leave during a furloughed period?

In short, no. Only one type of leave can be used at any one time. They cannot overlap.

An employee must be continuously furloughed for 3 weeks in order to claim the reimbursement.

Can an employer make employee take annual leave?

Yes, but they must give double the amount of time notice to time of leave to be taken. Depending on employment contract conditions.

Can employer waive an employee’s contract holiday entitlement?

With employee agreement, an employer can ‘buy-back’ some holiday entitlement and potentially use this money to top up the 80% furlough pay to 100%.

Can you ask no furloughed staff to not take their annual leave?

If they have already booked in, an employer can cancel their leave request, but they need to give enough notice. They must also give the employee the ability to book time off later in the year. An employer can also refuse leave requests.

Can an employer force employees to take pre-booked holidays?

Yes, but take note that furlough leave and annual leave cannot cross over. For an employee to be furloughed and receive the grant, they must be furloughed for a continuous 3 week period.

Sick leave and unpaid leave

Where any other type of leave is being taken, the employee cannot be furloughed.

I have an employee on sick leave, they have asked to be furloughed, can I as an employer do this?

If an employee is off sick, then no. They can only be furloughed if they are able to work. The exemption to this is if they are shielding for 12 weeks because of letter from Government, they can be furloughed.

Can you furlough someone on unpaid leave?

No. They must be able to work to be furloughed.

Can you furlough someone who returns from sick leave?

Yes, as long as they are fit to return to work.

Help with Coronavirus Job Retention Scheme

If you need help with the terms of the scheme, our employment solicitor Jamie Brown has not been furloughed, he is very much here to help.

Maybe you have questions about furloughing your own employees? Maybe you feel that you have been unfairly furloughed?

We’re here to help. Feel free to contact our employment law solicitors.

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