We are being asked a lot about furloughed workers. Here is a summary of the current position:
1. The Government has introduced the Coronavirus Job Retention Scheme (“the Scheme”). Under the terms of the Scheme, the employer will be able to claim up to 80% of the employees’ wage costs, up to a cap of £2500 per month. The Scheme will be back dated to 1 March 2020. It will be open for at least three months, but extended for longer if necessary.
2. For an employee to qualify for the Scheme, they must be designated as “furloughed” and notified of the change. There is no previous legal term for this and it is a new concept to English employment law. In simple terms, this means the employee will remain on the employers payroll, rather than be made redundant or laid off with no pay. Their employment will continue but they should not undertake any work for the employer while classified in this way. This includes answering calls or emails. We are still waiting for the detail, but it seems most likely that if an employee has an express lay off clause in their contract, the employer could designate the employee as a furloughed worker. The employer would need to discuss this with staff. If the employee does not have a lay off clause in their contract, the employer is likely to need to have a discussion and seek the employees consent to be classified as a furloughed worker. Given that the alternative could be redundancy, most employees are likely to agree.
3. The employer will have to decide who to furlough. Employers should ensure they have objective reasons for selecting who is furloughed and who is not.
4. The terms of the Scheme are still a little uncertain. The early guidance is clear that the employer could choose to fund the difference between the Government payment and the employee’s salary. However, the employer does not have to do that. We don’t know whether the 80% grant is limited to just salary or whether it extends to include employers National Insurance or cost for any benefits such as pensions, health insurance etc. Although it seems unlikely, this might mean that the sum actually paid to the employee is less than 80% of net salary. So care should be given when communicating with staff to say that wage payments for the furloughed employees will be in accordance with the Scheme.
5. We also don’t know how that 80% would be calculated for those whose monthly or weekly salary varies. Again, at this stage, it is best to communicate to those staff that payments will be in accordance with the Scheme once clarified.
6. Holiday pay will continue to be accrued during the furloughed period. It’s likely that the Scheme will not interrupt an employee’s continuity of service.
7. There has not been any Government guidance about giving furloughed status to those more at risk from Coronavirus. For example those over 70 or those with a medical condition that makes them more vulnerable. Without the Government guidance it does increase the risk of a discrimination claim. The employee may say they have only been picked because of a discrimination characteristic such as age or disability. So careful thought will be needed with this.
8. It is also still not clear about the status of people who are sick or self-isolating, and whether employers can designate them as furloughed to enable them to receive more than statutory sick pay, or to cover the cost of company sick pay.
9. What should an employer do if they intend to shut the business for a period? The suggestion would be to get the confirmation from the employees first about furloughed status before they close. Without this, if the business is shut, there may be an argument the employees are entitled to full pay. The reason being that the employee is ready and able to do work, it is the employer that is not providing work for them and the employee does not have furloughed status.
We hope you find this useful. We will let you know when more detail comes out. In the meantime, if you have any queries or questions, please let us know.