The Scheme is a temporary scheme open to all UK employers for at least three months starting from 1st March 2020. The scheme is expected to be up and running by the end of April. It is designed to support employers whose operations have been severely affected by the Coronavirus.
Who will be eligible to claim?
The scheme will be available to all UK employers, of any size and in any sector. It involves ‘furloughing’ designated workers who would otherwise have been laid off or made redundant during the crisis. Essentially, it’s about keeping workers on the books and jobs open.
Furloughed employees must have been on your PAYE payroll on 28th February 2020, and can be on any type of contract, including flexible and zero-hour contracts. During furlough leave the employment contract continues. Any employee hired after 28th February 2020 cannot be furloughed or claimed for in accordance with this scheme.
To be eligible for the grant, a furloughed employee can not undertake work for or on behalf of the company, including providing services or generating revenue.
What if an employee is on unpaid leave?
Unless they were placed on unpaid leave after 28th February 2020, they cannot be furloughed.
What if an employee is on sickness absence?
Those on sick leave or self-isolating can be furloughed after their current sickness absence ends. If they are self-isolating in line with public health guidance, they can be placed on furlough
Can an employee carry out voluntary work whilst on furlough?
Yes, they can take part in voluntary work as long as it does not provide services or generate revenue for or on behalf of the company.
Can an employee take part in training whilst on furlough?
Yes, if an employee is required to take part in training, they must be paid at least the National Minimum Wage for the time spent training, even if this is more than 80% of their wage that will be subsidised.
What if an employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay?
All statutory rules and regulations apply in terms of pay and leave.
How will the scheme work?
HMRC will reimburse 80% of furloughed workers’ wage costs, up to a cap of £2,500 (gross) per worker per month. The scheme will be backdated to 1st March 2020 and will run for 3 months. The Chancellor may extend the scheme if necessary. The system will be managed through an online portal being set up by HMRC and likely to be available by the end of April.
Employers can choose to pay the remaining 20% if they wish, but there is no legal liability to do so.
How will workers be paid?
Payment will be a grant from HMRC to employers. It is unclear if HMRC will impose conditions, such as employee consultation or a commitment not to make any redundancies for a period of time as a result of Coronavirus.
Do I need consent to furlough a worker?
Theoretically any employee can be furloughed. They need to be on PAYE for an employer to be able to claim the grant for their employees wages. If the employer proposes to maintain full normal pay (i.e. pay the remaining 20%) for furloughed workers, then employers will not necessarily need worker consent to designate them as furloughed.
Some employees have an implied contractual right to be provided with work (i.e. if key skills were to diminish) and therefore employers may not be able to impose furlough on those employees, even on full pay. Generally, this edict will apply to a small minority of employees, however, and in any case it is unclear how a right to keep working could be exercised if there is no work for them to do.
It is not likely that an employee’s contract will include a specific right to use furlough. If the employer proposes to reduce pay for furloughed workers to the maximum HMRC grant, then it will need worker agreement. This is because reducing a worker’s pay amounts to an unlawful deduction from wages unless there is prior written consent or contractual agreement.
What if the contract says that workers pay can be reduced?
Consent will not be required in this case.
How will I choose which employees are to be furloughed?
Workers who cannot work from home and who currently have no work to do will be obvious candidates for furloughing. Employers may also want to consider calling for volunteers, and using pooling and selection criteria – similar to a redundancy process. Furloughing may be particularly attractive to carers who might otherwise need to take unpaid dependant’s leave. Others may agree as a last resort alternative to being made redundant, or put onto an unpaid lay-off arrangement.
What if I have already laid-off employees?
In this situation, an employer can get in touch with those employees and agree to change their current status from lay-off to furlough. This would simply involve changing their pay arrangements from nothing (if not entitled to Statutory Guaranteed Pay) or SGP to 80% wages, as they are already not working.
Can I furlough employees now?
Yes, you should write to those employees who you need to place on furlough and seek their agreement, and keep a record of this communication.