24 March 2020

Furlough Leave

By the Employment Law Department, Hayes + Storr.

You will have no doubt heard by now Boris Johnson using the term “furlough leave”. Furlough leave is not technically a legal term but is an American word used as we might use the terms “leave” or “sabbatical”.

There has been an announcement of a series of measures to assist employers and employees in the coming months during the Covid-19 crisis. As you will appreciate, so far very little information has been released by the Government about how this will work practically, however, we will report on the information we have to date and the steps you can take to place employees on furlough leave if you need to do so. The measures outlined will be backdated to 1st March 2020.

What is furlough leave?

Under the newly created Covid-19 Job Retention Scheme, an employer will be able to agree that a worker who would have otherwise been made redundant during this crisis can be designated as a furlough worker. They will then remain in employment and on the payroll but are not to undertake any work. HMRC will reimburse the employer 80% of the furlough worker’s wage cost, up to a maximum of £2,500 per month. HMRC are urgently setting up a system for reimbursement.

Which employers can claim it?

Any employer, whether a sole trader, partnership, limited company or limited liability partnership can claim the benefit. The only criteria is that you have employees and that you send them home without work.

Can the employer insist on putting someone on furlough leave?

If the contract of employment has a lay-off or short-time working clause, then yes you can place someone on furlough without their agreement and no consent is required.

As you will have noted from our previous articles, the lay-off clause and short-time working clause are rare clauses and therefore it is unlikely you will have this clause in your contracts. Technically therefore consent will be needed, however, if an employee refuses to consent to being sent home on furlough they risk being made redundant. The employer could make an employee redundant if they refuse, provided they have selected the employee for redundancy fairly.

How do you decide which employees to place on furlough leave?

We advise that you use a shortened version of a redundancy selection criteria and have some objective selection criteria. It might be worth considering making productivity records, previous appraisals or contacting each of your senior managers and speaking to them about their different employees.

It is helpful to have this information because if the employee refuses furlough then the employer could then select them for redundancy and the basis would already be on a fair footing.

Can an employer ask an employee to work part-time and pay them part-time?

We think this is unlikely although we are awaiting further guidance. The rules seem to be quite clear that the employee must not do any work while on furlough leave.

Will the employer have to top up the 80% wage to 100% for an employee on furlough?

An employer does not have to increase the Furlough wage from 80% to 100%.

There is a future risk of a claim for deduction of wages however, bearing in mind the current situation, the chances of a claim are small and the chance of an employer losing such a claim is also small. It is however best to get the employee’s written consent to the terms of the furlough. We suspect this will not be difficult bearing in mind the alternative of redundancy.

If the employee refused furlough can they be made redundant?

Yes the employee can be made redundant provided that a fair selection and procedure can be applied as we have set out above.

What are the limits?

Furlough pay will be 80% of normal wages. There will be a cap of £2,500 per month which is a figure being paid to the employee not the normal wage. This cap will include pension and NI contributions.

How will employees who are not on furlough deal with the changes?

You may have employees that you do not place on furlough leave. These employees will be required to do their usual work and it may mean that they actually do more than their normal work as a result of the employees on furlough doing no work. This could result in your employees who are not on furlough feeling that the process if unfair.

Our advice would be to make clear to employees who are not being placed on furlough that you are retaining the employees that you truly need and we advise that you explain this to your employees. Explain that you value the input and the additional work which they have done when moving forward and that they are integral to keeping the business going. It may also be the case that some of the employees you are placing on furlough leave hold positions which are not currently needed and their stand alone jobs would otherwise be redundant.

What is the procedure for recovering the money back from the Government?

The Government is setting up an on-line portal but the general process we would advise is as follows:

1. Go through the selection criteria selecting which employees will be placed on furlough leave.

2. Notify the employee who is being placed on furlough leave.

3. Obtain written consent to the 80% pay with a £2,500 cap. This will of course mean that some employees will receive less than 80% of their actual pay.

4. Send the employee home without work.

5. Register for furlough pay using an on-line portal which we expect will be up and running soon.

We note there are likely to be a number of issues moving forward with furlough leave. If you would like further advice on this matter or on any other employment law related matter, please don’t hesitate to contact our employment law department on 01328 863231 or 01553 778900 or email anissa.hallworth@hayes-storr.com, gerald.bloye@hayes-storr.com or abigail.reynolds@hayes-storr.com.

This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek our specific advice.