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FAQs: Furlough Advice for Employers

Furlough leave is part of the Coronavirus Job Retention Scheme and offers support to employers to save jobs during the Coronavirus crisis. Our expert Employment law solicitors answer your questions about what this means and detail their furlough advice for employers.

  1. Does the Coronavirus Job Retention Scheme apply to all businesses?
  2. What does furlough actually mean?
  3. Which sections of my workforce will furlough apply to?
  4. What support is the Government offering businesses under the furlough scheme?
  5. Do employers have to show that they would otherwise have had to make the employee redundant?
  6. Will I have to pay back the furlough grant?
  7. How do I claim re-imbursement of my furloughed employees’ wages?
  8. How do I calculate a claim for an employee who has variable hours?
  9. When will we receive the first payment?
  10. How often can I put in a claim for a furloughed employee’s wages?
  11. How much work can an employee do while they are on furlough leave?
  12. Do I have to top up employees’ salaries so that they receive their full income while on furlough leave?
  13. What about their other contractual benefits?
  14. Can I insist that employees take furlough leave?
  15. What if my employee refuses to take furlough leave?
  16. Does the furlough agreement have to be in writing?
  17. I have some work for my employees but not enough for all of them. How do I decide who to offer furlough leave to?
  18. Would I be discriminating if I offered furlough in the first instance to “vulnerable” employees eg. those over 70 or with underlying health conditions?
  19. Can I rotate employees on furlough?
  20. What if I have already offered someone a job with a start date after 19 March 2020?
  21. I recently made a member of staff redundant– can I reinstate them and put them on furlough instead?
  22. I have staff on sick leave – can they be furloughed?
  23. Can I continue with a grievance or disciplinary process while an employee is on furlough leave?
  24. Do employers have the right to tell furloughed employees that they must take holiday during their furlough period?
  25. Is holiday pay when on furlough based on 80% or 100%? And does it include commission and bonuses?
  26. Can a furloughed member of staff volunteer to carry out tasks for their employer and if so what might those tasks be?
  27. Does the employer have any right to insist that furloughed staff carry out online training sessions or attend educational workshops?
  28. How long will the furlough scheme run for?
  29. Now that the furlough Scheme is being phased out from 1 August what else can I do to protect my business as my revenue streams have dropped?
  30. What will happen to employees who are shielding once the furloughed scheme finishes?

Does the Coronavirus Job Retention Scheme apply to all businesses?

It applies to all businesses in respect of employees (which includes workers) who were on a PAYE scheme on 19 March 2020. It includes companies, charities and public sector organisations.

What does furlough actually mean?

Furlough just means a “leave of absence”. Find more information about what is furlough leave here.

Which sections of my workforce will furlough apply to?

It applies to full-time, part-time, agency and zero-hours employees and workers, and apprentices as long as they are paid through PAYE.

What support is the Government offering businesses under the furlough scheme?

They are offering to re-imburse 80% of furloughed employees’ usual monthly wage costs up to £2,500 a month, plus the associated Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions on that salary. This will end on 31 July. From 1 August, the government will cover the cost of wages but employers will be asked to pay employer National Insurance and pension contributions. On 1 September, the government will drop its contribution to 70% of wages, and on 1 October, the government’s contribution will drop to 60% until the scheme ends on 31 October. The employer will be expected to top up the reduced grant so it is made up to 80% of salary or the cap.

Do employers have to show that they would otherwise have had to make the employee redundant?

No. As long as the decision to furlough relates to coronavirus-related circumstances.

Will I have to pay back the furlough grant?

No, it is a grant not a loan. Payment will be backdated to 1 March 2020.

How do I claim re-imbursement of my furloughed employees’ wages?

The Government has set up an online portal which went live on 20 April. Employers can use the portal to claim the grant. Employers will have to provide all the information about their claim; the number of furloughed employees, NI numbers etc and will also have to calculate what they are claiming for each employee.

How do I calculate a claim for an employee who has variable hours?

You can claim 80% of the amount paid in the same period in the previous year or an average over the previous 12 months, whichever is the higher. This will reduce to 70% on 1 September 2020 and 60% on 1 October 2020.

When will we receive the first payment?

The first payments were made after 30 April.

How often can I put in a claim for a furloughed employee’s wages?

A claim can only be made every 3 weeks.

How much work can an employee do while they are on furlough leave?

Currently, your employee can’t do any work but they can attend training or volunteer. From 1 July, your employees that have been furloughed by 10 June can work for as many hours as you need them and you will being able to claim the Coronavirus Job Retention Scheme grant. For example, if a full time employee works for you for 2 days they receive normal pay and you can claim the 80% of your employee’s wage for the other 3 days. This scheme will close to new entrants from 30 June as you will only be able to claim for employees that have been furloughed for a full 3 week period.

Do I have to top up employees’ salaries so that they receive their full income while on furlough leave?

No, while your employee retains a contractual right to full pay, by agreeing to be furloughed they are agreeing to a variation of their contract for the period of the furlough.

What about their other contractual benefits?

The scheme does not cover other contractual benefits. You will remain liable for other contractual benefits unless your employee agrees to waive or defer them.

Can I insist that employees take furlough leave?

No. You will need the employee to agree to the arrangement. This is essentially a temporary variation of their contract of employment for the duration of the scheme, or whatever period you decide to keep a particular employee on furlough leave.

What if my employee refuses to take furlough leave?

If you do not have sufficient work for the employee then there is likely to be a redundancy situation. You can make them redundant but you still need to ensure that you follow a proper process, particularly if the employee has more than 2 years’ service.

Does the furlough agreement have to be in writing?

Yes – but an exchange of emails would be sufficient.

I have some work for my employees but not enough for all of them. How do I decide who to offer furlough leave to?

It is likely that taking furlough leave will be a popular option for employees and there is a real risk of tension, if some employees do no work for 80% of their salary, and others have to work, particularly if requiring them to work exposes them to additional risk. Volunteers should be sought in the first instance. If you have to narrow it down you could adopt a straightforward “matrix” selection process. You should keep the process transparent and objective to avoid any arguments of discrimination.

Would I be discriminating if I offered furlough in the first instance to “vulnerable” employees eg. those over 70 or with underlying health conditions?

It is likely to be justifiable to discriminate on the basis of age and, in relation to individuals with underlying health conditions. This is the case whether or not they would be considered to be disabled for the purposes of the Equality Act. A “healthy” employee has no cause of action under the Equality Act if she is passed over. You should however be alive to the fact that someone with a mental health condition might also be “vulnerable” in the circumstances.

Can I rotate employees on furlough?

The furlough period has to be for a minimum period of 3 weeks therefore there is nothing to stop an employer rotating employees every 3 weeks. While this is potentially better for industrial relations it somewhat undermines the object of reducing the number of people in circulation.

What if I have already offered someone a job with a start date after 19 March 2020?

As long as you have evidence that this was a legitimate hire, which was in motion before the scheme was announced, it is likely that it will be permissible for you to seek their agreement to put the individual on furlough leave from their start date. The alternative is to terminate their contract on notice.

I recently made a member of staff redundant– can I reinstate them and put them on furlough instead?

Yes.

I have staff on sick leave – can they be furloughed?

Staff who are in receipt of Statutory Sick Pay or contractual sick pay can be put on furlough leave once they have recovered and would otherwise have returned to work.

Can I continue with a grievance or disciplinary process while an employee is on furlough leave?

The guidance indicates that doing anything which provides services to or generates revenue for the business is prohibited while on furlough leave. But there seems to be no reason why you could not progress a disciplinary or grievance process.

Do employers have the right to tell furloughed employees that they must take holiday during their furlough period?

Many employers are now compelling employees to take annual leave while on furlough, mainly to prevent them accruing eight months’ worth of holiday (furlough now being known to last between 1 March and 31 October 2020) being due when they return to work or their employment ends.

The government has published guidance, which supports the view that employers can compel employees to take holiday during furlough.

The relevant part of the guidance states:- “If an employer requires a worker to take holiday while on furlough, the employer should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the worker from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday.”

The Working Time Regulations 1998 reg 15 makes it clear that an employer can insist on an employee taking annual leave on particular dates, as long as they give twice the number of days’ notice that they want the employee to take as holiday. So, for example, an employer needs to give two weeks’ notice to require their employee to take one week’s annual leave.

In practice this means an employer can furlough the employee for three weeks and tell them at the start that the third week is annual leave. By definition, this then means they’ve given the required two weeks’ notice of the one week’s annual leave.

Is holiday pay when on furlough based on 80% or 100%? And does it include commission and bonuses?

An employee is entitled to be paid their ‘normal remuneration’ when on their first four weeks of annual leave. This has been interpreted in numerous cases as including overtime, allowances, commission payments and contractual bonuses. That’s because the law should not allow employees to be disincentivised from taking annual leave by paying them less on holiday than they would be when at work.

In contrast, the Coronavirus Job Retention Scheme (CJRS) specifically excludes commission, fees, and bonuses from the amount HMRC will reimburse. As the CJRS only pays 80% of base salary there has been uncertainty as to what has to be paid for holiday pay. We would advise that you should pay the employee taking Annual Leave while on furlough their normal pay which includes bonuses, commission, and allowances.

Can a furloughed member of staff volunteer to carry out tasks for their employer and if so what might those tasks be?

Currently, not for the employer but they can for another organisation. This is because up until 1 July employees and workers cannot carry out any work if furloughed. As working part time is permitted from 1 July any work should be paid.

Does the employer have any right to insist that furloughed staff carry out online training sessions or attend educational workshops?

Furloughed employees can attend training under the Employers CJRS guidance and the Treasury Directions. The CJRS  guidance says this is as long as this is not used by the employer to generate revenue.

The Treasury Directions are more limited and the exception is training “directly relevant to the employee’s employment”. There is also reference in the Treasury Directions to there being agreement about training but not specifically in writing. We would however recommend that the safest route is to secure employees written agreement in their Furloughing Agreement to undertake training.

How long will the Furlough scheme run for?

The current furlough scheme will run until the end of July 2020. From 1 August to 30 October 2020, employers will be expected to contribute to the costs. Also, furloughed employees can be brought back part-time. Full details of how this will work will be announced by the government at the end of May 2020.

As the Furlough Scheme is being phased out from 1 August, what else can I do to protect my business as my revenue streams have dropped?

If it is clear that you are going to have to restructure your business and or make provision for the phasing out and end of the furlough scheme then alternatives include:

Salary sacrifice where everyone gives up a percentage of their salary for a defined period. This can be offered as an alternative to redundancies and there must to be the employee’s agreement to this.

Part time working

Again, this can be offered as an alternative to redundancy and you need the employees agreement to this. We are still waiting for a new government announcement which should set out whether furloughed employees can go back to work part time and what proportion of furlough pay the government will still pay.

Redundancy / restructuring

Many employers are already gearing up to restructure their business so that the people they are making redundant can be served notice while they are still on full 80% furlough pay.

We would recommend that any notice is paid at ‘normal renumeration’ if not topping up the 80%. This is unless the employee agrees to accept the furlough pay instead of their notice pay. The redundancy process must be fair and include a fair selection process. Accrued holiday will also need to be paid.

What will happen to employees who are shielding once the furlough scheme finishes?

Employees who are shielding are entitled to Statutory Sick Pay (SSP) if they cannot work from home. This came into force on 16 April.

The Acas guidance currently states that employers are entitled to furlough employees who are unable to work because they are shielding, in line with public health guidance, or because they need to stay at home with someone else who is shielding.

As shielding employees are now entitled to SSP, if they are unable to work from home, the Treasury Direction seems to be that an employee cannot be furloughed while they are entitled to SSP, (whether or not they are actually receiving SSP).

There is therefore a risk that an employer will not be able to recoup the furlough pay of a shielding employee they place on furlough under the terms of the Coronavirus Job Retention Scheme.

The position is different if the employee is shielding and able to work from home because that category of employee does not qualify for SSP. The deemed incapacity provision require that the employee is unable to work due to their isolation.

We would argue that those shielding employees who were furloughed before 16 April 2020, who were not entitled to SSP, should result in entitle the employer being able to claim under the CJTS.

For expert advice on furlough leave and the Coronavirus Job Retention Scheme, contact our Employment Law team on 01273 609911, or email info@ms-solicitors.co.uk.

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