Coronavirus Job Retention Scheme
FURLOUGHING – FAQs
In an effort to provide employers with assistance in what for some organisations will be challenging economic conditions as a result of the Coronavirus pandemic, the Government recently announced the Coronavirus Job Retention Scheme whereby employers can place staff on leave where there is a downturn in work as a result of COVID-19 or they are unable to work from home.
To many this will be a welcome lifeline, particularly for organisations where there has been an immediate drop off in work due to the sector in which they operate. The concept of furloughing people will, however, be a novel one for many and as a result will likely raise more questions than there are answers. Below we have aimed to answer some of the questions that those affected may have.
What is Furloughing?
Under the Coronavirus Job Retention Scheme (‘the Scheme’), employers can place staff on temporary leave – or ‘furlough’ them – and claim a grant for 80% of the net wages of an employee who has been placed on leave plus the associated National Insurance and minimum auto enrolment pension contributions. The wages claim is subject to a cap of £2,500.
Who is eligible to claim under the Scheme?
Provided an employer was operating a PAYE payroll system at 28th February 2020, this Scheme will be open to them. It is open to all UK organisations including private enterprises, public bodies and charities as well as recruitment agencies who have agency workers paid through a PAYE scheme.
Which employees does the Scheme apply to?
It applies to employees who are full time, part time, those who are on zero hour contracts and those on agency contracts.
However it does not apply to self-employed workers (the Government has announced separate measures in this regard) or new starters who were employed after 28th February 2020.
What should an organisation do to furlough an employee?
To place an employee on furloughed leave, it is vital that an employer obtain their consent as this may be seen as a variation to the employee’s contract of employment. Notification must be given to the employee in writing by the employer that they are being placed on leave.
It is important to bear in mind that discrimination and equality laws will still apply and therefore this should always be borne in mind when decisions are made as to those employees affected.
What happens whilst the employee is furloughed?
Whilst they are furloughed, employees must not undertake any work at all for their employer. Therefore they cannot do reduced hours.
However an employee may carry out voluntary work provided this provides no benefit to the employer.
Employees can undertake any training which may be necessary for their work and if they do they must be paid the National Minimum Wage/National Living Wage for the time spent training.
Can an employee who is currently off sick or in self-isolation be furloughed?
Yes. However, whilst they are off due to sickness or self-isolating, then they should receive sick pay. Once they are well or outside the required period of self-isolation then they can be furloughed.
Is furloughing an alternative to redundancy?
The Scheme is an attempt by the Government to enable organisations to avoid having to make redundancies where there has been a downtown in business as a result of COVID-19. However, furloughing is not compulsory, and if employers prefer, they can still go down the redundancy route.
It is important that if redundancy is the chosen option then a proper redundancy procedure must be followed and the appropriate redundancy payments made in order to protect the organisation from any claims.
It may be the case that an employer has made redundancies before the Scheme was announced. In such instances, businesses can choose to re-employ those who were made redundant, but it is under no obligation to do so.
What if an employee is on maternity, paternity or adoption leave?
The normal leave rules will continue to apply in this case and where an employee qualifies for Statutory Maternity Pay they can claim it in the usual way.
If, however, an employer offer an enhanced maternity pay then this counts as a wage cost that can be reclaimed through the Scheme.
The same applies in the case of paternity, adoption pay or parental leave.
How long can an employee be furloughed for?
There is a minimum period of 3 weeks. After this has expired, an employee can undertake work and then be placed on further leave at a later period.
Is the Scheme indefinite?
Not at the moment. The Government has announced that it will be for an initial period of 3 months starting from 1st March 2020. However, given the fluid nature of what is occurring and the uncertainty as to how long this pandemic will last, this may be extended.
How does an organisation claim?
It appears that HMRC will be running the Scheme and a portal is in the process of being set up. However this is not expected to go live until the end of April 2020. Given that businesses can claim from 1st March 2020 this does present organisations who may already be experiencing cash flow issues with a problem as they will need to ensure that any furloughed employees are paid correctly even though they will not have been able to access the grant money.
Rutherfords recognise that for many organisations and individuals alike, the current economic and social climate may be a worrying and stressful one. Our commercial team is sensitive to such concerns and has the expertise to assist in making process run as smoothly as possible. If you require any assistance or advice in relation to employment or other commercial matters please contact Natalie Mellors on 01827 311 411 or by email at [email protected].
Natalie Mellors is a solicitor in the corporate and commercial department