Residential property
30 Mar 2020 News

Furlough leave

The legislation establishing the Government’s Coronavirus Job Retention Scheme (CJRS) and the newly introduced ‘furlough leave’ has not yet been enacted and the HMRC portal is yet to open.  Helpfully, the Governmental guidance was updated on 26 March 2020 and is available here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme.  Amongst other things, this guidance sets out exactly what you’ll need to be able to make a claim.

Here’s what we know so far:

  • The CJRS will be open from 1 March for three months and then will be reviewed.
  • It is open to all UK businesses that had a PAYE scheme running on 28 February 2020 and which have a UK bank account.  All employees and workers paid through PAYE (including full and part time employees and those on zero-hours contracts) are eligible to be furloughed.  Notable exclusions are employers who receive public funding for staff costs, employers who are receiving public funding specifically to provide services necessary to respond to COVID-19, employees who started after 28 February 2020, employees who were placed on unpaid leave on or before 28 February 2020, and employees eligible to receive SSP.
  • An employee or worker who has agreed to reduce their hours or days of work does not qualify for furlough leave. They must stop or have stopped working. 
  • Employers will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.  The 80% calculation is based on the employee's gross salary at 28 February 2020.
  • Employer National Insurance contributions and automatic enrolment contributions on any top-up salary will not be funded through this scheme; nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution.
  • Employees must be furloughed for a minimum of three weeks.  This is relevant to those employers who had planned to ‘rotate’ employees on furlough leave.
  • Employees who have been made redundant since 28 February 2020 can qualify if they are re-engaged by their former employer.
  • The precise circumstances in which an employer can put employees on furlough leave and claim reimbursement remains unclear.  It appears likely that it is intended to cover employers who would otherwise need to drastically cut their payroll as a result of the crisis, either through lay-off or redundancy. We do not yet know if HMRC will seek evidence of the employer's ability to continue paying its staff before making a reimbursement; and/or of HMRC will impose condition that the reimbursement will only be made where the furlough leave was expressly agreed as an alternative to redundancy.

How to put an employee on furlough leave 

Being put on furlough (and agreeing to a salary reduction, if you don’t intend to top up) are changes to an employee's terms and conditions of employment.  Unless there is an express provision in the contract of employment entitling you to lay-off an employee (which provisions are rare) an employee needs to agree to that change/those changes being made.  Unilaterally imposing change(s) risks grievances or claims.  We have included a template agreement for this purpose.  We strongly recommend that the furlough leave be agreed in writing – it’s said to be an express condition for eligibility of reimbursement.

Practical points to bear in mind 

  • First payments could be another month or so away, and you will still need to pay the wages of the furloughed employees meantime.  This could cause a significant cashflow burden on some businesses.  You might want to consider an emergency loan or perhaps even agreeing a further change to an employee’s terms and conditions – that their pay will be deferred. 
  • If you are furloughing 20+ employees and are contemplating (i) dismissals by reason of redundancy if individuals do not agree to the changes being made to their terms and conditions; or (ii) making redundancies more generally; take advice – collective consultation regulations will be triggered, which if not followed, can lead to claims.  It was hoped these regulations would be relaxed for furlough leave but the Government have now confirmed that is not going to be the case.
  • Employees can ask to be furloughed if they wish, but you do not need to agree.  Ultimately employers have discretion who to ask to go on furlough leave, if anyone.  It is entirely possible for an employer to lawfully choose to furlough only part of the workforce, provided you've used non-discriminatory section criteria.
  • You cannot select individuals for furlough for discriminatory reasons.  Selecting for example all those with childcare responsibilities or all those in a particular age bracket is likely to be discriminatory.  Equality and discrimination law still applies.
  • Annual leave continues to accrue whilst employees are furloughed.
  • Furloughing is not the only option to help you through this difficult time – see our other suggestions here.

See our template furlough agreement here.

TEMPLATE AGREEMENT – provided as guidance only – we recommend you take full advice before using it

 

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