Legal News | 8.04.20
The Job Retention Scheme (Furlough)
To whom does the scheme apply?
The scheme applies to employers who are unable to operate or have no work for their employees due to Covid-19. The scheme applies to both the public and private sector, with the exception of public sector employees providing essential services in the UK’s response to Covid-19.
How should employees be selected?
There is no clear guidance on the selection process for deciding which employees should be furloughed. It is important to highlight that the Equality Act 2010 (EA 2010) and discrimination laws will apply in the usual way. EA 2010 outlines nine ‘protected characteristics’: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation, and there are four main types of discrimination: direct, indirect, harassment and victimisation. Disability discrimination is more complex, there are two additional protected characteristics that apply, the failure to make ‘reasonable adjustments’, and discrimination ‘arising from’ disability.
An employer applying a blanket policy of furloughing employees, such as ‘last in first out’ or a performance based approach can do so as long as they can show the policy they have taken is justifiable. Employers seeking to apply a blanket policy to furlough all ‘high risk’ employees may receive a claim for indirect disability discrimination, failure to make reasonable adjustments, age discrimination or pregnancy discrimination. An employer would need to show that the blanket policy is justifiable. For such ‘high risk’ employees could the employer make an adjustment such as the facility to work from home? If the work needs to be carried out at the employer’s premises, could the task be carried outside normal working hours? Could additional measures be put in place to ensure social distancing and extra cleaning?
The risk of a claim for discrimination could be reduced by asking for volunteers to furlough, explaining the rationale for the decision to furlough employees and why those specific employees have been selected. The best approach to take is to have an objective set of criteria, which does not target specific groups to decide which employees to furlough.
An employee must be consulted and agree to be furloughed as it will change the terms and conditions of their employment. If an employee has more than one job, they can be furloughed for each job. Each job will be treated separately and the cap (outlined below) applies to each individual employer.
If an employee is on sick leave, they cannot be furloughed at that time. An employer should continue to pay statutory sick pay (SSP), but they can be furloughed once they return to work. If an Employee is shielding for 12 weeks in line with Public Health England guidance they can be furloughed. If an employee is on unpaid leave, such as a sabbatical they can only be furloughed if they went on unpaid leave after 28 February 2020. If an employee is on maternity leave, they are entitled to at least two weeks leave (four weeks if they work in a factory or workshop) immediately following the birth of their baby. Where an employer pays enhanced maternity pay it is possible to reclaim the difference between the statutory minimum and the enhanced payments under the scheme.
Do the collective consultation obligations apply?
The guidance issued is not clear on this, but they potentially do if more than 20 employees are involved. If employers are identifying individuals for furlough who would have been made redundant, then this does potentially trigger collective consultation duties. The uncertainty is around whether the ‘special circumstance’ exception will apply.
What are the requirements of the scheme?
The scheme applies to an employee who is not working. It does not apply where an employee is continuing to work but for reduced pay. It will also exclude individuals employed on part-time and zero hour contracts who are working less hours than normally.
An employee must be furloughed for at least three weeks and can be furloughed more than once. This allows employers the flexibility of rotating employees who are being furloughed, so long as the minimum three-week period is reached each time.
The scheme only applies to employees who were on an employer’s PAYE payroll on 28 February 2020. It will cover all contract types, including agency and zero hour contracts.
What are employers entitled to claim under the scheme?
The grant is 80% of an employee’s monthly earnings, caped at £2,500. This is subject to income tax and national insurance deductions. For a salaried employee, it will be the individual employee’s salary as at 28 February 2020. Where an employee’s wages vary, it will be the higher of the same month’s earnings from the previous year or the average monthly earnings from 2019-2020 tax year. Any fees, commission or bonus is excluded.
As highlighted above each employee must be furloughed for at least three weeks and the scheme is set to run for up to three months (subject to extension). An employer cannot make a weekly claim under the scheme, they can only claim once every three weeks.
The National Minimum Wage and National Living Wage do not apply to furloughed workers. These payments only apply when an employee is working.
Employers are not required to ‘top up’ the additional 20% of employee’s wages or pay any extra salary for staff earning over the cap per month.
Will pension contributions change?
Employers can claim the associated minimum automatic enrolment employer pension contributions on the wage of the furloughed employee. This does not excuse an employer from paying the higher contribution outlined in their pension scheme or as outlined in their contractual obligations to an employee. An employer should continue to make the same percentage deductions for the employee contributions
What about benefits such as health insurance, dental insurance, death-in-service, gym memberships etc.
These will need to be maintained, unless a furloughed employee agrees for these benefits to be suspended or amended. It appears from the scheme guidance that employers cannot claim back the cost of these benefits. Employers should check with the scheme provider to understand what salary would be used in the event of a claim for death-in-service. Would it be the normal annual salary of the furlough pay?
Can an employee carry out voluntary work or training?
Yes. Any voluntary work cannot generate revenue or services for an employer. Where the employee is required to attend or carryout training, they must be paid National Minimum Wage.
Employee holiday entitlement (annual leave)
Whilst an employee is being furloughed, annual leave will continue to accrue. An employer could agree with an employee that contractual holiday (beyond the statutory minimum) will not accrue during furlough. Employees and workers can carry over up to four weeks’ paid holiday over a two year period, if they cannot take holiday due to Covid-19. This could be due to self-isolation, they have been furloughed or they have continued to work but not take holiday.
What if an employer has already made employees redundant?
The scheme has been backdated to 1 March 2020 to allow employers the flexibility to re-hire employees who have been made redundant and an employer can then furlough the employees.
What if at the end of the scheme an employer cannot afford to take staff on?
The government guidance suggest that if an employer cannot afford to retain staff or there is no longer a business need for those staff it may be necessary for an employer to consider termination of employment or redundancy.
Sick Pay during Covid-19
Where employees are following advice to self-isolate at home and cannot work as a result are eligible for SSP, even though they are not themselves sick.
What if employees require time off to look after a dependent?
Employees are entitled to time off work to help someone who depends on them (a ‘dependent’) in an unexpected event or emergency. This does include any related situations to Covid-19, such as schools closing and the employee is unable to arrange childcare or a dependent becomes sick, need to self-isolate or go to hospital. There is no statutory right for pay for this time off.
On 17 March 2020 it was announced that the commencement of the revised IR35 rules will be delayed until April 2021.
If you have any questions on the content of this article or for assistance with Employment Law advice please contact a member of the Commercial Team on 01380 733300 or at email@example.com.
Last updated 08/04/2020