Further guidance on COVID-19

Of the measures created  by the Government  to assist employers and employees with the economic fallout from COVID-19, the most significant from an employment law perspective is the introduction of  “furlough leave”.

Simkins published an article last week about furlough leave shortly after it was announced. However, more information about how the scheme will operate in practice has now been provided.

Background

Under the proposed scheme, an employer will have to declare to HMRC that an employee is “furloughed”, essentially laid-off. HMRC will then reimburse 80% of furloughed worker’s wage costs, up to a cap of £2,500 per month. HMRC do not have a system in place to make these payments yet, however, the Government has made it clear that employers can furlough employees now and receive reimbursement later.

New information

When furlough leave was announced, there was a concern that it could be open to abuse. There were fears that some employers would hire friends and family in order to claim the grants. In order to prevent this, the Government has confirmed  that furlough leave will only be possible for employees who were on their employer’s payroll on 28 February 2020. Unfortunately, this also means that employees hired in March 2020 may need to be made redundant if no work is available.

Conversely, employees who were employed on 28 February 2020, but who were made redundant in March, can be reinstated for the purpose of being furloughed. However, it is not yet clear whether the Government will cover the costs for the time that the employee was redundant or whether any statutory redundancy payments and/or notice periods will need to be returned if already paid.

There is no requirement for an employee to furlough all of their employees. Given that furloughed employees are not allowed to carry out any work for a company, this may be impossible in practice in any event. As things stand, there are no criteria that a company has to fulfil when deciding which employees should be furloughed and which should not. However, we would advise employers to have a set of reasonable and identifiable criteria so that there is no risk of discrimination claims.

The payment that a furloughed employee will receive is still subject to tax and National Insurance.

Employees have to be furloughed for at least three weeks at a time. It is also clear that an employer cannot use furlough leave to make an employee part time; i.e. an employer cannot ask an employee to work reduced hours and claim a furlough grant for the remainder.

Employers still do not have the right to furlough an employee against their will and an employee will still need to agree to be furloughed. Agreement is likely to be forthcoming if the alternative is redundancy. In the event that redundancies are necessary, normal employment rules apply. In the event that an employer makes more than 20 redundancies in 90 days, collective consultation is still required.

It is also now clear that being furloughed does not count as work for the purpose of the National Minimum Wage. Accordingly, employers can furlough employees who earn National Minimum Wage and still limit pay to 80% of the employee’s salary, however, the employee would still need to agree.

Employees cannot do any work while they are furloughed, however, employees can attend training courses. If employees are attending training at their employer’s request, then National Minimum Wage will need to be paid for that time. 

In another new development, the Government is planning to change the Working Time Regulations to enable employees to carry over up to four weeks of annual leave for two years instead of one. The Government have stated that this is to assist key workers who are having to work without holiday to deal with COVID-19. From what we understand, this change will not affect an employer’s ability to force employees to take holiday in a given year (provided sufficient notice is given).

What we still don’t know

We still don’t know exactly how employers will apply for furlough leave. Until HMRC have the system in place to make payments to employers, employers will need to cover salary costs themselves. However, we recommend that employers have written evidence that employees have been furloughed to make claiming the relevant grants easier.

It is clear that an employee can carry out volunteering work while furloughed, however, it is not clear whether a furloughed employee can start a new job and remain furloughed (assuming that the relevant employee’s contract allows this).