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Insights

What you need to know about furloughing staff

Posted on 09th April 2020 in Employment, Coronavirus Pandemic

Posted by

Joanna Parry

Solicitor
What you need to know about furloughing staff

Last month the government announced that under the Coronavirus Job Retention Scheme (CJRS), all UK employers will potentially be able to access support to continue paying part of their employees’ salary by ‘furloughing’ employees. The idea is to encourage employers to keep employees on, rather than make them redundant. Here, we set out how the CJRS works and what you need to do to access this.

What is the CJRS and what will it cover?

The CJRS is available if you cannot maintain your current workforce because your operations have been severely affected by coronavirus. The employer can claim a grant of up to 80% of an employee’s regular payments up to a monthly cap of £2,500 plus (not including) the associated employer NICs and minimum auto-enrolment pension contributions on that wage.  Wages, past overtime, fees and compulsory commission payments all count; discretionary bonus (including tips) and commission payments and non-cash payments are not included.

The key points of the CJRS are:

  • An employee will need to be “classified as a furloughed worker” and this needs to be confirmed in writing;
  • Employers can choose to top-up pay, either for the unfunded 20% of pay or the amount above £2,500 for higher earners, but this is not a formal requirement to obtain access to the scheme;
  • The scheme will be backdated to March 1st 2020 and will be open initially for a period of at least three months but extended ‘for longer if necessary’;
  • Furlough leave must be taken in minimum blocks of three weeks to be eligible for funding and employers can only claim once every three weeks.

How will the CJRS operate in practice?

The scheme will be administered by HMRC. We know that employers need to:

  • Seek affected employees’ agreement to become ‘furloughed workers’ (see further below);
  • Have created and started a PAYE payroll scheme on or before 19 March 2020 ;
  • Have enrolled for PAYE online; and
  • Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details about this and the information required in due course.

It is expected that the CJRS will be up and running by the end of April but the timing of payment by HMRC remains unclear and employers will have to keep a close eye on cash flow.

How do I furlough my employees?

Furloughed employees remain on payroll but are temporarily not working during the coronavirus outbreak. By furloughing your employees, you will be changing their terms and conditions of employment and you need their agreement to do this (if you don’t have an existing contractual right to make these changes). You should be clear on what date the furlough begins and state that employees will not be required to undertake any work from that date. You should also clearly set out what changes to their contractual terms you will be making during a period of furlough (in terms of pay, benefits etc.). It is also sensible to agree contact details, as the employee should not be required to check work email.

Can employees work part-time for you while furloughed?

No. Employees must not be working for you at all. If they work even an hour, they are not eligible. However, employees are able to undertake training and do volunteer work, provided they do not provide services to or make any money for their employer. However, if you let them (or the terms of their contract permits it) your employees are permitted to work for another employer whilst you have placed them on furlough.

Which employees can be furloughed?

Employees on any type of contract, including employees on flexible or zero-hour contracts, can be furloughed and are eligible. However, they must have been on the payroll on 19 March 2020 . If they were hired later, they are not eligible. Anybody who was on the payroll on 19 March 2020 and has since been made redundant can be rehired and put on the scheme.

What about employees on maternity or other parental leave?

Employees on maternity (or similar) leave remain entitled to SMP (or similar) payments. If employers offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme. The same principles apply to contractual adoption, paternity or shared parental pay. The current government guidance does not prohibit women on maternity leave agreeing to return to work early and then being furloughed, or electing to change to shared parental leave and then being furloughed.

What about employees on sick leave?

Current government guidance says:

“You cannot claim for employees while they’re getting Statutory Sick Pay, but they can be furloughed and claimed for once they are no longer receiving Statutory Sick Pay.”

You can claim for furloughed employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home and you would otherwise have to make them redundant. Similarly, employees who are unable to work because they have caring responsibilities resulting from coronavirus can be furloughed.

Can I still make redundancies?

It is your choice whether to furlough an employee or make them redundant, although the availability of furlough may be one factor that is considered if an unfair dismissal challenge is brought. You should therefore ensure that you have a good reason for dismissing an employee (which might e.g. be a reasoned assessment that your requirement for this role will have ceased / diminished for an extended period, not just on a temporary basis). In terms of selection process, it is broadly for you to choose who to furlough and who to make redundant, again subject to any challenge as to fairness (in the context of an unfair dismissal claim) and subject of course to you not unlawfully discriminating. A furloughed employee will retain the right to a statutory redundancy payment if subsequently made redundant.

For further guidance about how we can help you and your business during the Coronoavirus pandemic visit our support hub, or for any other help and advice contact a memeber of our Employment team.

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