In order to avoid redundancies and encourage employers to keep staff on the payroll the government will pay 80% of wages (up to a maximum of £2,500 per month) for employees who are temporarily laid off with no work.
Many employers and business owners I had been speaking to prior to the announcement had been working hard to find ways to keep as many staff as possible in employment and pay during this time. No one wanted to make redundancies or put staff on unpaid leave and therefore the news that businesses can keep staff on the books and in pay up, to 80% (100% if employers want and are able to pay the difference) was a huge relief.
Following the original announcement came numerous questions about how the scheme would work in practice and what would happen in a variety of scenarios.
Since the original fairly short guidance was published there have been several updates and the latest was published on the 17th April 2020.
Whilst there are some unresolved issues that us employment lawyers are still grappling with I am not sure that there will be any further revision to the guidance given the fact that the portal to make claims will open on Monday 20th April (all being well!). If there are changes I will of course add the details to our resources.
If you have any other questions please let me know: firstname.lastname@example.org or for a free initial telephone call contact the office on 01983 897003, 023 8098 2006, 01722 653001 or 020 3470 0007.
Key updates to note about the scheme as at 17th April 2020
New qualifying date
The qualifying date for employment for the furlough scheme has been changed from the 28th February 2020 to the 19th March 2020. This means that anyone employed on or before the 19th March 2020 and which were notified to HMRC on an RT1 submission on or before the 19th March 2020 are now eligible for the scheme.
The original date of the 28th February 2020 was set to prevent fraudulent claims, but after many stories emerged of people who fell into this ‘limbo’ period having started work between 28th February – 20th March (when the scheme was announced), the government have extended it.
If you have someone who falls into this timescale of starting work for you and you have terminated employment or put on unpaid leave then you can now re-employ them and furlough them and make a claim for 80% of their pay (as long as you had completed the RT1 for HMRC before the 19th March 2020).
When I first read this change I thought that it would be helpful for a lot of people, however having spoken to several business owners today it seems that most file their RT1 around the same time as processing payroll, which is, for the majority, at the end of the month. Therefore many employees will miss out on the furlough scheme because of the requirement to have filed the RT1 on or before the 19th March 2020.
Directors can be furloughed
A director can be furloughed but must not undertake any work, unless it is to fulfil a statutory obligation.
The guidance states:
‘Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.
Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, i.e. they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.
This also applies to salaried individuals who are directors of their own personal service company (PSC).’
I recommend that sole Director companies proceed with caution if furloughing the Director as you will need to ensure that no work is undertaken in the furlough period, save for legal duties, which are limited.
Put the details in writing to the Employee
The guidance states that in order to be eligible for the grant employers must confirm in writing to their employee that they have been furloughed. You must keep a record of this for 5 years.
The relationship between annual leave and furlough has not been clarified and there is no detail in the guidance about it.
I attended a webinar on Wednesday 15th April 2020 run by HMRC about the scheme and in the questions box there were numerous questions about annual leave which were answered by HMRC staff with the same response ‘you will need to check this with ACAS’.
HMRC tweeted on their official twitter account last week that employees can take annual leave during the furlough period and it would not break furlough. This therefore seems fairly straightforward, if an employee requests annual leave during the furlough period they can take it and you would be required to pay 100% of pay for that annual leave period. The ACAS guidance is consistent with this.
The main issue that has arisen is whether employers can stipulate that annual leave must be taken during the furlough period. Unfortunately my fellow employment lawyers and barristers are divided on the legal implications of annual leave and furlough and therefore I fear the issue will only be resolved in the future when someone makes a claim and it makes its way through the Tribunals and Courts. Which of course will be too late for many employers!
In light of this uncertainty I recommend that you discuss your situation and seek specific advice before taking action. This way you can weigh up:
- the commercial/financial risks,
- the potential legal risks, and
- implications for employee relations
of any action that you wish to take.
ACAS guidance: https://www.acas.org.uk/coronavirus
Support from the RELA Team
- Letter/notice to all staff asking for volunteers and notifying staff of proposal.
- Example Selection criteria form.
- Letter notifying staff that they are being furloughed – agreement included within.
- Letter notifying staff that they are being furloughed – agreement separate.
- Furlough agreement.
- FAQ’s sheet to issue to employees.
- Spreadsheet to record furlough details.
You can purchase the documents here: HERE
Business Support from a Solicitor: For a fixed fee of £250 plus VAT we can provide:
- Review of your employment contracts to check relevant applicable clauses that may assist in your decision making.
- Providing advice on options available at this time in respect of staff during the current situation including:
- Reducing hours
- Up to 1-hour of telephone calls to discuss and answer questions.
- Template letter depending on your choice of action.
- FAQ’s document for furloughed employees.
- Automatic updates when available of if there are changes to the scheme.