Employment Law update: The Coronavirus Job Retention Scheme

The Government announced the Coronavirus Job Retention Scheme (“the Scheme”) on 20 March 2020, as part of the range of measures put in place to support businesses during the Covid-19 pandemic. The aim of the Scheme is to avoid redundancies by employers whose operations have been severely affected by coronavirus. The official guidance to the scheme for employers, and for employees confirms that employers can ‘furlough’ workers, which is an unknown term in UK Employment Law, but describes a situation where a worker remains employed but is not provided with any work.

Information for Employers:   1) Which businesses can use the Scheme?   Any UK organisation that had PAYE payroll in place by 28 February 2020 can make a claim under the Scheme. Eligible organisations can include businesses, charities, recruitment agencies (if they have agency workers on PAYE) and public authorities. The Scheme is due to be live by the end of April and has initially been put in place for three months, backdated to 1 March 2020, but can be extended.   2) Who can be furloughed?   Workers who were on an employer’s payroll for PAYE purposes as of 28 February 2020 can be furloughed, but this is likely to exclude many workers in the gig economy. The Guidance does not state that evidence that a worker would otherwise have been made redundant will be required, but it does say that “HMRC will retain the right to retrospectively audit all aspects of your claim”. Any worker whose employment was terminated after 28 February can be rehired and furloughed, but there is no obligation on employers to re-hire a worker whose employment has been terminated.   3) Does the Scheme cover workers on reduced hours?   No. A furloughed worker is someone who remains employed but who is not provided with any work. This means that the worker cannot undertake any duties which provide a service to or generate revenue for their employer whilst furloughed, although training can be undertaken.   4) Can workers who are on sick leave be furloughed?   The Guidance confirms that workers who are on sick leave, or self-isolating in accordance with the advice issued by Public Health England, and receiving statutory (or contractual) sick pay, can be furloughed.   5) What will the employee be paid during furlough?   Employers will be provided with a grant by the Government for workers who are furloughed, to cover 80% of workers’ wages, capped at £2,500 per month. Employers are not obliged to top up the difference but may decide to do so – if not then the workers would need to agree to the reduction in pay. The Guidance states that employers can claim an additional grant to cover associated Employer National Insurance Contributions (NICs) and minimum automatic enrolment employer pension contributions.   6) Can employers just tell employees that they are being furloughed?   In most cases, no. Many employment contracts will not have made provision for a worker to be laid off on this basis and therefore the employer will need to seek the worker’s agreement to vary their terms, particularly to reduce their pay.   7) How should employers select which workers to furlough?   In many cases employers who are operating at reduced capacity will need to select which workers to furlough. This could create problems if either too few or too many workers want to be furloughed. The Guidance does not set out how an employer should select the workers that it furloughs, but employers must remember that they will continue to be bound by general employment law, particularly discrimination.   8) Can workers come on and off furlough?   Yes. The Guidance states that while a worker must always be placed on furlough for a minimum period of three weeks, they can be placed on furlough more than once.   9) What records do employers need to keep?   The Guidance states that employers can only make a claim if they have provided workers with written confirmation that they are furloughed. It is therefore strongly recommended that a “Furlough Agreement” is put in place to cover the terms upon which the worker is furloughed.   10) Can employees take annual leave whilst they are furloughed? As yet, the official Guidance) does not make specific provision for this, but ACAS guidance and HMRC’s customer services team suggest that this will be possible and that it should be paid at 100% of normal salary. If this is correct, then it is assumed that the employer will have to top up the pay for such holiday from 80%, but at the time of writing, this is yet to be confirmed.   Information for Employees:   1) Who can be furloughed?   Workers who were on an employer’s payroll for PAYE purposes as of 28 February 2020 can be furloughed, but this is likely to exclude many workers in the gig economy. Any worker whose employment was terminated after 28 February can be rehired and furloughed, but there is no obligation on employers to re-hire a worker whose employment has been terminated.   2) Can you just work reduced hours?   No. A furloughed worker is someone who remains employed but who is not provided with any work. This means that you cannot undertake any duties which provide a service to or generate revenue for your employer whilst furloughed, although training can be undertaken.   3) Can you be furloughed if you are on sick leave?   The Guidance confirms that you can be furloughed, even if you are on sick leave or self-isolating in accordance with the advice issued by Public Health England and receiving statutory (or contractual) sick pay.   4) What will you be paid during furlough?   Employers will be provided with a grant by the Government for workers who are furloughed, to cover 80% of your wages, capped at £2,500 per month. Employers are not obliged to top up the difference but may decide to do so – if not then you would need to agree to the reduction in pay.   5) Can your employer just tell you that you are being furloughed?   In most cases, no. Many employment contracts will not have made provision for a worker to be laid off on this basis and therefore the employer will need to seek your agreement to vary your terms, particularly to reduce their pay. However, this is likely to be the more attractive alternative to redundancy.   6) Can you demand to be furloughed?   No. Under the Scheme, the decision to designate a worker as furloughed and claim the grant from HMRC can only be made by the employer. You do not have an explicit right to put yourself on furlough, even if you have caring responsibilities or cannot work from home.   7) How should employers select which workers to furlough?   If employers are operating at reduced capacity, they may need to select which workers to furlough. When selecting which workers to furlough, employers will be bound by general employment law, including discrimination in particular.   8) Can workers come on and off furlough?   Yes. The Guidance states that while you must always be placed on furlough for a minimum period of three weeks, you can be placed on furlough more than once.   9) Can you work elsewhere whilst you are furloughed?   The Guidance states that you can do volunteer work and/or undertake work for a new employer whilst furloughed, provided that your contract of employment allows you to work elsewhere. However, you cannot provide a service to or generate revenue for your employer or any organisation linked to your employer. This means that you could receive up to 80% of your wages from your existing employer, in addition to the wages you receive from a new employer.   10) Can you take annual leave whilst you are furloughed?   As yet, the official Guidance does not make specific provision for this, but ACAS guidance and HMRC’s customer services team suggest that this will be possible and that it should be paid at 100% of normal salary. If this is correct, then it is assumed that the employer will have to top up the pay for such holiday from 80%, but at the time of writing, this is yet to be confirmed.   For any Employment Law advice or more information on furloughing, contact Carla Gowing at [email protected]