The legal landscape in relation to employment law is changing on an almost daily basis with new schemes being invented rapidly by the government to deal with the coronavirus crisis.
With such changes being made, there has been a lot of confusion, so we have put together a list of the most frequently asked questions our employment team is receiving about furlough in the hope that this will help answer some of your questions.
This is based on our understanding of the Government’s guidance to date, as of 27 March 2020. This is an ever-changing landscape and if the position changes further we will update you.
The employment guidance for business portal
In addition to the Q&A’s, we are pleased to announce that the Ashtons Legal Online HR Portal, which contains all manner of HR documents such as policies, contracts, invitations to disciplinary hearings, amongst other things, now also contains a Furlough Leave Agreement.
All of these materials will be updated as the COVID-19 crisis continues and the government issues further guidance, schemes and updates.
If you would like unlimited one-year access to this portal, we are charging £125 plus VAT. Please get in touch at [email protected] or call 01473 261394.
Your questions answered
The legal infrastructure around furlough is changing on a daily basis. The content of these answers have been sourced from the government’s update given on 26 March 2020 and may continue to change. Please contact a member of the team for bespoke legal advice.
1. What is furlough leave?
Furlough leave is a type of paid leave which the government announced on 20 March 2020 to help businesses retain their staff during the coronavirus crisis. It is a scheme where the business can opt to send their staff home and whilst they are not working, agree with staff that they will be paid 80% of their gross salary.
The business must furlough staff for a minimum of three weeks. The 80% (or £2,500 cap) is paid by businesses and then will be refunded by HMRC once their portal goes live, which is expected to be by the end of April.
2. When does the scheme run until?
The scheme is to be backdated to 1 March 2020, for any staff already on lay off or made redundant as a result of the crisis. The scheme is currently intended to last until 31 May 2020.
3. Who is entitled to furlough?
Full-time employees, part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts, that were on the payroll as of 28 February 2020. For the purposes of this note “employee” covers all these individuals.
4. What can individuals do whilst furloughed?
Individuals cannot perform any work for the organisation that has furloughed them. They can, however, perform training or voluntary work for the organisation, so long as it does not provide services or generate revenue for the organisation.
Individuals can continue to work other jobs (as each organisation has its own responsibility to furlough if necessary) and can volunteer for other organisations.
5. What is the 80% (or £2,500 cap) comprised of?
As at 26 March 2020 the 80% will be based on the employee’s regular salary plus their associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on the subsidised wage. The government has confirmed that fees, commission and bonuses should not be included.
The calculation is based on an employee’s actual monthly wage, before tax. If the employee has variable earnings then:
- for those employed for 12 months prior to the claim – the claim is for the higher of either the same month’s earnings last year, or the average monthly earnings for the 2019/20 tax year
- for those employed for less than 12 months – the claim is an average of monthly earnings of their period of work.
Employees are only entitled to National Minimum or Living Wage if they are working. If the 80% will drop them below that threshold you can pay the lower rate if they are not working. However, if they are required to complete any training (including online training) during this period they will have to be paid NMW / NLW even if that includes the employer topping up. The current rates and rates applicable from 6 April 2020 are here.
The employer and employee can agree to the reduced wage of 80% / £2,500, or the employer can agree to top up the salary to the full rate.
6. What about tax?
All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment pension contributions on behalf of furloughed employees, but the grant claimed from HMRC can include this.
Wages of furloughed employees will be subject to income tax and National Insurance as usual (on the reduced rate). Employees will also pay automatic enrolment contributions on qualifying earnings unless they have chosen to opt-out.
7. When will my business be reimbursed for the wages paid during furlough?
HMRC hopes to have their online portal available by the end of April. It is not clear what their response times will be but given the present situation with COVID-19 it could take a while after the online portal opens for payments to be made.
8. What if someone is working their notice period right now, can I furlough them?
An employee who is working their notice period is still an employee, therefore, they can be furloughed along with the rest of the staff.
9. Can I rotate staff on furlough, for example, one week normal working, one week furlough?
Employees must be furloughed for a minimum of a 3 week period. There does not appear to be anything in the guidance that suggests they could not be rotated after that minimum period.
10. What about staff on maternity leave, sick leave etc?
Staff currently on sick leave and in receipt of sick pay should remain on sick leave until the end of that period, and can then be furloughed if agreed.
Staff on maternity leave, adoption leave, shared parental leave or paternity leave the usual rules for statutory payments apply.
11. How should I deal with someone on maternity or paternity leave who now wishes to return to my business to claim 80% (or £2,500) furlough pay?
Women on maternity leave must take the minimum maternity leave period off work (2 or 4 weeks as relevant) following the birth of their child. Following this if they wish to return to work they can do so in line with the usual notice periods.
12. Can I make staff redundant whilst they are on furlough leave?
The usual processes and procedures regarding redundancy remain in place. Therefore, a redundancy process can run alongside furlough leave.
The government has confirmed that furlough leave will only be available until 1 June and at that point your business must make a decision as to whether you bring back furloughed employees, implement another form of leave that you may have the contractual right to engage (e.g. unpaid lay off), or make them redundant.
If you are making 20+ staff redundant please take legal advice on collective consultation requirements.
Further information
For specific advice for your business, please get in touch with our specialist Employment Law team through this website or by calling 0330 404 0778.
Our partners at Ashtons HR Consulting are also on hand to assist you.
This information is correct at 3.30pm on 27 March 2020.
