Updated: Jun 26
To Furlough or not to furlough, that is the question
For many businesses, the unprecedented development of the Coronavirus pandemic has required owners, directors and shareholders to make important business decisions – and fast. In most cases, revenue has drastically decreased, which left employers facing perhaps one of the trickiest decisions of all – whether, in order for the business to survive, redundancies must be made. The UK government, however, recognised the impending mass unemployment as a result of redundancy and swiftly introduced the Job Retention Scheme.
The Scheme has given businesses the opportunity to furlough their staff – or temporarily stop them from working, whilst remaining an employee - by covering 80% of the wages of each individual signed up to the Scheme. The official explanation of the government support offered is available on Gov.uk and states:
“Under the scheme, employers can claim a grant covering 80% of the wages for a furloughed employee, subject to a cap of £2,500 a month.”
Since the initial announcement of the Scheme, the government has agreed to also cover employer national insurance payments and mandatory auto-enrollment pension scheme contributions. This was initially to cover March – May 2020, however, has since been extended to June 1st in support of UK businesses.
Over 40% of businesses within the UK have signed up to the Job Retention Scheme, meaning that hundreds of thousands of employees are retained, avoiding re-recruiting delays and costs for employers when business returns to usual. The lifeline has also ensured that employees and their families can continue to pay mortgages, rent, bills and for food.
Who can apply for the Job Retention Scheme?
Businesses that are unable to pay their staff as a result of the Coronavirus, whilst not having enough work to keep all employees busy, are suitable to apply for the Scheme. Employees can be furloughed at any point during the scheme (between March and June 2020) “by reason of circumstances arising as a result of the Coronavirus or Coronavirus disease”. All applications must be made via employers on behalf of each staff member. Included in the scheme are:
Full time staff
Part time staff
Staff on zero-hour contracts
All employees must meet the following criteria in order to be eligible for the Job Retention Scheme:
Be employed on 19th March 2020;
Be individually notified to HMRC on a Real Time Information (RTI) submission on or before 19th March 2020.
If your company has already made redundancies as a result of the COVID-19 outbreak and subsequent disruptions to business, the government have allowed employers to reemploy staff as long as they were on the payroll on 28thFebruary 2020.
Do employees need to agree to be furloughed?
As furloughing an employee will require a degree of variation to their employment contract, they should be consulted prior to being furloughed. It should be made clear, however that those employees who refuse furlough, for whatever reason, may face redundancy if there is insufficient work to occupy them and no company funds to pay their wage.
The Job Retention Scheme does not, in any case, override the principles of UK employment law or the requirements of the collective consultation regime.
How does a company decide which employees should be furloughed?
Should there be sufficient work to occupy some but not all employees, the employer faces the decision over whom to furlough. The decision process should be fair and considerate to limit risk of falling foul of discrimination law, such as the Equality Act 2010.
There is no guidance given on how to select the employees to furlough, but you might begin by asking for volunteers from those who don’t have the skills or training to complete the tasks which remain operational. Discussing the practicalities of furloughing, including the reduction in pay and how it will benefit the company may help in getting agreement from employees.
Employers may also consider whether the business can top up the 80% salary payment from HMRC, as most employment contracts entitle staff to the right to be paid a certain amount, not the right to work.
Can employees still work during furlough?
This has been debated often since the Job Retention Scheme was announced and rolled out. The answer, however, is that staff are not to do any work for the company, even on a voluntary basis, that could increase revenue. The government have highlighted the vital need for the Scheme to not be abused by employers. In fact, companies can be investigated for fraud by HMRC if staff continue to work, risking their payments from the Scheme.
Staff can, however, complete training necessary for their role. The employer is required to pay at least National Minimum Wage for the hours spent training.
New, temporary employment or volunteering opportunities can be sought outside of the regular place of work, however employees must ensure they are prepared to return to their regular employment as soon as given notice that the company is recommencing operation and retracting their involvement in the Job Retention Scheme.
Can employees have contact with the business whilst furloughed?
Although staff are unable to work for the company, they are still able to stay in contact. Employers should consider methods of communication as staff are unable to access their work email address under the terms of furlough. Weekly company update emails to personal email addresses, or even welfare phone calls to check in on the employees are a good way of ensuring employees do not become alienated from the business whilst furloughed.
A clear communication policy should be developed and rolled out so that employees don’t accidentally risk them being seen to be operational whilst officially furloughed.
How can a company manage the return to work process as furlough ends?
No official guidance has yet been given to employers about instructing their employees to return to work, however an inclusive approach is sensible and fair. From the time that an employee is furloughed, they should be prepared for how they will be recalled to work for the company, for example, employers may like to offer a week’s notice to ensure family responsibilities and childcare can be taken care of.
Do furloughed workers still accrue holiday?
Yes! Under the Working Time Regulations 1998, all contractual arrangements and employee rights remain the same. Some workers may wish to use their accrued holiday at the end of the furlough process, which should be managed with tact so as not to delay the company operations.
A new regulation has been introduced allowing employees who couldn’t take their full holiday entitlement for the year as a result of the Coronavirus to carry their leave over to the following two years. This will benefit employers as it’ll avoid all staff attempting to take their annual leave at the same time, just as business is adapting to the new normal.
The UK government has been quick to react to the unprecedented impact of the Coronavirus pandemic, already extending the Job Retention Scheme by a month in response to on-going economical concern. We, at Serenity Law LLP, keep up to date with the latest advice and legislation communicated by the government to enable us to support you and your business. We are experienced in revising and renegotiating terms of agreement for businesses around the world and manage cross-border disputes with consideration to the different jurisdictions. To learn more about how we can support your business through the continuation of the pandemic, contact the team today to book a free consultation.