COVID-19 Government Financial Access
Furlough Leave: What is it and who is entitled?
The Chancellor has announced a package of measures to help businesses. One of those being the Coronavirus Job Retention Scheme, part of which is the introduction of Furlough Leave. This note explains our understanding of the scheme based on the guidance currently available, although details remain sparse. We have therefore made certain assumptions about some of the terminology used by the Government.
What is Furlough Leave?
Furlough Leave does not (currently) have any statutory or technical status in the UK and is not a term recognised in UK employment law. However, it has been introduced as a specific job retention measure in response to the COVID-19 crisis. Furlough Leave is intended to protect employees, who would otherwise have been made redundant (or laid-off) due to the Coronavirus outbreak, by preserving their employment whilst the Government pays a proportion of their salary (and potentially benefits, such as pension).
How do we place someone onto Furlough Leave?
In order to take advantage of Furlough Leave, employers must designate employees as furloughed workers. However, employees should be notified and consulted with about the proposals with a view to reaching agreement (in the absence of an express pre-existing contractual right – for which, see more below). The employers should explain the reasons for Furlough Leave, their understanding of how the leave is intended to operate, and the likely consequences for employees should they refuse.
It is worth noting that some employment contracts will contain “lay-off” clauses providing employers with the right to reduce employees’ hours and pay. However, such terms are more often found in seasonal worker or some blue-collar worker environments and are not common in white-collar office-based industries.
How do I /we reclaim salaries for Furloughed status individuals?
Once you have designated an employee as a furloughed worker, you will be required to submit information to HMRC through an online portal. This portal has yet to be set up and we have no details on how it will operate at this time.
HMRC will reimburse 80% of the furloughed worker’s wage costs up to a cap of £2,500 per month. Whilst the employer’s guide is silent on whether they have to pay 20% of the pay to top up to the employee’s normal level, the guide for employees says that the employer can choose to pay this, but it does not have to.
Can I ask the employee to work whilst on Furlough Leave?
No, the Government specify in their guidance to employees that in order to qualify for the scheme, they should not undertake work for their employer while furloughed.
Furlough leave must be applied fairly and therefore adherence to the Equality Act provisions is a prerequisite.
In the coming weeks and months, the impacts and nuances of this legislation will become apparent, and no doubt subject to challenge. Please seek further advice to obtain in-depth guidance to your specific issues.
This summary is an overview of UK Government employment, however for sake of clarity it is not in-depth legal advice.
Many Thanks to GreenKite for providing this advice.