EMPLOYMENT BRIEFING: FIVE FREQUENTLY ASKED QUESTIONS ON FURLOUGHING EMPLOYEES – 15 APRIL 2020
The Government is continuing to issue additional guidance on the Coronavirus Job Retention Scheme (the “Scheme”) the most recent of which is on 15 April 2020. The purpose of this Briefing is to answer five frequently asked questions on the operation of the Scheme, in light of the revised guidance.
1. Which employees can be furloughed?
The Scheme will cover all workers on PAYE, including any casual or zero-hours workers who are paid via PAYE. However, they must be on the payroll on or before the 19 March 2020. Employees that were hired after 19 March 2020 cannot be furloughed or claimed for. If redundancies have been made since 28 February 2020, it is possible to rehire the employees (subject to their consent) and put them onto the Scheme – or likewise if someone has resigned since 28 February 2020, they can be reinstated. Workers on fixed term contracts can also be furloughed. “Limb-b” workers, agency workers, office holders and salaried members of Limited Liability Partnerships can also be furloughed. Employees cannot decide to put themselves on furlough – the decision is up to the employer.
2. Do employees have to agree to being furloughed?
Yes – the employer must agree the arrangement in writing with each employee. The guidance states that employers should discuss the change with employees and make any changes to the employment contract by agreement. The agreement must be retained by the employer for five years.
3. What can employees do whilst on furlough leave?
The revised guidance makes clear that the employees must not do any work for their employer company whilst on furlough leave. They cannot therefore work reduced hours, or even the “odd piece of work here and there”. If they do, they will risk jeopardising the employer’s ability to claim the furlough grant from HMRC. They can undertake volunteering activities or even obtain a new job with a different employer during furlough leave (depending on the terms of their employment contract). Employers may not always be keen to permit employees to work for other employers, for example if this presents a competition risk. The employer may ask a furloughed employee to do training, provided it does not involve providing services or generating revenue. In fact, the guidance says that furloughed employees should be encouraged to undertake training, although they must be paid at least the national living wage/national minimum wage/apprenticeship minimum wage for the time spent in training (even if this increases the amount due to the employee above the furlough subsidy and is a cost to the employer). Directors will still be allowed to perform statutory duties if furloughed, provided that they do no more work than is reasonably necessary for that purpose. They must not generate commercial revenue or provide services to or on behalf of the company.
4. What happens at the end of furlough?
The furlough scheme will be open for initial period of three months until 31 May 2020, but may be extended by the Government. The purpose of the furlough regime is to encourage employers not to reduce their workforce and that the employees will be able to come back to work at the end of the furlough period. However, if this is not possible, the employer will still be able to make furloughed employees redundant at the end of the furlough period subject to the usual employment rules.
5. Will employees continue to accrue holiday allowance whilst furloughed?
The revised guidance still does not answer difficult questions regarding holiday. We believe that employees will continue to accrue holiday during furlough leave, at least insofar as this relates to their statutory minimum of 5.6 weeks’ per year. It appears that employees will be permitted to take holidays whilst on furlough leave, and Bank Holidays will need to be accounted for (there are four which fall during the furlough period until 31 May 2020). The questions are whether the employer needs to pay the employee at their normal contractual rates (as indicated by a tweet from HMRC Customer Support on 7 April 2020) or the reduced rate, and which amount (if any) can be recovered from HMRC. The answers will not become clear until further details are published. The Government has also indicated that employees will be able to carry-over untaken holiday (due to Covid-19) into the next 2 leave years, but further details are also awaited.