Furlough leave – what do you need to know?

30th March 2020

Furlough leave – what do you need to know?

We are receiving lots of enquiries from businesses about the Government’s Coronavirus Job Retention Scheme and Furlough Leave. We will address some of the key questions we are being asked below.

What is Furlough Leave?

As part of its package to support employers, businesses and employees during the COVID-19 pandemic, the Government has published plans to introduce a Coronavirus Job Retention Scheme. Under the scheme, employers are able to put employees, that would otherwise be at risk of redundancy, on Furlough Leave on 80% of their regular salary (capped at £2,500 per month), plus the associated employer national insurance contributions and minimum automatic enrolment employer pension contributions on paying that salary. Those employers can then claim that back from the Government. Most UK employers with a PAYE scheme are eligible.

How do I put an employee on Furlough Leave?

To access this support, employers will need to designate employees as “furloughed employees” and notify them of this change. The guidance from the Government states that “changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation”. In most cases, a variation of the contract of employment will be required which will need the agreement from employees. This will usually require consultation and may, in certain circumstances, trigger collective consultation obligations.

Once the employer has selected which employees are going to be furloughed then they will be required to submit information about the furloughed employees and their earnings to HMRC. Employers will need to do this via a new online portal and HMRC will provide further details on the information they require in due course. HMRC will also introduce a system for reimbursement as the current systems are not able to facilitate payments to employers.

Do I have to top up the salary to 100% of pay?

An employer can opt to pay the difference between the payment and the employee’s full salary however employers are not obliged to top up the payment.

What about employees receiving national minimum wage?

There is no requirement to top-up the pay of employees who would normally receive national minimum wage. However the Government guidance says that if a furloughed employee is asked to complete training, e.g. online, then they must receive at least the national minimum wage for this time.

Can I make a claim in respect of employees who have agreed to short time working (reduced pay on reduced hours)?

To qualify for the scheme, the employee cannot undertake any work for their employer while they are furloughed (although they will remain employed). This suggests that there is an all or nothing element to this scheme and an employer will not be able to make a claim in respect of employees who are short-time working.

Can employees who are on sick leave be furloughed?

An employee who is on sick leave cannot be furloughed, they can however be furloughed once they’re fit to return to work.

I’ve just recruited a new employee, can I furlough them?

Only if you employed them on or before 28 February 2020.

How long will the scheme run for?

The Coronavirus Job Retention Scheme will run from 1 March 2020 for at least three months and will be extended if necessary.

For advice on the Coronavirus Job Retention Scheme or any other employment law issue relating to the COVID-19 pandemic, please contact Kimberley Clayton on 01473 298168 or email [email protected].

 

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