Coronavirus: Clarification on furlough and other fall out from Covid-19

Claire Vane
April 8, 2020

In light of the current circumstances, there are numerous questions being asked by employers and employees; below are some answers to the most commonly raised queries.  Please note that these notes of ours are for guidance based on information available only at the time of writing. The Government brings in changes regularly and we will give clarity where it is possible to do so but you should be mindful that guidance has evolved over recent days and will continue to do so as more information is published.

We have been asked a large number of questions on furlough and these are dealt with below.

There are some fundamentals of employment law that it’s always wise to remember:

• UK employment law is built around what is reasonable and not on the burden of proof

• A unilateral contract change is illegal

Furlough and some answers

To be furloughed, an individual has to be on PAYE, on the payroll on 28th February 2020. This requirement includes all types of contracts, whether employees or workers (casual and fixed term).  If there are employees who are not on the payroll at that date, they are not eligible for furlough.

An employee who is made redundant after February 28th 2020, may be re-employed or placed on furlough.

The furlough scheme is backdated to 1st March 2020, but employers can only claim back from the date the employee ceases work and goes onto furlough leave, i.e. the agreement needs to be in place first.

Employees chosen for furlough are furloughed at the decision of the employer, because there is no suitable work for them to do, but also they must give consent to the variation of terms in their contract.

If there are more than 20 employees affected by furlough and the employer has no intention of terminating employment (by reason of redundancy), then there is no requirement to consult collectively.  However, it is important for employers to keep their approach to consultation under review in case their intentions change over time as collective consultation could be triggered further down the line.

Caution must always be exercised in relation to possible discrimination against those with any of the 9 protected characteristics from the Equality Act 2010, namely; age, disability, gender reassignment, marriage, civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation.  So, the way you choose those to be furloughed; this must be for sound business reasons and not be linked to any protected characteristic. This point also includes those who have blown a whistle in the past.

The written confirmation of furlough must be kept by an employer for 5 years.

In furloughing the employees, you can furlough any regular payments that you are obligated to pay an employee, as follows.  The calculation for furlough includes: wages or salary, past overtime, fees and compulsory commission payments.  A discretionary bonus or ‘tips’, commission payments and non-cash payments are absolutely excluded.

The reference salary in calculating what to claim, must not include the cost of non-monetary benefits, such as Benefits- in-Kind, benefits through a salary sacrifice scheme (including pension contributions) that reduce an employee’s taxable pay.

Provided an individual’s employment contract allows for this, or that the employee has asked the employer to waive that particular clause, employees are now permitted to work for another employer, even though they have been placed on furlough by their existing employer.  This is an important point and one that has only recently been made clear by the Government.

Employees who are on sick leave and who are claiming statutory sick pay, cannot go on furlough until their period of sickness is over.

Employees designated as ‘shielding’ as a result of health issues making them particularly vulnerable, can be furloughed.

Employees on maternity leave may choose to end their maternity leave early and be placed on furlough, provided that they follow the correct notice periods for returning early to work.  They can also ask to be switched to shared parental leave, be placed on furlough and then continue the shared parental leave once the job retention scheme ends or they are taken off furlough.

Furlough is for a minimum of 3 weeks.  If you take someone off furlough leave, part-way through a payment period, the rebate will be pro-rated.

It is possible to rotate furloughed employees, but only in blocks of a minimum of 3 weeks, and provided that consultation periods are followed along with reasonable notice.  

Furloughed employees remain employed and their continuity of employment is unaffected by the furlough.

Furloughed employees still accrue holiday and it is unclear what individuals should do with this holiday.  It is clear that holiday can (now) be carried forward for two years under the latest legislation because of the current situation.  

There are some questions which remain unanswered.  For example, if employers are forcing their employees to take accruing holiday and to take holiday now.  It seems to us that a common-sense approach needs to be adopted and the forcing of taking holiday would not normally be permitted and therefore should not be forced now.  Likewise, the HMRC only allow for accrued but untaken holidays to be paid in the year of leaving and we would assume that current employment law on this basis, still applies.

Rights to work

There is further impact of Covid19 on people-related processes: the Home Office has released guidance on how to conduct ‘right to work’ checks by video call. Further details can be found here.

Those employees with UK work permits require that the terms of the Visa must be confirmed before undertaking any changes to salary level or working activity in connection with the job retention scheme.

There are other questions to which we do not yet have answers but a commonsense approach, for the moment, might apply.

If somebody is on furlough leave, are they allowed to check their e-mails, or does that count as work?  We feel that the approach here is to ask: Is the employer benefitting from potential revenues if the time is spent on checking emails?  If the answer is no, then we see no problem with looking at e-mails.

If holidays are taken (willingly by employees), what is the rate at which you pay them during the period of furlough? We would have thought, applying a common-sense approach, if somebody is on furlough and they willingly choose to take holiday, then they should be paid at the furlough rate because the furlough arrangement should not be used to bring about financial gain.

If furloughed employees become sick then the furlough period will be pro-rated and the individual should be paid sick pay according to their contract of employment, with any time limits therein.  

These latter points are guesswork extrapolating from common sense and the principles of employment law, but guidance is likely soon to be available and may be at variance with these surmises.

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Claire Vane

Claire is the Managing Director and Founder of Integrated Resources. She is passionate about releasing potential in individuals and organisations.

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