15 Sep 2020
The Furlough-down: An employer's guide to furlough
The last few months have been challenging for all businesses. We are keen to support firms throughout the lifting of lockdown and help them get back to business as usual.
To that end, we have collated a number of frequently asked questions that may be of some relevance to you and your business.
We've broken them down into five topics, simply click the links below to read each article:
- An update on furlough and the Coronavirus Jobs Retention Scheme (THIS ARTICLE)
- Flexible furlough - what is it and how to use it
- Exiting furlough and unfurloughing staff
- Making redundancies in a covid world
- Changing staff terms and conditions
What is the Coronavirus Job Retention Scheme?
Introducing our new favourite “f” word. ‘Furlough’ was a concept we had never imagined until March this year. The Coronavirus Job Retention Scheme (CJRS) was a welcome announcement to most businesses when it was announced by the Chancellor back in March, and it has, for many businesses, been a saving grace despite some of the complex calculations involved.
To be eligible for the CJRS, an employee had to be employed by 19th March 2020 and also on the PAYE payroll on or before that date. The scheme permitted employers to recover up to 80% or £2,500, whichever is the lower, of a furloughed employee’s salary from the government. Whilst the scheme was ground breaking and introduced in entirely unprecedented circumstances, the government was clear from the outset that the usual employment law principles would apply.
‘Furloughing’ an employee (putting them on a period of leave) was a change to their contractual terms, even more so if they were to be paid 80% (or less) of their usual pay. Usual employment law principles require that employers obtain agreement from employees on this change, and HMRC have confirmed that to be eligible for the furlough scheme employers should have recorded the employees’ agreement to furlough in writing.
Initially, if an employer wished to use the CJRS then their furloughed employees could not undertake any work for their employer at all during the period in which they are furloughed. That position changed in July when an employee could be “flexibly furloughed”.
Does an employee have a right to be furloughed?
Contrary to popular belief, the furlough scheme did not confer a ‘right’ for an employee to be furloughed. It was (initially) posed as a mechanism open to employers to prevent mass redundancies. Since then, the government has changed their tune and widened the use of the scheme to include any business that has been affected by coronavirus and the guidance has been extended to suggest that many categories of employees can be furloughed, including if they are shielding or have childcare difficulties, even if they were not at risk of redundancy. However, whether an employee should be furloughed is a business decision for the employer, and there is no entitlement for an employee to be furloughed if their employer still has, for example, plenty of work for them to do.
Nevertheless, employers should consider carefully any requests to be furloughed on the grounds of childcare difficulties etc. We have not yet seen how the Employment Tribunal will consider claims arising out of the CJRS or the overall impact of COVID-19, but we do know that the Tribunal always expects an employer to act reasonably.
Does an employee on furlough need to be paid the National Minimum Wage?
No, pay received whilst on furlough does not need to meet the National Minimum Wage unless the employee is undergoing training whilst on furlough. Entitlement to the National Minimum Wage is only for time spent actually working or training.
Do I have to top up the remaining 20% of salary?
No, but you should ensure that you receive agreement from any employees being paid less than 100% of their normal salary, as a reduction in their salary will almost always be a fundamental change to their terms and conditions of employment.
Some employers have chosen to top up the remaining 20% (or more) of salary. If you choose to do this, you should be aware that you cannot claim back any additional NI or pension contributions you make because you chose to top up, and you cannot claim any pension contributions about the mandatory employer minimum.
How should I deal with holiday entitlement?
Employees still accrue holidays whilst furloughed. They can be on holiday whilst also on furlough leave but they must be paid at their full rate for any time that they are on ‘holiday’. If the employee is furloughed at the time they are deemed to have taken their holidays then the employer can reclaim 80% (capped at £2500) of their pay during that period.
Subject to any contractual terms to the contrary, employees can and should be directed to take holidays to ensure there is not a build up on holidays to be taken by the whole workforce when everyone returns to work. If you are directing an employee to take holiday at a certain time, you should give them twice as much notice as the amount of holiday you need them to take
What does the Employer pay?
Aside from any decision to “top up” a furloughed employee’s ay, employers are required to make tapered contributions towards an employee’s furlough pay (which should still be 80% of their normal pay up to £2,500) as follows:
- September 2020: Employers will also be required to pay 10% of employees' pay, capped at £312.50. The government will pay 70% of employees' pay, capped at £2,187.50; and
- October 2020: October 2020: Employers will be required to pay 20% of employees' pay, capped at £625. The government will pay 60% of employees' pay, capped at £1,875.
Employment law experts
Aberdein Considine’s national employment law teams assists both individuals and businesses with employment legal matters.
Click here to get in touch or get in touch with the team directly using the links below:
- Sally-Anne Anderson, Partner, Edinburgh
- Karen Harvie, Senior Associate, Edinburgh
- Nicola Gray, Partner, Aberdeen
- Catriona Ramsay, Associate, Glasgow
Disclaimer: This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. Aberdein Considine is not responsible for any activity undertaken based on this information.