The government’s new Coronavirus Job Retention Scheme will see HMRC pay costs of up to £2,500 per month for ‘furloughed workers’. Employment solicitor Paida Dube explains what furloughing is and what it means for your business
The COVID-19 outbreak is forcing employers across the UK economy to make drastic changes to their workforces. This means looking at alternative contractual and temporary solutions such as layoffs without pay to see them through the crisis.
To support employers through the crisis, and to try to avoid layoffs and redundancies, the Government is implementing a Coronavirus Job Retention Scheme.
Coronavirus Job Retention Scheme
Under the new scheme, which was announced on Friday 20 March 2020, the Government is offering UK employers financial support to pay the wages of workers who would otherwise have been laid off on an unpaid basis as a result of Coronavirus.
To qualify, workers have to be designated as ‘furloughed’. Furloughed workers are those who have been asked to stop working due to a lack of available work, but have not been made redundant. They remain on the employer’s payroll but cannot do any work for the employer that has furloughed them.
HMRC will reimburse 80% of furloughed workers’ costs, up to a cap of £2,500 per worker per month. Employers can then choose to top-up the 80% HMRC payment.
The new scheme is expected to be available in April. Employers will have to notify HMRC through a new online portal. Payments will be backdated to 1 March 2020 and run for three months from that date.
The scheme will be available to all UK employers, regardless of sector or size.
Do employees need to consent to be furloughed?
Furloughing can offer a financial lifeline to workers who otherwise face losing income or their job. Employers should be open when consulting with employees if furloughing is the last-resort alternative to being made redundant or put onto an unpaid lay-off arrangement.
Furloughed workers must have been advised of their change in status to qualify for the scheme, but do they need to consent to the change?
If the employee’s pay is to remain consistent, even though it is being funded by HMRC, their consent may not necessarily be needed to be designated as furloughed.
However, employers should proceed with caution and take advice on the specific circumstances. For example, if an employee has an implied contractual right to be provided with work, the employer could not impose furlough even where there will be full pay.
If the employer is proposing to reduce furloughed workers’ pay, they should first check their contracts of employment. If the contract permits a reduction or even cessation of pay where there is no work, then employee consent would not be needed.
Where there is no such contractual provision, the employer would need each affected employee’s consent. Failure to get written consent or contractual agreement in this instance could be deemed an unlawful deduction from wages.
Selecting furloughed workers
If there is some work in the business, but not enough for the full workforce, you may have to select workers to furlough.
Identifying which workers to furlough will largely be a business decision, but employers should ensure they follow a fair, well-documented process in doing so.
For example, workers who cannot work from home and who currently have no work to do are likely to be priority for furloughing. Employers may then need to look at alternative approaches, such as asking for volunteers, or pooling and selection.
Employers are advised to treat such processes in the same way as redundancies to minimise the risk of tribunal claims.
Beyond the initial detail, many questions remain for employers requiring further HMRC clarification:
- Is the £2,500 cap gross or net?
- Will eligibility requirements and conditions be applied to scheme users? For example, will employers be required to undertake not to make furloughed workers redundant for a period of time after the crisis?
- How will HMRC satisfy that the worker has genuinely been furloughed and would otherwise have been laid off or made redundant?
- Will employers have to pay their National Insurance contributions in relation to the HMRC subsidy?
- Will the period of furloughing be fixed or open-ended and will employers be able to ‘call back’ employees from furlough?
- Will workers be allowed to work for other employers while on furlough?
- Will a furloughed worker be entitled to statutory sick pay or company sick pay?
As we await further detail, and as employers navigate the challenges of the coronavirus, it is important to remember that existing employment laws continue to apply and any changes to workers’ status should be handled with full consideration of their rights while managing legal risks for your business.
Employment law solicitor