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Guide to Furloughing: Employers Q & A

Posted Friday 24th April 2020

Q: Do I need consent from my employees to furlough them?

A: Yes, unless you have the power to do so in the employment contract which is unlikely.  When you are approaching staff, you are asking them to agree to be furloughed.  The act of you seeking such consent should not itself trigger a claim for constructive dismissal.  If staff ask you what happens if they do not consent you should say you need the requested change for good business reasons and given the virus situation you consider your request to be reasonable and hence you hope that employees will give their consent.  There should be no discussion of redundancy.

Q: How do I document an employee’s consent to be furloughed?

A: An employee needs to consent to be furloughed and for their salary to be reduced to the level payable under the scheme.  Employees will need to sign a deed of variation. Signatures to a deed of variation need to be witnessed however, due to the social distancing in place this is unlikely to be possible for many people.  Acceptance of variation can be achieved by email or DocuSign and you can include an agreement from the employee to provide a witnessed signature when the social distancing rules are relaxed.

Q: What should I include in the variation consent deed?

A: Include the date when furlough will start and state that it will continue until you say otherwise.  State how much they will be paid, when you will review their status and how they can keep in touch during furloughing.

Q: What happens if an employee does not consent to be being furloughed?

A: If an employee refuses a reasonable request for necessary changes to their employment contract due to the virus situation you may be able to dismiss them fairly after following a proper process based on that refusal i.e. you would not be dismissing for redundancy.  If you receive such a refusal you should explain again why you need the changes sought and ask the employee to reconsider and say that in the event they do not agree you will need to consider possible dismissal based on that unreasonable refusal.  You would need to take legal advice and follow a proper process before doing so.

Q: Staff who have been furloughed are saying they want to do work. Can they?

A: Furloughed employees should not do any work for you as doing so will jeopardise their furloughed status which will affect your ability to claim under the Corona Job Retention Scheme.  If you require employees to do any training, that will need to be paid at full salary.  Employees on furlough leave can do volunteering for another organisation such as the NHS volunteer scheme.  You should tell staff in writing that they must not undertake any work for you whilst furloughed (this can be covered off in the deed of variation).

Q: We have some work that still needs doing, how do I decide who to furlough and who I should keep working?

A: You need to be able to objectively justify your choices.  You should not apply any criteria which could be considered discriminatory.  Your choices should be based on who has the requisite experience to do the work you think will need doing.  You can take into account level of pay and length of service.  You could also take into account the ability of the employee to work effectively from home.  To the extent to which any such criteria could be considered indirectly discriminatory, you will need to be able to justify it on the basis that you need to have staff who can do the remaining work when clients/customers demand it.

Q: Are new starters excluded from the scheme?

A:  Yes, to be eligible an employee must have been employed by you as at 19 March 2020 and you need to have notified HMRC about them on a Real Time Information submission. For the employer to be able to make a claim for payment for an employee under the Scheme that employee must be furloughed for a minimum of three weeks.  They can then be taken off furlough.  Employers can rotate staff between furlough and non-furlough status providing each period of furlough is at least 3 weeks.

Q: Can I furlough staff who have already gone onto reduced days/hours/pay?

A: Yes, but this may mean that their salary for furloughed purposes will be based (to a certain degree) on their recently reduced pay.

Q: Are employers obliged to pay the difference between the furlough payment and normal salary?

A: Employers are not obliged to make up the balance, but some may choose to do so.

Q: How can employers claim under the Scheme?

A: Employers need to make a claim under the Scheme which is being operated by HMRC when the portal opens on 20 April.  Employers will need to submit information to HMRC about the employees that have been furloughed and their earnings through the online portal.  To cover the gap in time before the new portal opens you may be eligible for a Coronavirus Business Interruption Loan.  It is not necessary for an employer to pay the furloughed employees and then claim back under the scheme and hence employers can furlough staff on the basis that they will receive furlough pay but only if the employer is able to  successfully claim such payment under the scheme.  Any deed of variation will need to make this clear.  The Scheme has recently been extended to the end of June.

Q: Can employees who have recently been made redundant be furloughed?

A: Yes, this may be possible but you would need to rehire them first. The act of rehiring may mean that any statutory redundancy payment made would lose their tax-free status.

Q: Will furloughed employees accrue holiday?

A: Yes, they will continue to accrue holiday whilst they are furloughed. They are also able to request to take annual leave during a period of furlough. Any holiday taken during furlough will need to be paid at normal pay rates but can only be claimed by the employer under the furlough scheme at 80%/£2500.  You can refuse to allow employees to take annual leave during the furlough period if this would cause problems for your business.  Statutory leave which has accrued during a period of furlough leave can now be carried forward by two holiday years.

Q: I am worried about furloughed employees accruing holiday during lock down which they will want to take as soon as things return to normal – what can I do?

A: If you ask them to use up their holiday during furloughing you will need to pay it as full normal pay, so a better approach may be to require them to use such holiday over time when things return to normal.  Very recent changes allow for the carry over of such accrued statutory holiday for two holiday years.  If furloughed employees have pre-booked holiday which falls in the furlough period and if you do not wish to pay them for that holiday at their full salary rate you will need to tell them that they can no longer take any holiday during their furlough period.

Q: Can I ask employees to use up their annual leave?

A: Yes, you can ask employees who are not on sick leave or self-isolating to take statutory annual leave on specified days, provided they are given the required level of notice. Notice must be at least twice the length of the period of leave that the employee is being ordered to take. For example, if the employer wants an employee to take annual leave of 1 week, they must be given at least 2 weeks’ notice of this. However as above holiday pay during a period of furlough will be at full pay.

Q: What is the difference between furloughing and laying off employees?

A: When employees are laid off they are provided with no work and no pay for a period but are retained as employees. Furloughed staff remain employed, do no work and receive reduced pay.

Q: Can staff on maternity leave be furloughed and if so how does that impact what they get paid?

A: You can furlough staff on maternity leave or about to go on maternity leave with their consent.  The statutory 6 weeks at 90% must be paid without reduction.  Furloughed staff who are entitled to enhanced maternity pay after the initial six week period will only receive furloughed pay thereafter whilst the period of furlough continues.

Q: For very new starters who are not entitled to be furloughed what are my options?

A: Dismiss during probation or get them to agree to be laid off without pay in which case they may be entitled to a statutory guarantee payment.

Q: Prior to furloughing or instead of furloughing, can I vary the working days/hours/pay of employees?

A: Yes, but only if you have the contractual power to do so – otherwise you will need written consent from the employee.  A general power to vary any term of a contract will not be enough. Even where you have the required power you need to consult and exercise it fairly.  Any such variation will need to be be by deed.

Q: If I am approaching more than 20 staff to ask them to agree to be furloughed does that trigger collective consultation requirements?

A: If you are approaching staff expecting them to agree to be furloughed and you are not therefore considering dismissing staff or making redundancies the collective consultation rules should not be triggered. If, however, you are saying it is furlough or redundancy then collective consultation requirements are likely to apply.

Q: Can staff be put on notice while on furlough?

A: Yes, staff can be given notice while on furlough. There are special rules depending on the length of the notice period.  Staff who have notice periods that are the statutory length, or less than one week more than the statutory length, are entitled to receive their normal pay for their notice period.  Staff whose contractual notice is over a week more than statutory leave will only be entitled to receive notice pay during furlough at the reduced furlough level of pay.

Q: Can notice pay be claimed under the CJRS?

A: You can claim under the CJRS for notice pay up to 80%/£2500 limit if staff are on furlough for the notice period. Alternatively, staff can be taken off furlough to work out their notice period but that can’t be claimed under the CJRS.  Payments in lieu of notice cannot be reclaimed under the Government’s reimbursement scheme.

This note is an overview only and should not be relied on as legal advice.  The rules of the Corona Job Retention Scheme are still to be further clarified.  Many of the steps above could result in claims if implemented incorrectly and hence specialist legal advice should be taken before doing so.  The Joelson employment team can be contacted on 0798 479 4162.  We can provide fixed price packages including consultation scripts and deeds of variation.

 


This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.


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