Coronavirus Job Retention Scheme (and “Furlough” Leave) – The Latest
Euan Smith, Employment Solicitor at Macleod and MacCallum, has helpfully prepared the below summary (of the above Scheme), for clients/contacts and intermediaries. Macleod & MacCallum are a full service civil law firm, with offices in Inverness (Queensgate) and on Skye (Portree).
The below, Q&A note, is provided more from an employers’ perspective, based on what we know so far (31 March/1 April), and various questions Euan has been fielding (from home)! If your business, or anyone you know, needs advice in this area please contact Euan on, 07741908566 or firstname.lastname@example.org .
What is Furlough Leave?
This word is a new term of art, even for employment law practitioners. However, current guidance around the Scheme describes this as a temporary leave of absence. The Scheme being designed to allow employers to place staff on Furlough leave, as an alternative to redundancy or “lay-off” (due to the pandemic). It is not yet known whether current guidance, which has recently been updated, will ultimately become legislation.
Is my Business Eligible?
Yes, it should be. The guidance states that all businesses with staff (including charities) are eligible. You will though, need to have created and started a PAYE scheme on/by 28 February 2020.
When Will the Scheme be up and Running?
The Scheme will be administered by HMRC, through a portal, although this may not be “live” until toward the end of April. Employers will designate staff as “furloughed/affected employees” and will have to provide certain further information in support of claims. It appears the Scheme will operate on a reimbursement basis, meaning there will never be a stage when businesses are paid “up front” in respect of furloughed staff wages. This may be of particular concern to those businesses who pay staff weekly and advice, legal and otherwise, is suggested for those with immediate cashflow difficulties.
It should be noted that there is no formal barrier to making redundancies, while staff or on Furlough leave, but normal employment legislation still applies. This is why advice is extremely important, if this is a possibility being considered.
How Long will the Scheme Last?
The Scheme has been set up to cover a three month period, 1 March – 31 May, but may be extended beyond this. This means that, if staff were made redundant (or “laid off”), in the first few weeks of March (due to the pandemic), then backdated wage reimbursement claims can still be made for them. This is provided any such staff member, made redundant (during this time), is brought back onto the PAYE payroll. When considering whether or not to bring staff back on payroll, advice is also recommended (particularly if there has been a formal redundancy dismissal, with any accompanying payments).
Which Staff can be placed on Furlough Leave?
The updated employer guidance seems to confirm that you are eligible to claim for almost all staff, including; full-time, part-time, agency workers (though wages would generally be the responsibility of the employment business) and those on flexible/zero-hours contracts. Although it is not yet specifically made clear flexible contracts would normally be taken to include (for example) annualised hours contracts. In theory therefore, although none of this is yet law, zero-hours and flexible contract workers (including annualised hours staff) should be covered. Again, while the guidance doesn’t directly deal with the question, seasonal staff, would normally be considered either flexible or zero-hours workers.
However, there is one major caveat to the above, which is that relevant staff members must have been on your PAYE payroll on 28 February 2020. It would seem clear therefore that “new” staff, those to be (or already) employed from 1 March will not be covered under the Scheme. The position, in respect of seasonal staff, who have worked for the business previously (and were to return), is not entirely clear. A literal reading of the guidance would suggest that, even if such seasonal staff were (demonstrably) to be reengaged, then there would only be eligibility provided they remained (or were put back) on PAYE payroll on/by 28 February 2020. If they were not on payroll, at 28 February, then (based on the guidance, although it may be that certain exceptions emerge) there would seem to be a difficulty.
Can my staff do work for me if on Furlough Leave?
The short answer to this is no. This Scheme is designed for full “lay-off” (and not “short-time” working). It is recommended that staff do no work at all while on this form of leave. There will no doubt be relevant enforcement action, capable of being taken, for those employers felt to be abusing the Scheme in any way.
Staff will, however, be able to perform voluntary work, as long as they are not doing anything which may constitute the provision of services (for the employer), or be acting in a way which might otherwise be seen as revenue generating.
Can I put staff on holiday, while on Furlough Leave?
Again, the position here is not entirely clear yet. However, the majority legal view is that, particularly while such heavy restrictions are in place surrounding movement, holidays shouldn’t be allocated/taken at this time. To the extent that this might (perhaps understandably) be attempted, holiday days ought normally to be designated and this could, in turn, interrupt the period of furlough leave. However, this is an area to watch closely, as it may be guidance emerges which suggests that holidays can not only be taken but that this would not, in fact, interrupt the furlough leave period. This is very much a case where any update guidance is likely to rule. If you were to seek to allocate holiday though (ideally once any further guidance emerges), you would have to give twice as much notice as the number of days holiday being set down/allocated. The above appears the position for standard employee contracts, disclosing a certain amount of days holiday, within each holiday year. However, zero-hours staff would generally only accrue holidays (at the rate of 12.07%), in accordance with hours/days worked, so it should follow that they will not accrue holiday during furlough leave. Albeit, for the similar reasons (as noted above), it may be best to wait, just now, before any holiday days are allocated.
How do I manage the Furlough Leave process?
The guidance so far confirms that normal UK employment legislation still applies. This, in summary, means that agreement should be obtained to Furlough (as it will be a (temporary) change to terms and conditions), but there are differing ways of achieving such agreement. However, this is perhaps the area of most legal sensitivity and raises the possibility of claims beyond breach of contract, so specialist advice is recommended. This is also the case surrounding the appropriate selection of persons for furlough, assuming all staff are not to be placed on this leave, which may raise additional issues surrounding (for example) equality act legislation. Separately, the guidance also notes that written evidence off furloughing should be retained, although this appears more related to any HMRC enforcement (even retrospective) there may be. The guidance also suggesting that legal advice should be taken surrounding the question of (for example) agreement and selection.
What can be Claimed?
Grants can be claimed to cover the lower of 80% of regular wages, or £2,500 per month, plus associated employer NICs and minimum employer auto-enrol pension contributions, on that subsided wage. Fees, Commissions and Bonuses should not be included. “Topping up”, of the wage, would seem entirely optional. Further guidance is awaited regarding how employers should calculate claims, for employer NICS and minimum employer auto-enrol pension contributions, before the Scheme becomes live. It is important to note that, while employment law advice is recommended, good (hopefully affordable) payroll/accounting advice surrounding the Scheme is also very important.
What if Wages Vary?
While the situation re salaried (full-time and part-time) staff will likely be straightforward, the guidance does mention staff whose pay varies. It being the case that this should include, for example, zero-hours workers. If such a staff member has been employed for 12 months, then you will be eligible to receive the higher (i) the same month’s earnings in the previous year or (ii) the average of monthly earnings for the entire 2019/2020 tax year. If a staff member has been employed for less than a year, then you can claim for average monthly earnings since they started work. If they only started in February, you can pro rata for the earnings prior to furloughing. It hasn’t yet been confirmed but it appears that variable pay staff, might also encompass those who receive (regular) overtime, even if under a full (or part)-time contract.
What about Minimum Wage Legislation?
This only applies if the staff member is working so, if 80% would take you below the NMW, then there should be no issue here.
How often can I make Claims/Is there a minimum Furlough period?
The swiftest intervals you will be able to claim for, following any initial claim you may make (once the portal is up and running) is three weeks. This also matches up with the minimum period someone can be placed on Furlough, in order for you to be eligible. To this extent therefore there would seem the ability to switch staff in and out of Furlough.
What is Someone Receives a 12 week Government “Shielding” Letter
The updated guidance does now suggest that employers can put such persons on Furlough. However, as this has been a recent addition, with little further information, employers would be advised to take advice, and craft Furlough letters carefully. Particular caution should be exercised in respect of those businesses may not otherwise be utilising the Scheme. This on the basis that they will want to manage expectation, and legal entitlements carefully, in the event of a failure to be reimbursed, under the Scheme. Certainly, such persons should be taken out of the workplace (to look after their health & safety) and placed on sickness leave, pending further advice/investigations re Furlough leave.
Can A Director be Furloughed?
In light of latest guidance the general view seems to be that Directors (and even owner-managers) can be Furloughed, if paid via PAYE payroll. This may be the case, although it is also not yet 100% clear, even if they do not fall into the employment law definition of “employee”. Like most of this though, interpretations can only be made on the basis of the guidance (as it stands) and advice is recommended. There would also be practical/commercial considerations here, as it is clear that such persons should perform no work at all (other than perhaps very limited statutory director duties) under the Scheme.
Summary/What to do Now?
It is appreciated that this is all very new to everyone and the guidance is still evolving. However, with UK employment law legislation still applying, businesses will have to be very careful/whilst being sensitive toward staff. One crucial point to keep in mind is that eligibility would seem to only apply in respect of those staff on PAYE payroll at 28 February 2020. This may involve, for example, special consideration regarding a staff member who was already, or was about to, move onto Furlough.
As with all of this, the staff messaging is going to be very important, and there may also be associated PR implications (although we cannot provide advice, in this particular regard). One area where we think employment advice is highly recommended is obtaining agreement that staff move to Furlough and how best to do this, under the circumstances. This may also involve a form of selection, and making sure that matters are kept under review. As we start to see the Scheme take place there may come a stage, even before 31 May, when other possible action (including redundancies) might, unfortunately, come into sharper focus.
Please note that the above should not be taken as legal advice but is meant as a helpful summary of what we know of the Scheme so far (end of March 2020). If you feel that you could benefit from formal advice, in this area, please contact Euan on 07741908566 or email@example.com .