19 January 2022 - Article
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COVID-19 or ‘coronavirus’ has thrown up a myriad of questions for employers. Here we want to share with you some that we have been asked and how we have answered them so far.
The guidance and rules from government have been issued and reissued several times, but still leave a number of questions unanswered so we continue to fill in some of the detail working from experience and first principles. This note was updated, in accordance with new government information, on Wednesday 13 May, 2020. The government announced on 12 May 2020 that the scheme would be extended to the end of October 2020, but that there would be changes to the scheme from the end of July of which further details are awaited.
The Government has also published detailed guidance on how to calculate wages under the scheme, further guidance about reclaiming statutory sick pay due to coronavirus for small and medium sized employers and, on 13 May, new guidance on holiday during furlough.”
Frequently asked questions
- Can I carry on operating my business?
- What if my staff refuse to come to work?
- What if my staff refuse to stay at home?
- What is the furlough scheme?
- What is the difference between furlough, redundancy and lay off?
- What can be claimed through the scheme?
- Do I have to top up the payments with the remaining 20% of pay?
- When will employees be eligible for the scheme?
- Does the furlough scheme cover all my staff?
- What steps do I take to put staff on furlough?
- What if a member of staff refuses to go on furlough?
- Can I rotate staff through furlough?
- Can I ask staff on furlough to undertake work for me?
- What about holiday and sick pay during furlough?
- Can I ask for volunteers for furlough?
- Can I reemploy staff who I have already made redundant or who have left and then furlough them?
- Can I mass furlough staff?
Can I carry on operating my business?
Certain businesses were mandated to close on 23 March 2020 and others are entitled to carry on operating. If you do continue to operate you will need to ensure that you do so as safely as you can. As an employer, your normal duty continues to safeguard, so far as is reasonably practicable, the health, safety and welfare of employees. This will now include ensuring that staff practice social distancing .
Review your workplace carefully and consider practical measures like allowing staff to travel outside rush hour, moving desks further apart and placing temporary markers on the floor to indicate the 2 meter distance.
You will also need to factor in your duties to others such as clients, customers and suppliers.
What if my staff refuse to come to work?
You will need to explore the reasons for this carefully. Employees may be ill or self-isolating under government guidance (in which case they are likely to be eligible for statutory sick pay and possibly company sick pay depending on their contracts). They may also have concerns about contaminating vulnerable relatives or may have caring responsibilities (including for school age children).
The government confirmed on 4 April 2020 that its furlough scheme (see below) is available for staff who are unable to work because of caring responsibilities.
Where possible explore the potential for home working and other solutions and do not be too quick to assume that staff are taking advantage of the situation.
Employees who tell you that they won’t come to work because they consider it too risky may also be protected both by the legislation relating to whistle-blowers and potentially other specific legislation protecting those who believe themselves to be in danger that is ‘serious and imminent’.
What if my staff refuse to stay at home?
If you do not believe that you can keep your staff safe at work, then requiring them to stay at home is a lawful and reasonable order. If they refuse, then this is a disciplinary matter.
What is the furlough scheme?
The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for eight months starting from 1 March 2020 and, as announced on 12 May, ending on 31 October 2020 (unless it is further extended). A Treasury Direction setting out the rules of the scheme was published on 15 April 2020 and is supplemented by government guidance.
The Treasury Guidance states that a ‘furloughed’ employee is one who has been instructed by the employer to cease all work in relation to their employment for a period of at least 21 calendar days and that instruction is given by reason of circumstances arising as a result of coronavirus or coronavirus disease.
The scheme is designed to support employers whose operations have been severely affected by coronavirus (COVID-19). The fact that it is open to all employers means that some employers have sought to take advantage of it only to be criticised by the public and stakeholders for doing so. Each employer will need to weigh up its own reasons for making use of the scheme, bearing in mind how a decision to use the scheme is likely to be viewed. There will also be an audit process by HMRC and it is difficult to predict what HMRC might consider to be abuse of the scheme.
The HMRC portal through which claims can be made has been up and running since 20 April 2020. Employers can use the scheme anytime during the eight month period, subject to further announcements.
In order to use the new portal employers will need to be enrolled for PAYE online and must have created and started a PAYE payroll scheme on or before 19 March 2020. They will be able to make claims in respect of employees on the payroll on or before 19 March 2020 and which were notified to HMRC on an RTI submission on or before that date. Employers should bear in mind that there may be no RTI submission for employees put onto payroll in late February 2020 if their pay was not processed for the first time until the March payroll. On the assumption the March payroll was processed at or around the end of the month, the RTI submission is likely to fall after the cut-off of 19 March. Some employers may have operated on a different set of assumptions given earlier guidance and may wish to take advice if so.
What is the difference between furlough, redundancy and lay off?
Furlough is a short term leave of absence taken pursuant to the Coronavirus Job Retention Scheme. The concept has previously not been used in UK employment law.
Lay off and redundancy are often used interchangeably, but actually have different meanings in law. However, ‘lay off (and its sister provision ‘short-time working’) are technical terms which describe an employer’s contractual right either to send employees home on unpaid leave where there is a temporary cessation of work or to reduce their working hours (and pay). Clauses entitling employers to do this are common in some industries, so do check your contract carefully to see if you have this provision. If you do have this provision and wish to operate it, certain detailed technical rules apply. The scheme is unlikely to be attractive to employees as the new furlough scheme is much more generous.
Redundancy is a form of dismissal that arises in an actual or anticipated situation where the employer no longer has enough work for employees to do or a business or workplace is going to close.
Redundancies involving 20 or more employees at one establishment in a 90 day period are referred to as ‘collective redundancies’ and specific consultation rules apply.
What can be claimed through the scheme?
The scheme allows employers to use a portal to claim a grant for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated employer national insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
Wage costs will include regular payments to staff including contractual overtime, commission and other guaranteed payments but not discretionary or conditional payments and not taxable benefits.
The Treasury Direction states that employers will only be able to make claims under the scheme if they have a written agreement with the staff they have furloughed (this can be obtained via email or other electronic means). This is at variance with the guidance that appeared before the Treasury Direction, and although the Government has since sought to clarify the position, employers who have furloughed staff unilaterally and without agreement, may wish to take advice on their position.
Where there is a salary sacrifice arrangement in place it is the post sacrifice salary that will form the basis of the 80% calculation. Where salary sacrifice is used to make pension contributions a salary sacrifice arrangement will limit the amount of pension cost that employers can claim through the scheme, unless the employer and employee agree to vary the salary sacrifice arrangement.
The £2,500 is the gross figure and employees will need to pay PAYE and employee’s NI on this figure.
Grant claims will start from the day the person starts a furlough period, not for example when the decision to furlough them is made. Grants will be reduced pro rata for employees who are furloughed for only part of a pay period.
Do I have to top up the payments with the remaining 20% of pay?
The government guidance makes it clear that whilst this is up to you and will not be a requirement of the scheme itself, you need to take account of your existing legal obligations to your staff under their contracts of employment. Few contracts are drafted in a way that enables an employer to impose a pay cut unilaterally. Proceeding without explicit agreement about reducing pay also runs the risk that staff might bring deductions from wages claims, even if they appear to have accepted the furlough arrangement itself. As set out in the previous section, an employer who does not have a written agreement to furlough staff risks not being able to make a claim under the scheme.
See below ‘What steps do I take to put staff on furlough?’ for more detail about obtaining consent.
When will employees be eligible for the scheme?
When it was originally announced on 20 March 2020, the government referred to the scheme being available to employees who were ‘otherwise at risk of being laid off’. This was widely understood to be employees who were at risk of redundancy. In updated guidance published on 4 April the government recognises that businesses may not all be affected in the same way by COVID-19. The revised guidance makes it clear for example that a claim can be made in respect of staff who cannot work because of caring responsibilities resulting from COVID-19.
The Treasury Direction has set out more specific criteria that must apply for an employee to be a ‘furloughed’ employee (see ‘What is the furlough scheme?’ above).
Given that HMRC may well audit claims for reimbursement under the scheme and it is designed to protect those businesses ‘severely affected by coronavirus’, it may be wise for management to document their decision making, ensuring that they refer to their business being severely affected and that the staff who are put on furlough were otherwise at risk of being made redundant or were unable to work for other COVID-19 related reasons, such as having to look after young children or having to shield themselves in accordance with public health guidance due to health conditions that make them vulnerable.
Does the furlough scheme cover all my staff?
The scheme is available in respect of staff who were already on your payroll for PAYE purposes on 19 March 2020 (this is a revision to the previous cut-off date of 28 February and will catch newly recruited staff who were otherwise not eligible). Provided they are paid through a PAYE payroll this may include:
- full-time and part-time staff, as well as staff on agency contracts and other flexible or zero-hour contracts;
- staff on fixed term contracts. The new guidance is also explicit that you can extend the fixed term of a furloughed fixed term employee without breaching the terms of the scheme.
- directors, office holders and LLP members;
- staff employed by individuals, such as nannies;
- apprentices, who can continue with their training during a furlough period provided that they receive at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage whilst undertaking training;
- staff who have already been made redundant or stopped working for you since 28 February 2020, if you decide to rehire them. This suggests that staff who have resigned of their own accord but apply to be rehired would be eligible for the scheme.
It will not cover self-employed staff, for whom the government has announced a separate scheme .
What steps do I take to put staff on furlough?
Step 1: Select staff
Bear in mind that furloughed staff cannot do any work for you whilst on furlough (except for some training) and that you have to furlough staff for a minimum of three weeks at a time.
In some cases it may be obvious whom to select, eg employees who cannot perform their roles at home and are no longer needed in the work place or where the workplace has closed. In other cases, where you have seen a drop off in work and need to select some employees amongst a group of employees, we suggest developing fair and non-discriminatory furlough selection criteria similar to the ones used in a redundancy situation. For other staff, it may be more appropriate to agree reduced hours and pay rather than putting them on furlough, but bear in mind that staff who are working (even for limited hours) are disqualified from the furlough scheme and may therefore feel unfairly treated. You may want to make sure that anyone whom you ask to continue to work is at least as well off as anyone who is furloughed.
Step 2: Ensure that you have documented staff consent
The Treasury Direction has now stipulated that the employer must have the written agreement of staff to furlough them, although not all the government guidance is consistent on this point. You are likely in any event to need consent as a matter of contract law. We anticipate however that consent will be forthcoming from most employees where employers are agreeing to top up the minimum furlough reimbursement available from HMRC to 100% of the employees’ salary and will be covering any other employee losses, such as the value of benefits, bonuses and commission.
As discussed above, if you are not intending to top up in this way or there are likely to be some financial losses to employees then you will need to make sure that the consent you receive explicitly covers agreement to lower pay.
You should set a clear deadline for responses to any request for consent. If staff are adamant that they will not agree to a pay cut you may need to consider entering into redundancy discussions. Imposing a pay cut unilaterally runs the risk of unlawful deduction from wages claims, and potentially breach of contract claims from some employees. It will also jeopardise the employer’s ability to make a claim under the scheme.
The guidance states that employers must confirm in writing to their employee that they have been furloughed (the agreement with employees would serve that purpose) and a record of this communication must be kept for five years.
What if a member of staff refuses to go on furlough?
If you have no contractual lay off clause (see above), then you have two options:
1. make them redundant instead, but bear in mind that this will involve the cost of redundancy payments and notice pay.
2. impose the variation by means of a dismissal and an offer of reengagement, but seek specialist advice on how to do this appropriately.
Can I rotate staff through furlough?
Yes, the minimum length of furlough is three weeks. You can put staff on furlough for three weeks, then take them off furlough and bring them back into the work place / ask them to work at home. This may well be a fair way of dealing with a team in circumstances where you are facing a longer shut down.
Can I ask staff on furlough to undertake work for me?
No, staff on furlough cannot provide services or generate revenue for you or any connected employer, even on a voluntary basis. This is something that employers in the charity sector should be aware of – it will prevent paid staff of charitable organisations who have been furloughed providing voluntary services to their charities and associated charities.
However, during furlough staff can undertake volunteering for other organisations (including pursuant to the NHS volunteering scheme announced on 24 March 2020 ). They can also undertake training for the purposes of their work for you (as long as this does not generate revenue), provided that if the training is of value to you, you must make sure that they are receiving at least the National Minimum Wage for the hours spent in training. The National Minimum Wage will not otherwise apply to furloughed staff.
What about holiday and sick pay during furlough?
Revised guidance published on 17 April addressed the question of holiday for the first time and there was a further update on 13 May. The updated guidance confirmed that furloughed employees continue to accrue leave as per their employment contract and can take holiday whilst on furlough. It also made it clear that employers can require furloughed employees to take leave, or refuse to grant leave, under the usual notice periods provided for in the Working Time Regulations. If they are requiring employees to take leave, employers should engage with staff and explain their reasoning. The updated guidance also suggests that employers should consider whether any social-distancing or self-isolation requirements a furloughed employee is under would prevent the employee from resting, relaxing and enjoying leisure time, (the fundamental purpose of holiday) before requiring them to take leave.
The guidance states that as the Working Time Regulations require holiday pay to be paid at the employee’s normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the previous 52 working weeks, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with those regulations. This is likely to be a higher rate of a pay than an employee is receiving whilst on furlough and should be calculated with care. Employers will be able to continue to claim 80% of holiday pay as a furlough grant as taking holiday does not break the furlough period. However, it may be that making up the difference to 100% of holiday pay is not possible for some employers due to the impact of coronavirus on operations. The guidance suggests that this may mean that it would not be reasonably practicable for a furloughed employee to take their leave (because of the reduced rate of pay), and might therefore need to carry forward the leave. Separate Regulations have made it possible for employees to carry over into subsequent holiday years leave that they have been unable to take because of the pandemic.
If an employee usually works bank holidays then the employer can agree that this is included in the grant payment received in respect of furloughed employees. If the employee usually takes the bank holiday as leave then the employer will either have to top up their usual holiday pay, or give the employee a day of holiday in lieu.
There are provisions in the Treasury Direction that prevent a furlough period starting in respect of a person who is eligible to receive statutory sick pay when they are first told not to work, until the period of eligibility for statutory sick pay has ended. It appears however that if they fall ill again whilst on furlough, they will remain eligible for a furlough payment and will not have to be switched back to statutory sick pay.
Can I ask for volunteers for furlough?
We don’t see why not as this is good practice in redundancy situations.
Can I reemploy staff who I have already made redundant or who have left and then furlough them?
Yes, if they were on payroll, ie notified to HMRC on an RTI submission on or before 28 February 2020 and were made redundant or stopped working for you after 28 February 2020 but before19 March 2020 they can qualify if you reemploy them and put them on furlough.
Can I mass furlough staff?
Yes, there is no upper limit on numbers of staff you can put on furlough.
If the discussions about furloughing staff involve 20 or more employees in one establishment, you might have to consider whether at some point in the process you need to consult collectively (see the meaning of ‘Redundancy’ above). This could arise if redundancies are a real possibility, or you cannot obtain staff agreement and think you may have to dismiss and rehire.
You will need to take advice if you are in this situation to avoid potentially expensive penalties for failing to consult properly.
If you need further explanation or help with any of the above questions, please speak to a member of our employment team. For further advice, specifically on returning to a safe working environment, please click here.
Click here to read more insights on how we can weather the coronavirus outbreak with you.