This year has been a remarkable one to date. It’s hard to believe that a few months ago life was normal, we were going about our days blissfully unaware that we would shortly be experiencing a global pandemic.
Since then, Coronavirus has had a severe impact on businesses, especially those in the hospitality and events industry. We don’t know when normality will return, however, we have put together a list of Frequently Asked Questions to help you and your business during these difficult times.
What is Furlough Leave?
Chancellor Rishi Sunak announced on 20th March 2020, that the Coronavirus Job Retention Scheme had been created. The scheme helps businesses retain staff during the Coronavirus pandemic.
Where a business is affected by the pandemic, for example, lack of work or temporary business closure, an employer decides to send all or some of their staff home, the employer can recover 80% of wages (up to a maximum of £2,500 per month) from the government.
The staff on furlough must have been furloughed for a minimum of three weeks, and employers can top up to 100% or agree with staff to accept the lesser rate.
The government announced on the 29th May 2020, that the government contributions will gradually taper as follows:
- From 1st August 2020, the government will continue to pay 80% of wages up to £2,500 a month. Employers must pay employer NICs and employer pension contributions.
- From 1st September 2020, the government will pay 70% of wages up to £2,187.50 a month. To make up the 80% total (subject to the £2,500 cap), employers must pay 10% of wages plus employer NICs and employer pension contributions.
- From 1st October 2020, the government will pay 60% of wages up to £1,875 a month. To make up the 80% total (subject to the £2,500 cap), employers must pay 20% of wages plus employer NICs and employer pension contributions.
How Do I Furlough Someone?
Business Operations Reduced: Where business operations have reduced, and you need to furlough some but not all staff, you must decide who will be furloughed. You can ask employees to volunteer, rotate employees (on a three-week rotation), or you can decide which employees to furlough (like in a redundancy scenario you should conduct a scoring exercise to decide who should be furloughed).
Temporary Business Closure: Where your business is closed, and you need to furlough all members of staff, you must notify your employees in writing of the intention to place them on furlough leave.
As furlough leave is a variation to contract, whether business operations are reduced, or the business is closed, this change must be made in writing and the employee must agree. In the circumstances, it is likely that the employee will agree to this change as the only other alternatives are likely to be unpaid leave, lay-off or redundancies.
It is important to remember that you must keep a paper trail of all information regarding furloughing staff for five years so that the HMRC are able to retrospectively review claims.
Who Can Be Furloughed Under the Scheme?
Whether they work full time or part time, you can furlough employees, workers, agency workers, zero-hour contract workers and apprentices provided they:
- Were on a UK employer’s PAYE payroll and notified on an RTU submission on or before 19th March 2020; and
- Are furloughed for the first time on or before 10th June 2020*.
In addition to this, office holders and company directors can be furloughed.
You must ensure that employees, worker, office holders and company directors do not carry out any work whilst they are on furlough. Company directors owe duties to their company and, therefore, if they need to carry out particular duties to fulfill statutory obligations, they may do so, so long as it is work they would reasonably carry out.
Employees and workers on furlough can engage in training, so long as when engaging in training the employee does not provide services to, or generate revenue for, or on behalf of their organisation or a linked organisation. If the employee or workers furlough wage is below national minimum wage, the time spent training attracts a minimum wage entitlement in excess of the furlough payment, therefore, employers will need to pay the additional wages.
Important note: If HMRC find that those on furlough conducted work during their period of furlough leave, it can request that you repay the grant provided under the scheme.
*If an employee is returning to work after statutory maternity or paternity leave. Then HMRC have said that the employer can furlough them for the first time after 10th June, but only where you previously furloughed other employees.
How Do I claim The Furlough Payments?
Employers can claim their furlough payment through the HMRC website.
What is Flexible Furlough Leave?
From 1st July 2020, employees can work for some of the week and be furloughed for the rest, in proportions decided between employee and employer. You should have this set out in writing and agreed with the employee before the flexible working states.
Also, from this date, the minimum three week period for furlough has been removed. There is no minimum period, although any claim through the CJRS portal must be for a minimum one-week period.
When Will The Scheme End?
The scheme can be backdated to 1st March 2020, for any staff already on lay off or made redundant as a result of the pandemic.
The government announced on the 29th May 2020 that the scheme will close to new members on 30th June 2020.
After this date, employers will only be able to furlough employees who have already been furloughed for the minimum period of three weeks. This means that the last time you can furlough employees for the first time is 10th June 2020.
The scheme will permanently close on the 31st October 2020.
Can I Make Staff Redundant Whilst They Are On Furlough Leave?
The usual process and procedures in relation to making redundancies remain in place. Guidance confirms that an employee can be made redundant while on furlough or afterward.
Although the government have put measures in place to support businesses and extended the scheme until 31st October, note that the terms will change from 1st August 2020. When the scheme does end, it may be inevitable that redundancies will need to be made.
However, where the business is contemplating terminating an employee’s or worker’s employment by reason of redundancy prior to the end of the furlough period, there is a risk that this could amount to unfair dismissal. This claim has not been tested in a tribunal case yet. It will be interesting to see, if a claim is brought, what the tribunal would decide.
If you are making 20 plus staff redundant, you must ensure that you follow the additional statutory requirements.
An employer cannot claim redundancy payments under the scheme.
What Happens If An Employee Is Working Their Notice?
An employee or workers notice pay would be based on their entitlement under their contract of employment and the statutory right to notice pay.
Employees entitled to give statutory notice:
Employees with normal working hours (and without normal working hours) who are entitled to give statutory notice only, will be entitled to their normal remuneration for working their normal working hours (a week’s pay calculated in the way set out in the week’s pay provisions), even if they are on furlough and on reduced pay at the time notice is served, as long as the employee is ready and willing to work.
If they remain on furlough during their notice period, the employer will only be able to recover their notice pay up to the usual 80%/£2,500 cap.
Employees entitled to give more than statutory notice:
Employees with normal working hours (and without normal working hours) who are required to give more than the statutory notice from their employer will not benefit from the terms of Section 88.
Their statutory notice pay will be based on the pay that they would otherwise have received during their notice, which will be their reduced furlough pay if they remain on furlough for the duration of their notice.
What Happens to Annual Leave During Furlough?
Furloughed staff: Those on furlough leave can still take annual leave during this period. You can encourage staff to take annual leave, but you must pay them 100% during the period of furlough leave.
Working during the pandemic: Key workers have been needed during the pandemic and, as a result, it may not be possible for staff to take their holiday entitlement during the current holiday year. Though employers should still be encouraging workers and employees to take their paid holiday, where possible.
As a result of the pandemic and the difficulties workers may experience trying to take leave, the government has introduced a temporary new law allowing employees and workers to carry over up to four weeks’ paid holiday in to their next two holiday leave years.
The law applies for any holiday the employee or worker does not take because of the effects of the coronavirus outbreak. The following factors should be considered in terms of whether it is reasonably practicable to take the leave in the relevant leave year:
- Whether the business has faced a significant increase in demand due to Covid-19.
- The extent to which the business’ workforce is disrupted by Covid-19 and the options available to the business.
- The health of the worker.
- The length of time remaining in the worker’s leave year.
- How the worker taking leave would impact on wider society’s response to, and recovery from, the effects of Covid-19.
- The ability of the available workforce to provide cover for the worker going on leave.
Have Further Questions?
For more detailed information about any of the points covered in the above and to secure specific employment law advice, please contact us.