Out-Law Guide 9 min. read
06 Nov 2020, 2:56 pm
Furlough is more generous than and replaces, for now at least, the Job Support Scheme (JSS) announced by UK chancellor Rishi Sunak earlier in autumn 2020. In his 5 November announcement, Sunak confirmed that the Jobs Retention Bonus, which was to reward employers who previously furloughed staff where staff returned to full-time work before the end of January 2021, will now not be paid out in February, though he said there may be an alternative "retention incentive" at another time.
A policy paper, also issued on 5 November, helpfully sets out the parameters for the extended furlough scheme. It also confirms that new guidance will be published on 10 November. The legal basis for the scheme will be set out in a Treasury Direction which is still to be issued. Under previous iterations of the scheme, where there were discrepancies between the Treasury Directions and the guidance issued, HM Revenue & Customs (HMRC) indicated that they intended to act on the basis of guidance, so employers should be able to rely on the policy paper for the core requirements.
Under the furlough extension:
A definite answer will not be known until the full guidance and Treasury Direction are published. However, the scheme purpose is stated in the policy paper to be "to support individuals and businesses who are impacted by disruption caused by COVID19 this winter".
The purpose of the scheme under the Third Treasury Direction of 25 June was set out as: "Integral to the purpose of CJRS is that the amounts paid to an employer pursuant to a CJRS claim are used by the employer to continue the employment of employees in respect of whom the CJRS claim is made whose employment activities have been adversely affected by the coronavirus and coronavirus disease or the measures taken to prevent or limit its further transmission."
We can anticipate that the continued purpose will be in a similar vein, if not exactly the same.
We recommend issuing new letters, and keeping these records for the six years required by HMRC. This is for two reasons:
This is the case even where a previous letter envisaged a possible extension to the scheme.
The policy paper states that the employee does not have to provide a written response which is helpful clarification that, from a furlough perspective, this is not required. However, good record-keeping for furlough is essential, and a written acknowledgement, whether by email or text, from the employee that they agree to furlough is helpful. In any event, consent is strongly recommended from an employment law point of view. As well as addressing furlough eligibility concerns, this would guard against the risk that employees on whom furloughing is imposed could claim a sum equivalent to the reduction in pay through an unlawful deduction from wages claim as well as the risk of an additional PAYE liability.
Under the original furlough scheme in March, because it was only available on a full-time basis, a statement of employees’ usual hours of work was not required. Under flexible furlough, that requirement was added. The new scheme notes that the hours worked or not worked must be reflected in the agreement. We strongly recommend that employers record the hours worked and the usual hours an employee would be expected to work in a claim period.
Yes. Helpfully, the policy paper sets out clearly that furlough can be used for shielding employees or employees with caring responsibilities:
"Employees can be furloughed where they are unable to work because they:
The furlough scheme extension commenced on 1 November. Employers didn’t have to wait for the lockdown to start in England on Thursday 5 November, and furlough can be backdated. So a retrospective agreement can be applied, but only up until 13 November. That is the cut-off date for retrospective agreements under the new scheme.
Using the retrospective window is a perfect opportunity to check that furlough letters were correct. Check, check and check again. If not, they could undermine the business’ whole entitlement to furlough grants. Using the retrospective window to issue corrective notices can remedy defects. We are encouraging clients to check their furlough letters, and to get us involved – we can check for them on issues such as:
The claim portal is to open from 08:00 on Wednesday 11 November 2020.
The policy paper simply confirms that employees will retain their existing statutory rights in relation to annual leave. On 13 May, the government issued additional guidance on holiday entitlement and pay during coronavirus. Employers will also want to take note of the ACAS guidance on holiday pay, as employment tribunals will take that into account.
It is clear that annual leave will continue to accrue during furlough.
There remains ongoing debate about whether an employer can require an employee to take leave, as well as the employee being able to choose to take leave. As per the ACAS guidance, employers should first seek to encourage employees to take holiday. Many employees receiving 80% of pay on furlough would be happy to take holiday, as 100% of holiday pay is paid. On balance, our view is that employers may be able to mandate that leave be taken.
In the run-up to Christmas holidays, employers will be starting to think again about public holidays. Where a public holiday would normally have been taken as annual leave, the employer can either assign the public holiday as a day of annual leave or defer the bank holiday and allow the employee to take that day at another time.
The government guidance envisages calculation and payment of holiday pay in accordance with current legislation: see the government's general guidance on holiday entitlement.
The guidance sets out a number of factors to be considered when assessing whether it was reasonably practicable for an employee to take leave in the current holiday year. These are indicative, and there may well be additional factors for your business. The guidance also notes that employers should do everything they can to ensure leave is taken in the current year.
Notwithstanding that the position with regards to the grant of leave has been clarified, there are potential employment law issues about whether leave can be taken, so employers should seek legal advice.
The policy paper is clear that employees can't work for their current employer "during hours which employees are recorded as being on furlough". However, if their existing employment contracts permit them to, employees can take on new work for other employers during furlough provided that the new employer is not linked to their current employer. Employers that are furloughing employees should make their position on alternative work clear in their communications with employees.
In the current pandemic and economic circumstances, it is important not to overstate the employment law risks. The practical risk of claims must be much-reduced given the wider issues people are facing and the financial cushion provided by the scheme. The more important issue for most employers will be to ensure that they comply with the scheme rules so that they may successfully claim back employment costs. Particularly if employers opt to top up to full pay, the risks ought to be negligible.
However, employers need to at least be aware of the potential claims they may face. The scheme must be implemented in accordance with employment law. There will be no statutory right to designate an individual as furloughed. Therefore, employers should consider how they could obtain consent to reduce the legal risks.
The most obvious route is to run a voluntary scheme. Where employers have collective bargaining, they should talk to the union first before launching the scheme. With people increasingly nervous about leaving home, voluntary schemes should be successful. If anything, the issue may be that they are over-subscribed.
Employers should ensure they have objective and fair reasons for selecting who is furloughed and who is not. They should give serious consideration to alternating furloughed status between individuals subject to the scheme permitting that – which seems likely. In theory an employer could face breach of trust and confidence or discrimination claims from people who are not furloughed but who want to be, or from those that are and who miss out on pay because the employer is not topping-up. An objective selection process should provide a strong defence to such claims.
If employers still want to implement redundancies, care should be taken to consider whether the option to furlough is a reasonable alternative to dismissal, in order to reduce the risk of unfair dismissal claims.
Further risks arise in the context of disciplinary and grievance handling during the period of furlough.
Our guide, Coronavirus: advice for UK HR professionals, contains more information about ACAS guidance on this topic and further issues to consider for businesses.
Employers should consider furloughing as soon as possible – the sooner they furlough, the sooner wage costs will be covered by the grant.
We strongly recommend that employers seek written consent for furloughing.
Employers must retain a copy of the furlough notice and consent for at least six years.
They should also consider what position they wish to take in relation to annual leave.
Employers should consider the impact of the reduction in pay on salary-related benefits. For example they should check the terms of life insurance schemes to see whether this would impact on cover.
Finally, employers must carefully and diligently work through what counts as pay for the purposes of the scheme and make sure claims are for the correct sums. Penalties for improper use of the scheme are detailed in these companion articles:
09 Nov 2020
15 Apr 2020