Job retention scheme
The Government is offering all employers (whether they be sole traders, limited liability companies, partnerships or charities) across the UK access to a grant which will cover up to 80% (subject to a cap of £2,500 per employee) of the total cost of the wages of their workforce who remain on payroll, but are temporarily not working due to the coronavirus outbreak.
The logic behind this is to persuade employers not to make staff redundant, the thinking being that the economy will take much longer to recover if there are substantial numbers who have been made redundant.
For a grant to be obtained in respect of an employee, that employee needs to be designated (by the employer) as a “furloughed worker”. That suggests that ‘workers’ will also be included and at the press conference on Friday 20 March 2020, the Chancellor indicated that the scheme will cover workers on the PAYE system, and that it may include some workers on zero-hours contracts, depending on their arrangements.
“Furlough” has no legal meaning in employment law but the government has indicated that to be “furloughed”, the furloughed worker needs to remain employed, but be asked by the employer not to undertake any work for them.
Agreement or imposition
The government website indicates that this change in status remains subject to employment law and may require consultation. Traditional ‘lay off’ or ‘short-time working’ (‘LOST’) clauses are increasingly rare and it will also be rare for a contract to permit withholding work from an employee. However, if you do have LOST clauses in your contacts, you will need to activate them by following whatever notice is required in order to effect the change.
In the absence of LOST clause, the employer is faced with seeking agreement or imposing the change. Practically, faced with being made redundant in an economy where very few employers are hiring or remaining in a job, most employees will choose the latter. Equally, if the employer imposes the change, whilst that might give rise to constructive dismissal or unlawful deduction from wages claims, by the time any such claims get to an employment tribunal the employee will have got another job or the employer will have been able to rectify any underpayment.
Employers can recover 80% (or up to a maximum of £2,500 per month per employee) from the government but there is no detail as to how that will be calculated. One website says; “this will allow your employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month’ whilst another says; “HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month’ so the position is not clear.
It is possible that employer national insurance payments and employer pension payments will be included in the “cost” however this is far from certain. In addition, holiday accrual will continue over the furlough period.
The decision whether to furlough an employee is a matter for the employer and an employee cannot insist on being furloughed. Equally, there would appear to be no reason why an employer cannot designate some employees as furloughed workers and not others. Clearly selection on discriminatory grounds would be impermissible particularly if there was a financial impact of the furlough.
The current government employment retention scheme is stated to last until 1 June 2020 but there is no guarantee that it will not be extended and so, it would be prudent for employers to review existing furlough arrangements at that time.
Equally there seems to be no prohibition on bringing employees back off furlough and whilst it is probably not necessary to reserve the right to call employees back, it may be prudent to do so.
It is unclear whether employees be treated as furloughed for part of their working week and salary costs be claimed for that period, but I suspect that this may prove to be administratively difficult to do.
Working from home?
Can furloughed employees work from home? The answer is a very clear no and one of the things that the guidance is clear about is that furloughed employees must not undertake any work for the employer.
Is redundancy out?
There are no prohibitions on making employees redundant instead of furloughing them. This is subject to the usual processes for redundancies.
There would also appear to be no obligation to pay the remaining wage cost not covered by the grant for employees who are designated as furloughed. The government guidance for employees says “you will remain employed while furloughed. Your employer could choose to fund the differences between this payment and your salary, but does not have to”. The guidance therefore seems to suggest that the grant can be claimed even if the employer is not paying 100% of the usual salary cost for furloughed employees. However, if the employer has forced the furlough without the contractual power to do so or agreement, this may give rise to an unlawful deduction from wages claim or worse a constructive dismissal claim. However, the points made above on those claims apply here.
The scheme is now in place and the grants will be effective for 3 months backdated to 1 March. Claiming will be done via an HMRC portal which is currently under construction.
For more information and to find out the latest on the JRS, click here to read our most recent update.
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All information in this document is accurate at the time of writing. It is meant for general information only and is not legal advice.