Coronavirus (COVID-19) – All things furlough

definition of furlough

As explained in our April Newsletter All Things Furlough – FAQS and what we know so far the Coronavirus Job Retention Scheme (‘CJRS’) is a temporary scheme created as an alternative to implementing redundancies, lay-offs, unpaid leave or other measures employers might otherwise need to instigate during the current crisis.

When does the Furlough scheme end?

We updated you in our May Newsletter All Things Furlough – update to FAQS that the CJRS scheme was due to end on 30 June 2020.

However, the CJRS has now been extended again (see the press release here) in its current form until the end of July 2020.  From 1 August 2020 until the end of October 2020, the CJRS will still operate but with greater flexibility.

This extension comes at a key time as many businesses were considering whether they would have to start redundancy consultations to comply with minimum timescales by the end of the furlough scheme on 30 June had no extension been given.

From the beginning of August, furloughed employees will be able to return to work on a part-time basis and employers will be asked to pay a percentage towards the salaries of their furloughed staff. This arrangement will allow employees to have a phased return to work as well as giving businesses the chance to get back into full swing.

The employer payments will substitute in part the contribution that the Government is currently making and employees will continue to receive at least 80% of their wages subject to the £2,500 per month cap.

The Government also announced that they will explore ways to provide support for furloughed workers to carry out additional training or learn new skills during this period.

How do we end furlough?

There are no proscribed measures about how to bring employees’ furlough leave to an end.  Ending an employee’s leave will largely depend on the employer’s terms of their furlough leave, for example, whether it involved a temporary change to employment terms.

If employees are simply returning to their pre-furlough employment contract, with no changes, notice of the return date can be given verbally.  However, we would recommend also confirming this in writing.  Further, an early and open discussion with the employee about any difficulties they may face in returning to the workplace (such as childcare issues or health and safety concerns) will help manage such issues at an early stage (see Returning to the Workplace below).

If an employer needs to make changes to their terms and conditions, then they are likely to need to agree these changes with employees (see Returning to the Workplace below).

What about annual leave?

The Government has issued guidance (available here) on furloughed staff holiday entitlement and holiday pay during the Coronavirus (COVID-19) pandemic.

The most important points include:

Holiday during furlough:

  • staff continue to accrue statutory and contractual holiday (unless agreed otherwise) while on furlough leave;
  • staff on furlough can take holiday without disrupting their furlough;
  • employers can require furloughed staff to take leave or may refuse a request for them to take leave;
  • before requiring a worker to take holiday whilst on furlough, employers “should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the worker from resting, or enjoying leisure time, which is the fundamental purpose of holiday“. If this is not possible, the worker should be allowed to take their holiday at another time;
  • notice provisions for requiring or preventing staff from taking holiday continue to apply during furlough. The required notice periods are (a) double the length of the holiday if the employer wishes to require a worker to take holiday on particular days; and (b) the length of the planned holiday if the employer wishes to cancel a worker’s holiday or require the worker not to take holiday on particular dates;

Bank holidays: 

Employers can agree with staff who are furloughed and usually take bank holidays as annual leave, either:

  • that they will take the bank holiday as annual leave and receive holiday pay for this day (which would require the employer to top up to normal pay any furlough pay received); or
  • that the day of annual leave due for the bank holiday can be deferred until a later date. Employers should ensure that workers who choose this option continue to receive their full holiday entitlement.

Holiday pay:

In terms of holiday pay, the principle is that the pay received by a worker while they are on holiday should reflect what they would have earned if they had been at work and working.

Holiday pay, whether the worker is on furlough or not, should be based on a worker’s usual earnings (i.e. not on the level of pay they are receiving on furlough).  Employers therefore need to calculate the correct holiday pay (at either the employee’s normal rate of pay or the average pay received in the previous 52 working week reference period where an employee receives variable pay).  Where this is above the pay the worker receives while on furlough, the employer must top up the worker’s pay (but can still continue to claim the 80% from the Government).

If an employer cannot afford to fund the top-up for holiday pay, it would be reasonable to refuse a request to take holiday at this time. As set out below, annual leave can now be carried forward over the next two leave years. Salary in lieu of holiday is not permitted in any circumstances other than termination of employment.

Carry forward of holiday:

The guidance summarises the effect of the special Coronavirus (COVID-19) statutory rules in relation to carry-over of annual leave, under the Working Time (Coronavirus) (Amendment) Regulations 2020 (see our May Newsletter Government reforms (3): Carry over of holiday due to Coronavirus (COVID-19)).

The guidance explains that, where it has not been reasonably practicable for the worker to take some or all of the four weeks’ holiday due to the effects of Coronavirus (COVID-19), the untaken amount may be carried forward into the following two leave years.

However, some of the annual leave entitlement will not be able to be carried forward. That proportion would include:

  • the 1.6 weeks of additional annual leave; and
  • any part of the basic four weeks in respect of which it can be said that it was, despite ‘the effects of coronavirus’, nonetheless ‘reasonably practicable’ for the worker to take that leave during the original leave year to which it relates.

As regards such parts of annual leave that cannot be carried forward, the guidance states that employers must give staff the opportunity to take that leave before the end of the leave year (to prevent them from losing the leave when the leave year ends).

Factors to take into account in understanding when it is “not reasonably practicable” for staff to take holiday include:

  • whether the employer has faced an increase in demand due to Coronavirus (COVID-19), so that it reasonably requires the worker to continue to be at work and is unable to meet the demand by alternative practical measures;
  • considering the extent the workforce has been disrupted by Coronavirus (COVID-19) and the practical options available to provide temporary cover of essential activities;
  • the health of staff and how soon they need a period of rest and relaxation;
  • the length of time remaining in the employer’s leave year, to enable the staff to take leave later within the leave year;
  • the extent to which the worker taking leave would impact on the wider society’s response to and recovery from Coronavirus (COVID-19); and
  • the ability of the remainder of the available workforce to provide cover for the staff on leave.

The guidance states that furloughed staff are unlikely to need to carry forward statutory annual leave, as they will be able to take it during the furlough period.  However, the guidance notes that if, due to the impact of Coronavirus (COVID-19)  on operations, an employer is unable to fund the difference between the CJRS grant and the worker’s normal remuneration, it would be “not reasonably practicable” for the employee to take leave and the carry forward of that holiday would be justified.

definition of furlough