Government reforms (1):  Coronavirus (COVID-19): All things Furlough – update to FAQs

At the risk of (over-) loading you with more Coronavirus information, we thought it would helpful to add to our FAQs on its implications for the workplace.

We updated you in our April Newsletter All Things Furlough – FAQS and what we know so far on the information we had available to date.  The Government has continued to follow its ‘drip-drip’ approach and so can now update you further on some of the central issues.

When does the Furlough scheme end?

As explained in our April Newsletter, 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.

The scheme was initially due to last for period of three months, from 1 March 2020 to 31 May 2020.  The CJRS was initially extended for an additional month until 30 June 2020 but it has now been announced that the scheme will be extended by four months to October 2020, the Chancellor Rishi Sunak has said.  Employees will continue to receive 80% of their monthly wages up to £2,500.

The government will ask companies to start sharing the cost of the scheme from August in an effort to support the transition back to work.  This will enable employers to bring employees back part-time.

How do we access the CJRS portal?

Access to the portal is available here (see ‘How to claim’) on gov.uk.  The accompanying guidance also includes details of what you’ll need to make a claim, including the Government Gateway user ID and password you got when you registered for PAYE online.

HMRC has also created a guidance page (available here) dealing with practical points around accessing and using the CJRS, and an online wage calculator.

What about annual leave?

HMRC guidance (see here) and the Government guidance for employees (see here) have been updated to include new information on holiday pay.  They clarify that holiday:

• does accrue during furlough;
• can be taken without breaking furlough leave; and
• pay must be topped up to 100% by the employer (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).

This is encouraging for many employers who will no doubt want employees to take holiday during furlough to avoid excessive accrued holiday once the lockdown eases, and allows employers to accept holiday requests from employees without jeopardising their claim for reimbursement of wages.

While not expressly dealt with in the guidance, we consider it likely that employers’ usual rights to direct the timing of employees’ annual leave are unaffected by furlough leave.  This would mean that employers are able to require employees to take and/or not take annual leave at particular times during furlough leave subject to giving employees their statutory notice, which is at least twice as long as the time they are requesting that the employee take as annual leave.  (However, there is a risk that requiring furloughed employees to take annual leave will be deemed by HMRC to be against the spirit of the Job Retention Scheme as this will see the Government subsidising 80% of holiday pay).

For those businesses who do not have the cash flow to pay the 20% top up on wages, the good news is that the updated Government guidance does suggest that employers have the “flexibility to restrict when leave can be taken if there is a business need” so any holiday requests from employees may still be refused.

In respect of bank holidays, the guidance says that “If an employee usually works bank holidays then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave then the employer would either have to top up their usual holiday pay, or give the employee a day of holiday in lieu.”  I.e. where the employment contract specifies that a bank holiday necessarily leads to holiday being taken, then without subsequent variation to the contract (such as in the furlough letter), the bank holiday day becomes a day of holiday and 100% of salary is owed.  However, if nothing is specified in the contract, employees have no right to be off on bank holidays.  This would mean that if someone was furloughed over a bank holiday, the day would be furlough leave, and not holiday.

We do need to add a health warning to our comments above, as employers should be aware that the Government guidance is not yet set out in regulations or laws and so is subject to change.  Further, the guidance itself says that “During this unprecedented time, we are keeping the policy on holiday pay during furlough under review”.

Working for others during furlough

The Government employer’s guidance has been updated (available here – see ‘Working for a different employer’) and indicates that new separate paid work during furlough leave will be permitted.  The employer’s guidance says that staff may work for a new employer (if contractually allowed) whilst on furlough, and the employee’s guidance (see here) says that employees can get a new job whilst furloughed (if allowed under contract).  However, the employee’s guidance adds that employees do need to be able to return to work for the employer that has placed you on furlough.

This means that employees can legitimately get 80% of salary from furloughed employer and 100% from new employer, so long as any new employment is allowed under the employee’s contract with the furloughing employer.

Notice pay and furlough

It is now clear that a notice period can run during furlough.  In line with established employment law, an employee serving notice will be entitled to 100% of pay, so the employer will need to top up if currently paying only 80% based on the CJRS funding.

Redundancy and furlough

Furlough does not affect redundancy law and redundancy process.  If an employer wishes to make furloughed staff redundant, this can take place.  The mere fact that someone has been chosen to be furloughed is not, in itself, a sufficiently fair reason to select that person for redundancy.  Redundancy selection criteria should be decided upon and managed as usual.  It is of course likely that redundancy process meetings will need to take place by telephone or video call – there is no legal obstacle to this happening.

Statutory redundancy pay is not covered by the CJRS scheme although notice pay may be (see above), where any of the notice period runs at the same time as the employee is on furlough leave.