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Coronavirus Job Retention Scheme (Furlough)

Coronavirus Job Retention Scheme (Furlough)

The Government’s further guidance on the Coronavirus Job Retention Scheme sets out who will be eligible to use the scheme and answers some questions on how it will operate. 

Who can use the retention scheme?

All UK employers, including charities can use the scheme provided a PAYE scheme was in place prior to 28 February 2020. Any employee on the payroll after this date will not be eligible. It applies to any type of contract including flexible or zero-hour contracts. The employer must designate the employee as a ‘furloughed employee’. Any employee who was on the payroll on 28 February but has since been made redundant can be re-hired and put on the scheme. 

Employees on sick pay or in self-isolation cannot be furloughed until they are able to return to work. Those who are ‘shielding’ (‘vulnerable people’ who are minimising contact) are eligible and can be furloughed.

How much can be claimed?

Employers can reclaim up to 80% of wage costs up to a maximum of £2,500 per month plus associated employer National Insurance Contributions and auto enrolment pension contributions. Bonuses and commission are not included. Employers can choose whether to top up the wages. 
Furlough leave must be taken in blocks of three weeks. An employer can backdate a claim to 1 March 2020. 

What if pay varies?

Where pay varies, (such as where the employee does not work set hours), the employer can claim the higher of either the average monthly earnings in the 2019-20 tax year or the same month’s wages from the previous year.

Am I allowed to carry forward holiday if I can’t take it due to COVID-19?

The Working Time Regulations 1998 (‘WTR’) have been amended so that leave can be carried over to the next two leave years where it was not ‘reasonably practicable’ for a worker to take some or all of the leave because of the COVID-19 pandemic.  This applies to the four weeks of annual leave provided for Regulation 13 of the WTR but not the additional 1.6 weeks of annual leave provided under Regulation 13A as these are subject to different rules regarding carry over. The worker will also be entitled to payment in lieu of leave where employment has terminated prior to the worker taking the carried over leave.

How do employers claim? 

It is expected that HMRC’s online portal will be available by the end of April. Once the portal is running, a claim can only be made every three weeks. 

We await further guidance on the portal and making a claim in due course. 

Are there any potential pitfalls?

Changes to employment terms and conditions are subject to employment law. Therefore, employees could have certain employment claims if employers do not act lawfully and fairly.  

Redundancy v Furlough

Some employers took steps to make workers redundant prior to the government’s Coronavirus Job Retention Scheme (CJRS). Others are still making redundancies irrespective of the CJRS due to the uncertainties that remain or because they cannot afford to wait for reimbursement from the scheme. The aim of the CJRS is to provide financial assistance to avoid redundancies, if possible. 

The CJRS provides that any worker who was on payroll on 28 February 2020 and has since been made redundant can be re-hired and put on the new scheme. Whether employers will do this in practice remains to be seen. However, this may be a way of avoiding recruitment costs if staffing is not required now but the business could recover quickly. It is, however, difficult to predict whether this will happen as we do not know the length of the current ‘lockdown’ and whether the CJRS will be extended beyond May 2020. 

The CJRS guidance provides that employment law still applies. The CJRS is therefore not a panacea.  

A worker who is made redundant rather than being furloughed and has qualifying service may bring an unfair dismissal claim on the basis that the employer failed to consider this as an alternative to dismissal. Employers will need to consider alternatives prior to dismissing otherwise the dismissal could be rendered unfair.  If an employee is unfairly dismissed, an Employment Tribunal can award compensation for financial loss. 

It will of course depend on the situation and the facts. However, an employer will need to demonstrate that it genuinely applied its mind to the consideration of alternatives to dismissal, including furlough. 

Where a worker does not have qualifying service, this does not mean that the employer is absolved of responsibility or liability as equality laws apply when employers are deciding who to furlough. 

If you are an employee or an employer wishing to discuss employment issues arising from the current COVID-19 crisis or generally, please contact us

Please note that this information is for guidance only and should not be regarded as a substitute for taking full legal advice on specific facts and circumstances. This article reflects the law at the time of publishing but this is a rapidly changing area and advice should be sought at the relevant time.