Furlough - What do we know so far?

I wanted to get a short post out there today before the phones start ringing tomorrow, Monday 23rd March 2020. I suspect we will have a lot of calls about the way forward on the issue of furloughed workers alongside our HR colleagues and all the accountancy practices out there. I hope you find this useful and I will update when we know more. This is not a replacement for specific legal advice and is intended to reflect only my thoughts to date as and when the situation progresses.

I have read the guidance for employers and set out for completeness as follows:

How to access the scheme

You will need to:

·       designate affected employees as ‘furloughed workers,’ and notify your employees of this change - changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation (1)

·       submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)(2)

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of ￡2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.

If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan

This is great news for the pubs clubs restaurants theatres etc that were closed on Friday evening and I can see that if an employee in those circumstances can not go into work then rather than dismiss or use a lay off and short term working clauses in the contract (though I have previously said these were in my opinion not fit for these circumstances) this will enable employers to retain their employees and also their continuity of service without invoking arguments about redundancy pay. t will also give employees comfort as to their ongoing status and pay.

In terms of outstanding points of clarification I see these as:-

1. Until Friday there has been no mention in UK employment legislation of Furlough. I have certainly not seen a contract that gives the right in the UK for a company to Furlough a worker. In terms of the workers I mention above however if they do not want this status or will not agree to be Furloughed can they insist on a redundancy payment?

2. In relation to other ongoing but diminished/diminishing services such as shop workers and professional services for example, again I suspect the majority if not all) companies do not have a contractual right to Furlough. It appears then that employers are to seek agreement of the employee to change their status to Furloughed rather than making the decision and imposing it upon them unilaterally. With this in mind I can not see why an employee would not agree to the proposition if it meant longer term job security for them and others in the business so I suspect this is a moot point but ultimately if an employee did not agree or would not negotiate ( and in the absence of any other contractual rights) I see the options as dismissal / redundancy and/or if an employer unilaterally made the decision and it was not accepted, a breach of contract, redundancy pay claim or constructive dismissal claim against the employer (again unattractive vs the 80% payment proposed but possible) . 

3. In terms of the 80% payment contribution it is not clear from guidance for Employers whether the employer has to make up the additional 20% or whether this is this optional

The Guidance issued for Employees does however state that

if your employer cannot cover staff costs due to COVID-19, they may be able to access support to continue paying part of your wage, to avoid redundancies.

If your employer intends to access the Coronavirus Job Retention Scheme, they will discuss with you becoming classified as a furloughed worker. This would mean that you are kept on your employer’s payroll, rather than being laid off.

To qualify for this scheme, you should not undertake work for them while you are furloughed. 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.

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.

If your salary is reduced as a result of these changes, you may be eligible for support through the welfare system, including Universal Credit.

We intend for the Coronavirus Job Retention Scheme to run for at least 3 months from 1 March 2020, but will extend if necessary.

So it seems that the additional 20% is optional.

4 The next question that has come in over the weekend is whether this has to be a complete lay off or would a partial reduction (so say lay off of 2 days per week for a full time worker) enable the employer to claim back /recover 80% of the wages for the 2 days it can not provide work? 

If not isn’t this making it more attractive for employers to Furlough staff completely rather than seek to retain staff actively working where it can?  A lot of professional services firms such as mine for example are busy taking calls mainly pro bono this week and next but I can see a drop off in work the next week or so. I would really like if I can to keep my staff at least half employed at all times but like the rest of you I am realistically looking at the next 6 months as critical.

I am hoping for an answer on this in further guidance but remember in the event this is not he case you can still agree terms temporarily with your workers.

Whether the ￡2500 is gross or net pay is not clear but it seems from the guidance to be a grant towards "all employment costs " so pensions etc.... At the moment I am reading this as ￡2500 per employee but it may be subject to change.

5.In terms of the notification to HMRC the systems are not yet in place for this and I suspect there will be some problems here as a lot of payroll firms were worried and have processed wages early for March 2020 for fear of a lock down and to ensure employees were paid. Can they notify retrospectively of changes in April of the March submissions if the employee has agreed to pay full pay and processed this but will want to reclaim for workers at home (and not working)? This may be possible but lets wait and see how the system works

I hope that this article proves useful for my contacts and clients and we are here to help this week with your queries if you need to contact us.

I have been sent details now of how to contact the Local Authority for the small business grant and you can find this on your local authority website if you want to review it.

On Leeds City Council Website we are advised that to speed up the process you should send your bank account details and a copy of your rates to [email protected].

That's my first job tomorrow

In the meantime best wishes from myself and everyone at Team Green

Please do leave any useful comments for others.

We have an amazing online and offline community- lets use it.

Marie