Employers and employees (and even employment lawyers) all raised eyebrows at the Chancellor’s use of the term ‘furlough’ on 20 March as part of the latest Government response to the coronavirus crisis – but we all need to become accustomed to it, as it promises to be one of the most significant developments in UK employment law of all time. It is hard to recall anything more radical.
The word furlough originally referred to “a leave of absence given to soldiers.” It was borrowed from the Dutch verlof, which is related to the English word leave.
The official guidance that has been released by the Government refers to the “Coronavirus Job Retention Scheme” tells us the following:
- All UK businesses are eligible
- Employers will need to designate affected employees as ‘furloughed workers’ - namely an employee that would otherwise have been laid off as a result of the Coronavirus crisis
- Employers will need to submit information to HMRC about the employees they have furloughed and their earnings through a new online portal
- HMRC will reimburse 80% of the furloughed employees’ wage costs, up to a cap of £2,500 per month plus employers NI and pension costs
- The scheme will run (backdated) from March 1 2020 until the end of May though the Government say they will extend it ‘if necessary’.
The Government also pointed out however that employers still need to follow employment law and consider the terms of the employment contracts in force, as negotiation may be needed. We believe that this point is a reference to the fact that whilst the Government (and trade unions) are encouraging employers to pay to the employee 100% of their wage (at the net cost to them of 20% unless the employee earns more than £3,125 per month) it is recognised that some employers may wish to pay only 80% (or perhaps, say, 90%). To pay anything less than 100%, though, will require compliance with employment law (or at least acceptance of the risk of not doing so).
It is also important to note that an employee must not perform any work whilst furloughed. This scheme is thus not suitable for businesses that still want their employees to perform some or all of their roles but simply cannot afford to pay them their full wage. Employers who claimed furlough leave payments dishonestly would be likely to be committing a serious criminal offence. What would constitute work, and should/can the employer still ‘keep in touch’ as one does with employees on maternity leave (for example)?
One problem we can also foresee is that in some businesses there may be employees being paid their full salary (or 80% of it) whilst furloughed and expected to do no work, whilst colleagues are working in extremely stressful and difficult circumstances for the same (or perhaps even less) pay. The employer will need to very carefully handle the communications around furloughed workers and perhaps also put a policy in place about how they will be treated during their absence and upon their return.
The Leathes Prior Employment Team has already helped many clients with preparations for Furlough Leave and the lawyers in our Commercial Team are assisting businesses with their wider plans. We have prepared guidance notes and template documentation.
For bespoke advice on whether your business should and can implement Furlough leave and take advantage of the Coronavirus Job Retention Scheme (or for access to our documentation) and, if so, how – then please get in contact by with our Employment Team by email or by calling 01603 610911.