To Furlough or not to Furlough? Coronavirus Job Retention Scheme

Whilst, more information is yet to be released, what is a Furloughed employee?

DEFINITION

Furlough, is simply a word that the government have used, copying the US. It means nothing in law (currently), so don’t let that worry or concern you and don’t spend hours searching the internet.

WHO DOES IT APPLY TO?

Every UK employer – Ltd, LLP, Partnership, Sole trader, Charity, Association, CIC

SO WHAT ARE EMPLOYERS RECEIVING?

If someone is furloughed, the government will contribute 80% of their “full employment costs” up to a maximum of £2,500.

Full employment costs, would seem to include employers national insurance and pension contributions. This means an employee earning approximately £33,000 or less will have the full 80% covered by HMRC.

WHICH EMPLOYEES CAN BE FURLOUGHED?

It can be any employees who would otherwise be made redundant or laid off.

How do you choose which ones? There is no way of this not being tricky. Employers will want to keep their best employees in their business, laying off those not as good. This may create resentment from those good employees who are stuck in the office, whilst their colleagues are sat at home receiving 80% of their normal earnings.

CAN AN EMPLOYEE CHOOSE OR DEMAND TO BE FURLOUGHED?

Yes, but the employer can refuse. It is the sole discretion of the employer whether and/or which employees will be classed as furloughed. Whether an employee can be furloughed to begin with will depend on their contract of employment and/or negotiation.

EMPLOYEES HAVE ALREADY GONE, CAN I CLASS THEM AS FURLOUGHED?

Whilst the detail is yet to be released it would appear the answer might be no. If they have already been made redundant or laid off, they were not in employment or fully working at the time the measures were announced. It might be they could be reemployed or removed from temporary lay off and then designated as furloughed, but we need to wait for the detail to be released to be certain.

ANY CONDITIONS?

An employee MUST NOT do any work for their employer whilst furloughed.

The employee remains employed whilst they are furloughed.

Check terms of employment. If the contract terms DO NOT provide a right to remove work (e.g. temporary lay off), you will need the employee to agree to vary their contract. It’s unlikely an employee wouldn’t agree – most would be very happy be paid 80% of salary to stay at home. The alternative of course is be sent home with no pay or worse still be made redundant.

WHAT ABOUT THE OTHER 20%?

Employers can pay 20%, but don’t have to. But, if an employer chooses to withhold, they need a contractual right or agreement to do so. Where they do withhold with no right to do so, it may be for cashflow reasons. It is again unlikely an employee will jump up and down when the alternative is redundancy.

HOW DO I ACCESS AND WHEN DOES IT APPLY?

Details of how to access this are yet to be released. It will however be online through HMRC. Because HMRC do not have have never given any funds towards employees before, the website is having to be built to handle this – not a small or easy task.

It will be available to cover the cost of wages from 1 March 2020. It will only be available for 3 months at the moment – i.e. until 31 May. This may of course be extended if the virus is not subsiding.

WHAT IF FURLOUGHING EMPLOYEES ISN’T ENOUGH TO SAVE THE ORGANISATION?

Please contact kevin@lucasjohnson.co.uk or phil.ross@lucasjohnson.co.uk for further help and advice.

More on the support available for Covid 19 can be found here

NB This information was last updated on 21 March 2020

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