What is the Coronavirus Job Retention Scheme and who can participate?
The Government has announced the introduction of the Coronavirus Job Retention Scheme to help businesses recover 80% of wage costs for employees on ‘furlough leave’ subject to a cap of £2,500.
‘Furlough leave’ is a new concept that has been introduced as an alternative solution for employers who might have otherwise implemented redundancies, layoffs, unpaid leave or other measures for their employees.
Based on current guidance, all businesses will be eligible to claim a reimbursement for at least three months backdated from 1st March 2020.
- What do employers need to do?
In the absence of contractual provisions, employers and employees will need to agree to the employee being designated as a ‘furloughed worker’. Employees cannot elect to be designated as a ‘furloughed worker’ without the employer’s consent.
The option will be attractive to both employers and employees as it provides an alternative to redundancies, layoffs, unpaid leave or a reduction in pay.
Given the issues that could arise with designating some employees as ‘furloughed workers’ over others, employers should approach this with care. It would be advisable for apply a fair selection criterion when deciding who to designate as a ‘furloughed worker’ and then notify the impacted employees of the proposed designation. If the affected employees agree to a change in their status, this should be recorded in writing. It would also be advisable to implement an appeal procedure to address concerns regarding fairness and reasonableness.
Once employers confirm which employees are designated as ‘furloughed workers’ they will then need to submit details to HMRC through a new online portal which is due to be available in April 2020.
- Should employers top up the pay to 100%?
The guidance confirms that this is not mandatory. However, in the absence of consent, any reduction in pay could constitute an unlawful deduction from wages leaving employers with potential liability for claims in the Employment Tribunal. If employers do not wish to top up the pay, they should get explicit written consent from the employees affected. Again, when faced with the prospect of redundancy, this is likely to be an attractive solution for most employees concerned.
- What situations will this not help with?
Furlough leave is an alternative for employees that would have otherwise been laid off or made redundant. It is not necessary where employers have contractual provisions entitling them to make layoffs or implement short time working at a reduced rate of pay. The guidance also confirms that it cannot be used where an employee is still required to work, even on a reduced basis. Thackray Williams – Covid-19 update The introduction of ‘furlough leave’ will not prevent employers from managing employees or terminating their employment in cases of capability or misconduct. Care should be taken and employers are advised to take advice before making such decisions.
- What are the consequences of designating employees as ‘furlough workers’?
The employees designated as ‘furloughed workers’ will remain in employment and consequently will continue to:-
• be on the employer’s payroll;
• accrue holiday; and
• accrue continuous service.
- What if the employer only wants to designate certain individuals as furloughed workers?
The employer will need to approach this carefully. Selecting individuals for furlough leave is likely to give rise to potential appeals and claims similar to those that arise under a redundancy. Employers are advised to adopt a fair selection criterion, inform and consult employees and implement an appeal process.
- Interplay with employees not designated as ‘furlough workers’ and SSP
Employers will need to be aware that designating some employees as ‘furloughed workers’ whilst other employees continue to work, with business as usual, may create resentment. Employers are encouraged to listen to employee concerns and have meaningful conversations with all their employees so they can explain the rationale behind their decisions. For those self-isolating and in receipt of SSP, employers will need to consider whether to designate those employees as ‘furloughed workers’ after their period of self-isolation has expired. Employers should keep records for all their employees including the type of absence, the period and the pay.
- What if employers have already started a redundancy process?
Given the unprecedent impact of Covid-19, employers should continue to refer to Government guidance and developments. During redundancy consultations, employers are ordinarily under a duty to consider alternatives to redundancies and how to mitigate them. Given the support now available, it would be advisable for employers to consider designating at risk employees as ‘furloughed workers’ as a decision to continue with a redundancy could be unfair.