Coronavirus Job Retention Scheme - How To Furlough Employees

Furloughed Employees - Coronavirus Job Retention Scheme

Many Employers are asking the question how do they furlough employees for them to be eligible under the Coronavirus Job Retention Scheme (Scheme)?

The Scheme is designed to reimburse the Employer by way of a grant up to 80% of the employee’s wage subject to the monthly cap of £2,500. The reimbursement will be made through HMRC.

For details of the latest Government Guidance on the Job Retention Scheme please see our separate article. 

The article below (correct at 24 March 2020) provides some practical information about how to furlough employees. 

What is a furloughed employee?

They are employees who remain on the Employer’s payroll but are not working (temporarily) due to the coronavirus outbreak.

Zero hours contract employees may be eligible as the scheme intends to cover those paid through the PAYE system.

How do I select who is to be furloughed?

Similar to a redundancy process Employers would be well advised to have an objectively fair basis for selecting employees for furlough to avoid claims of unfair selection and/or discrimination.

How do Employers make employees furloughed?

If the Employer has a contractual right to vary the contract, reduce hours of work, lay off or short time working, then it may be possible to implement a furlough period without agreement. Much will depend on the wording of the contract.

Further if it is the Employer’s intention to pay the balancing 20% so that the employee receives full contractual pay then the Employer may be able to implement without agreement.

In the majority of cases Employers will need to place employees on furlough with their agreement as most employment contracts will not enable a change in employment status (variation of the contract) to be made unilaterally by the Employer or have lay off provisions.

Employers should therefore consult with their employees (or representatives/trade unions if there are any) in a similar manner to a redundancy process. They should notify employees that it is proposed that they be furloughed and explain why, when it would be effective from, over what period it is intended to last and what it would mean for the furloughed employee financially.

Being furloughed would likely be an alternative to terminating the employment relationship by way of redundancy, lay off or short time working. This should be explained in the initial letter.

Employees should be advised that they can discuss the proposal and how that discussion may be facilitated – conference call, email exchange may be appropriate methods. Alternatively, you could set a time limit for response and ask for any questions to be emailed in advance.

Once the employee’s agreement has been obtained then they are furloughed, and the Employer should notify HMRC through their online portal to that effect.

If the employees do not agree to be furloughed then the Employer should revert to the traditional routes for termination such as redundancy, lay off and short time working.

How long is the period of furlough?

At the moment it looks like this will be up to 3 months but that might be extended. This would be backdated to 1 March 2020.

Who pays the furloughed employee?

The Employer who then claims it back from HMRC.

Does the Employer need to pay the balance of the employee’s pay above the 80%/£2,500 cap?

No.

What if the employees work during a period of furlough?

If employees are working for you at any time during the furlough period, then they are not furloughed and ineligible for the payments.

For further information or if you require any Employment Law advice, please contact Alan Strain.

Disclaimer 
The matter in this publication is based on our current understanding of the law.  The information provides only an overview of the law in force at the date hereof and has been produced for general information purposes only. Professional advice should always be sought before taking any action in reliance of the information. Accordingly, Davidson Chalmers Stewart LLP does not take any responsibility for losses incurred by any person through acting or failing to act on the basis of anything contained in this publication.