Many employers are facing extremely difficult decisions in the light of the Covid-19 restrictions and are working hard to find solutions.
Our team have answered some of the most common questions we have been asked during the Covid-19 pandemic in the news articles which can be found here.
Please also see the most recent Government and Acas guidance.
Our most frequently asked questions relating to Covid-19, employment law and furlough leave:
1. Will we have a redundancy situation if we can now furlough workers?
2. Should we consult with staff whom we are making redundant during the Covid-19 crisis?
4. What can employers do if they still have work for staff but no funds coming in?
5. What should charities consider before putting staff on furlough?
6. How do I go about putting staff on furlough?
7. What will employers receive on the Job Retention Scheme?
8. How will pay be calculated for those on furlough with variable pay?
9. Do we have to pay the National Minimum Wage or National Living Wage (NMW) during furlough?
10. How long will the furlough scheme last and what do we do when it ends?
11. Will we recoup all of our employment costs if we furlough staff?
12. Can we put casual / zero hours contract workers on furlough?
13. Can an employer continue to keep staff working whilst they are furloughed?
14. Can our employees work for someone else while they are on furlough for us?
16. Can employers place someone who is self-isolating or off sick on the Job Retention Scheme?
18. If we have already paid staff for March, can we backdate a furlough claim for those wages?
19. Can we insist that staff take holiday during furlough leave and how would this be paid?
20. Can all staff carry leave over to the next 2 holiday years, including those on furlough?
21. Can we furlough staff who TUPE transferred to us after 28 February?
22. Can we pay some staff 80% of average pay but top up others pay to 100% while on furlough?
23. Can we furlough employees who are unable to work due to childcare commitments?
1. Will we have a redundancy situation if we can now furlough workers?
Employees may be furloughed under the government's Coronavirus Job Retention Scheme. However this new process is just one option open to employers when faced with a down turn in work and the law on unfair dismissal and redundancy remains unchanged. Employees with two years' service can bring unfair dismissal claims and can claim for statutory redundancy pay if this has not been paid. Employers should be aware that they must have a fair reason for dismissal (in this case redundancy) and the dismissal must be fair in all the circumstances.
Redundancy happens when an employer's business closes down altogether, when it closes one site and the work moves to another location, or when the kind of work done by some employees stops or reduces. A redundancy situation could therefore occur even though the Job Retention Scheme can help with paying employees for a limited period.
The starting point for employers when considering redundancy will be assessing whether there is a business case for making employees redundant. Employers should consider whether the financial and operational position of the business is such that it would be fair in all the circumstances to make employees redundant now rather than assessing the situation again when the Job Retention Scheme ends. If there are pressing reasons why the organisation cannot wait until then to make staff cuts, these should be recorded in writing and explained to staff as part of the consultation exercise.
To make a redundancy dismissal fair, employers also have a duty to consider alternatives to redundancy. The Job Retention Scheme will be such an alternative. Again, if it is not feasible to keep staff on and apply for a grant under the Scheme (for example because waiting until the end of April for the funds to come through is not possible), the reasons for this should be noted and communicated clearly to the affected staff.
2. Should we consult with staff whom we are making redundant during the Covid-19 crisis?
If employers decide to pursue redundancy dismissals, they should do all they reasonably can to consult individually with employees before the decision to dismiss is made. As face to face meetings are likely to be difficult in view of social distancing and self-isolation, this is likely to include letters, emails, telephone calls and video meetings. The consultation process should, even though it is done remotely, still allow employees to feedback suggestions on avoiding redundancy, to raise concerns and to ask questions.
Where 20 or more employees are affected by redundancy proposals, collective redundancy consultation obligations will apply. Employers must then consult with staff representatives at least 30 days before the first dismissal where there are between 20 and 99 affected employees, and at least 45 days before the first dismissal where there are 100 or more affected employees. Employers should consider the logistics of consulting with trade unions or other staff representatives and whether those representatives can meaningfully consult with staff in the current restrictions.
In "special circumstances" where it is not reasonably practicable to comply with these collective redundancy consultation rules in full, employers should still take reasonable steps to consult collectively with staff representatives. Employers should be aware that the existence of the Job Retention Scheme may lead employment tribunals to conclude in some cases that it was reasonably practicable for employers to comply with these consultation requirements while employees were on furlough.
Insolvency is not in itself a special circumstance but a 'sudden disaster' (either physical or financial) can be. This exception to the consultation rules is more likely to apply where the impact of an event on the business is immediate. A gradual run-down of a business over a longer time period is unlikely to fall into the exception. Employers facing insolvency, should still make reasonable efforts to consult employees and their representatives.
A failure to comply with collective redundancy consultation obligations can be expensive. It can lead to a protective award of up to 90 days' actual gross pay for each affected employee.
Where businesses go into administration, the administrator will also be able to apply for a grant to cover 80% of wages under the Job Retention Scheme. However recent guidance confirmed the government would expect an administrator to only access the scheme if there is a reasonable likelihood of rehiring the workers i.e. there is a future for the business.
3. If we made staff redundant or laid them off in March, should we rehire them / end lay-off and put them on furlough?
The Job Retention Scheme guidance states that staff can be rehired and placed on furlough as long as they were on your PAYE payroll on 28 February 2020. Employers who have laid-off staff can also bring the lay-off period to an end and move workers onto furlough.
One of the clear intentions of the Scheme is to provide employers with an alternative to lay-off and redundancy while Government restrictions are in place. Employers do however have a choice as to whether to rehire staff. If employers who dismissed before the Scheme was announced decide not to rehire and employees bring unfair dismissal claims, the tribunal would consider the circumstances facing the employer at the time of the dismissal rather than taking into account the support offered under the Scheme. The question for the tribunal will be whether the decision to dismiss, at the time it was taken, fell within the band of reasonable responses of a reasonable employer. The exception to this may be where dismissal appeals are still being considered by the employer. The option of furlough should be properly considered as part of any appeal process.
If staff are rehired, it is possible that an employment tribunal will consider that there has been a temporary cessation of work and that they have continuity of service. In that case employees could still bring claims relating to any later dismissal and would be entitled to statutory and contractual benefits on the basis of their full length of service. It is not yet clear whether specific provision will be made in the Scheme for such employees to be re-engaged with no loss of continuity of service. If this is the case, these employees will be entitled to pay and benefits for that period at the agreed rate.
Employers can bring periods of lay-off to an end at any time (subject to any contractual agreement). It may be that employers will wish to do so before employees are able to opt for redundancy and a statutory redundancy payment (for example after four consecutive weeks of lay-off). Pay during lay-off is limited to statutory guarantee payments with a current maximum of £29 per day for five days in any three month period. Employees will therefore be better off financially on furlough and are likely to ask the employer to move them from lay-off to furlough and to backdate pay accordingly. Claims for a grant under the Scheme can be backdated to cover any time during which the employee was doing no work (with a backstop date of 1 March 2020). Any pay already received by the employee should be taken into account when paying back pay.
4. What can employers do if they still have work for staff but no funds coming in?
Employers who have cash flow issues should consider whether there are alternative sources of funding in the crisis. Government guidance on possible means of support is available at: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses. Please see our FAQs on sources of funding for charities and social enterprises here.
Employers may have a redundancy situation if they are forced to close down all or part of the organisation because of the funding situation. Employers in this situation should consider whether redundancy dismissals will be fair in all the circumstances, including whether furloughing staff under the Job Retention Scheme is a viable way to avoid redundancies. For more information on this, see Will we have a redundancy situation if we can now furlough workers?
It is important to note that the Job Retention Scheme cannot be used to pay the wages of staff who are still working for the organisation. It may be possible to come to a mutual agreement with staff to reduce wages (engaging with trade unions where recognised). Such a change will be a fundamental change of contract and so should not be imposed unilaterally by the employer. Employees could decide to bring claims for breach of contract / unlawful deduction from wages at a later stage if the reduction is not agreed.
Employers should consider whether work can be restructured so that some employees continue to work and others are furloughed. Furlough leave could also be rotated between staff, remembering that each period of furlough must last for a minimum of 3 consecutive weeks.
5. What should charities consider before putting staff on furlough?
Charities and third sector organisations can make claims under the Job Retention Scheme along with all other employers.
When deciding whether to access the Scheme, charity trustees should consider their usual trustee duties, including the duty to manage the charity's resources responsibly. They should continue to follow decision-making guidance issued by the Charity Commission. We also recommend the Charity Commission's recent Coronavirus (COVID-19) guidance for the charity sector.
The guidance to date on the Job Retention Scheme suggests that organisations which continue to receive public funds during the crisis will not be expected to access grants under the Scheme. There may, however, be some roles within the charity which are no longer required and / or funded because of the crisis where it may be appropriate to make use of the Scheme rather than laying off staff.
Charity employers should consider the financial position of the charity in the round, taking into account the best interests of current and future beneficiaries. Where grant funding or financial reserves are available, trustees should consider whether these should be applied before the Job Retention Scheme is resorted to.
Charities should also be alive to reputational risks in the current crisis. For example, charities which make the decision to make redundancies instead of using the Job Retention Scheme could face public criticism. Equally, charities with significant resources may receive negative press for relying instead on the Job Retention Scheme.
6. How do I go about putting staff on furlough?
At this moment the 'how' does not exist. However, HMRC are working to create an online portal where employers will be able to register for the Scheme. The current intention is for this to be ready by the end of April.
To claim, employers will need:
- ePAYE reference number
- the number of employees being furloughed
- the claim period (i.e. start date and end date)
- the amount being claimed
- the employer's bank account number and sort code
- the employer's contact name and telephone number
HMRC will retain the right to retrospectively audit all aspects of the claim, so employers are best advised to review the information being provided before submitting it to the Scheme.
7. What will employers receive on the Job Retention Scheme?
Employers who place staff on furlough will receive a grant from HMRC to cover "the lower of 80% of an employee's regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage". Employees' pay will continue to be subject to deductions for PAYE and employee National Insurance contributions.
For salaried staff, pay will be calculated as at 28 February 2020. For more details of how the pay of staff with variable hours will be calculated, please see our FAQ 'How will pay be calculated for those on furlough with variable pay?' below. The guidance states that employers can also make claim against the wage costs of enhanced contractual maternity, adoption, paternity or shared parental pay through the Scheme.
8. How will pay be calculated for those on furlough with variable pay?
There are a number of ways of calculating the pay of staff on variable hours. It is for the employer to choose the most appropriate calculation method.
- If the employee has been employed for
twelve months prior to the claim, employers can claim for the
higher of:
- the same month's earnings from the previous year; or
- average monthly earnings from the 2019-20 tax year.
- If the employee has been employed for less than a year, employers can claim for an average of the employee's monthly earnings since they started work.
- Where the employee began work during February, employers should work out a pro-rata monthly average based on their earnings to date.
9. Do we have to pay the National Minimum Wage or National Living Wage (NMW) during furlough?
The NMW will not apply to furloughed workers because they will be carrying out no work during the furlough period. However, employees can be required to undertake training during furlough and, if so, the guidance states that they should be paid at least NMW for that time. In most cases it is expected the grant will cover NMW unless the employee is spending significant periods of time on training.
10. How long will the furlough scheme last and what do we do when it ends?
The Job Retention Scheme is initially being opened for three months from 1 March to 31 May 2020. This is subject to revision by the government, and the Scheme may be extended further. There is no clear end date to the Scheme, but the Government's mantra has been 'whatever it takes' when supporting employers through the current situation.
To qualify for the Scheme, employees must be furloughed for at least three weeks, but employers can bring the furlough period to an end at any time provided notice is given to the affected employees.
When communicating with employees about the Scheme, employers should make clear that the furlough arrangement is a temporary change to the employment contract, and that when furlough ends, the terms of the contract will be as before. Employers should ask employees to agree to this temporary change. It is to be hoped that this will mean employees will eventually return to work on full pay. However, employers may be faced with a redundancy situation when the Scheme ends and will need to comply with consultation requirements and a fair redundancy process.
To be eligible for the grant under the Scheme employers must confirm in writing to their employee that they have been furloughed. A record of this communication must be kept for five years.
11. Will we recoup all of our employment costs if we furlough staff?
By making a claim to HMRC an employer will receive a grant to cover:
-
80% of an employee's normal pay or £2,500 per month, whichever is the lower; and
-
the employer's NICs and minimum automatic enrolment pension contributions (at 3%) based on 80% of pay.
However, the actual employment costs for the employer will depend on a few factors. In most cases, employers will not have a contractual right to lay off staff or to reduce pay without the agreement of the employee. They will therefore need to ask employees to agree to being put on furlough. That said, when forced to choose between furlough and the alternatives, e.g. redundancy, it is likely that employees will agree to being put on furlough at 80% of wages. In such cases, the Scheme may cover all the associated employment costs of the furloughed workers.
Guidance published on 4 April 2020 confirmed employers can claim for any regular payments they are obliged to pay to employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments such as benefits in kind should be excluded.
Employers should be aware that contractual benefits may continue to be due at the rate of 100% of pay. This will depend on the way these benefits are worded in the contract. Employers should consider making clear in their communication with staff that any contractual benefits will be pro-rated during the furlough period. If staff take holiday during the furlough period, this will need to be paid at the worker's normal rate of pay and so the employer will need to fund the top up.
Some employers may agree to top up pay to 100% of wages throughout the furlough period. In such circumstances the employer will be left to cover the difference between the Scheme grant payments and the full wages to the worker, plus the difference on the employer NICs and pension contributions not covered by the Scheme grant.
12. Can we put casual / zero hours contract workers on furlough?
Yes. The Scheme can be used for anyone who is paid through payroll no matter what kind of contract they are on.
The Scheme guidance for employers states that: "Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract" and that this includes "employees on flexible or zero hours contracts". In most cases those on zero hours contracts will be workers rather than employees (for employment law purposes) but will be employees for tax purposes and so the Scheme applies equally to them.
The government guidance for individuals (https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronavirus-job-retention-scheme) states: "Any UK employer with a UK bank account will be able to claim, but you must have been on your employer's PAYE payroll on 28 February 2020. You can be on any type of contract, including a zero-hour contract or a temporary contract." If it was the case that only employees were eligible, that would exclude many people from the Scheme, which we understand is not the Government's intention.
13. Can an employer continue to keep staff working whilst they are furloughed?
No. To be eligible for the Scheme an employee cannot undertake work for or on behalf of their employer. This includes 'providing services' or 'generating revenue' for the employer. If an employee continues to work for an employer on reduced hours, the employer must continue paying the employee, subject to the terms agreed between the employer and employee.
Employees may undertake training whilst furloughed, providing that the employer ensures that the employee receives the national minimum wage (or national living wage) for the time spent training. This means employers need to check if they will have to pay to top up the pay of those employees on the Scheme for time spent training.
14. Can our employees work for someone else while they are on furlough for us?
This will depend on the working arrangements as of 28 February 2020. If the employee had more than one employer for whom they were enrolled on a PAYE scheme on 28 February 2020, then the employee can be furloughed for any one or all of those employers. Each job is treated separately under the Scheme and the Scheme's cap of 80% of earnings will apply to each employer individually.
Recent guidance has confirmed that if contractually allowed, employees are permitted to take up new work for another employer whilst on furlough.
For any employer that takes on a new employee, the new employer should ensure they complete the starter checklist form correctly. If the employee is furloughed from another employment, they should complete Statement C which confirms they have another job. If the existing contract of employment does not allow an employee to work elsewhere while in your employment and the employee seeks out another job after being furloughed employees risk disciplinary action unless they seek agreement in advance. Employers should make their expectations clear at the time of placing an employee on furlough.
15. Can employees volunteer while on the Job Retention Scheme and can they volunteer for their own employer?
Employees can "take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation". The meaning of this is not altogether clear, but we consider that there is a risk that staff volunteering for their own employer during furlough could be against the rules. This would not stop the employer informing their staff about volunteering opportunities in the community and even other work where these are run by other organisations and the opportunities are in line with public health guidance.
16. Can employers place someone who is self-isolating or off sick on the Job Retention Scheme?
Employers can only place someone on the Scheme after a period of sick leave or self-isolation ends. However, employees who are shielding themselves from exposure to Covid-19 in line with public health guidance, i.e. those who are considered extremely vulnerable, and those staying at home with employees who are shielding can be placed on the Scheme.
17. If an employee was hired after 28 February 2020 can the employer put them on the Job Retention Scheme?
No. The Scheme is only open to employers that had created and started a PAYE payroll Scheme no later than 28 February 2020 and can only be used to claim for employees on their PAYE payroll scheme as of that date. This means that employees taken on after 28 February 2020 will have to be managed in the usual ways where work decreases, e.g. reduced hours, lay-off (where the contract allows) or redundancy.
18. If we have already paid staff for March, can we backdate a furlough claim for those wages?
Yes. Claims under the Job Retention Scheme can be backdated to 1 March but only for a period during which the employee in question did no work at all for the employer. If employees performed some work in that period, you will only be able to backdate the claim to the date from which they ceased work.
19. Can we insist that staff take holiday during furlough leave and how would this be paid?
There is some doubt at present about how annual leave will interact with furlough. It is possible that the Government will clarify this point when further detail of the Job Retention Scheme is published.
As employment law stands, it is likely that statutory leave under the Working Time Regulations (5.6 weeks) will accrue during furlough.
We cannot be sure at the moment whether it is intended that employers can require workers to take holiday during furlough. There is also some doubt about how annual leave taken during furlough should be paid. We will provide an update on this question if further detail is provided by the Government.
There is a statutory rule which allows employers to give workers notice that they must take their statutory annual leave (up to 5.6 weeks) on particular dates. Unless this rule is varied by a clause in the contract, employers must give at least twice as much notice as the length of the leave. For example, to require a worker to take 2 weeks' leave, employers would have to give them 4 weeks' notice.
Subject to any further guidance from the Government, employers asking staff to take holiday during furlough should consider the needs of the organisation alongside the health and safety and wellbeing of workers. Organisations are likely to find it difficult to manage a glut of annual leave taken later in the year. However, consideration should be given to the limitations on the quality of workers' leave under the present restrictions as well as the implications for worker morale. It is likely that a balance will need to be struck between these competing needs.
Where holiday is taken, a week's pay is payable for a week's leave. Where the worker has normal hours (rather than variable hours), a week's pay should be based on pay for those normal hours. Because the change to furlough will be a temporary change to the contract, it is likely that holiday will need to be paid at the normal full pay rate.
20. Can all staff carry leave over to the next 2 holiday years, including those on furlough?
There have been recent changes announced to the WTR to allow workers who cannot take annual leave because of the impact of the virus on the worker, on the employer or on wider society, to carry over 4 weeks' leave to the next 2 holiday years. The new Acas guidance states that this will apply to workers placed on furlough. However, we consider that this new rule may not apply to those on furlough leave, if they are able to take annual leave (even though they may not be able to leave home under current restrictions). It is our understanding that this change is intended to provide flexibility where there is a high demand for work because of the virus (for example for NHS workers) or while businesses are working to get back on their feet when restrictions are over.
21. Can we furlough staff who TUPE transferred to us after 28 February?
Possibly not. We are hoping that future guidance will bring clarity on this point. As an employer's access to the Job Retention Scheme relies on the employee in question being on their PAYE payroll on 28 February, it is possible that a transferee employer will not be able to claim under the Scheme for employees who transferred after 28 February 2020. The grant is a matter between the employer and HMRC rather than being a contractual right which transfers with the employee under the TUPE Regulations.
Where TUPE transfers are planned in the next weeks and months, it is possible that transferee employers will take on a contractual obligation to pay wages for employees who have already been furloughed (which could be at 80% of normal pay or more depending on the agreement which has been made between outgoing employers and their staff) but will not receive any Government grant to support this payment. Well drafted furlough agreements should make clear that furlough leave will come to an end when the employer or employee is no longer eligible under the Job Retention Scheme. In that case, it is likely that the transferee employer will be liable for 100% of salary and benefits.
22. Can we pay some staff 80% of average pay but top up others pay to 100% while on furlough?
If you distinguish between groups of workers on the basis of a protected characteristic, there is a risk of a discrimination claim. Indirect discrimination could occur if you apply to everyone a policy which disadvantages people sharing a protected characteristic. For example, a policy or practice of paying part time staff 80% of pay while paying full time staff 100% of pay risks an indirect sex discrimination claim as the policy is likely to disadvantage women because statistically they are more likely to have caring responsibilities and take part time work.
Such a policy would also risk a claim under the Part Time Workers Regulations that a worker had been less favourably treated because of their part time status. In order to bring such a claim, the part time worker would have to be able to compare themselves with an actual full time worker paid 100% of pay while on furlough and who was working for the same employer, on the same type of contract (e.g. a worker contract) and carrying out the same or broadly similar work.
23. Can we furlough employees who are unable to work due to childcare commitments?
Yes. Employees who are unable to work because they have caring responsibilities resulting from coronavirus can be furloughed including employees that need to look after children.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
