Employers and employees (and even employment lawyers) all raised eyebrows at the Chancellor’s use of the term ‘furlough’ on 20 March 2020 as part of the Government’s response to the coronavirus crisis – but it has quickly become one of the most significant developments in UK employment law of all time. It is hard to recall anything more radical. And now things are set to change ….. again.
For those of you unfamiliar with the term (and we doubt there are many, sadly,) Furlough Leave describes a situation where an employee is not required to work as a result of Covid 19, and is instead put on a period of leave.
Employers can currently recover 80% of salary, up to a maximum of £2,500 per month for any employees they have placed on Furlough Leave, from what is known as the “Government Coronavirus Job Retention Scheme” (CJRS).
An employer can place any employee on Furlough Leave, including part-time employees, employees on agency contracts, and those on flexible working arrangements (including zero-hours), as long as, broadly speaking, they were on your PAYE payroll on or before 19 March 2020.
For those employers who do not “top up” their furloughed employees’ pay to 100%, then as this will result in a reduction to their employees’ salaries of at least 20%, we have been advising employers to, where possible, seek to agree Furlough Leave and the corresponding reduction in pay with their employees, and confirm this agreement in writing.
Whilst on Furlough Leave, employees can take part in volunteer work, and can even seek alternative employment, but they are not currently permitted to carry out any work for you whatsoever.
For all other purposes, employees on Furlough Leave remain your employees, and continue to accrue all other benefits and entitlements (to include accrual of holiday).
What’s next for the CJRS?
Since its introduction, the CJRS has seen an estimated 8.4 million of the UK’s employees furloughed – at a cost to the Government so far of circa £15 billion.
On 12 May 2020, it was confirmed that the CJRS would be extended until the end of October 2020, but that employers would need to start contributing to the costs of the CJRS in the coming months. Whilst the next full version of the official Guidance to the new CJRS will not be published until 12 June 2020, what we now know is that:
- There are no changes to the CJRS for June and July;
- From August employers will need to pay the NI and pension contributions for their furloughed employees (in respect of the hours the employee does not work);
- For September employers will need to fund 10% of the Furlough Leave pay (i.e. HMRC will pay 70% up to a cap of £2,187.50) and NI and pension contributions; and
- For October employers will need to fund 20% of the Furlough Leave pay (i.e. HMRC will pay 60% up to a cap of £1,875) and NI and pension contributions.
The CJRS will end entirely on 31st October 2020 and will be closed to new entrants from 30 June 2020. From this point onwards, employers will only be able to furlough employees that they have furloughed for at least a full three-week period prior to 30 June 2020. This means that the final date by which an employer can furlough an employee for the first time will be the 10 June 2020.
In addition, from 1 July 2020, the number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim under the CJRS.
Flexible Furlough Leave
The recent announcement also set out a further change to the CJRS and the concept of Furlough Leave. Under the current Furlough Leave arrangements an employee cannot carry out any work for you at all whilst on Furlough Leave, however from 1 July 2020, you will be able to ask employees on Furlough Leave to carry out work for you, on a part-time, flexible, basis. For the hours they work for you they will be entitled to full pay, which you will not be able to recover under the CJRS, but for the hours/days they remain on Furlough Leave, not carrying out any work, you can continue to recover a pro-rata amount (up to the maximums set out above) for the time they are not at work.
Whilst in the absence of definitive Guidance from the Government, there remains a lot of uncertainty, the Employmentor Team are on hand to answer any questions you may have and will provide a further update on the new law an the CJRS official Guidance after it is published, hopefully, on 12 June 2020.
Note: The content of this article is for general information only and does not constitute legal advice. Specific legal advice should be taken in any particular circumstance. If you would like more information on the content of this article, please call the Employmentor Team on 01603 281139.
