There was a time, up until very recently, when the majority of workers probably would have had scant if any knowledge of the term ‘furlough’. Even those who knew what it meant in theory likely had little idea of how it worked in practice. The COVID-19 pandemic has changed that dramatically, with hundreds of thousands of workers throughout the country suddenly finding themselves in the entirely unforeseen situation of being furloughed. Employees’ rights and what it is reasonable to expect of their employers has become a hot topic, but it is similarly fraught when employers are figuring out their responsibilities to staff. And, as we have only a few days for companies to register, we thought it would be good to collect together the key information, here.
The Coronavirus Job Retention Scheme (CJRS) supports employers whose operations have been severely impacted by the crisis or whose employees have legitimate reasons for being unable to work. In such cases, where staff members have been left temporarily with no work to do on account of the virus, they can be furloughed and the employer can claim government help in continuing to pay their wages. HM Treasury will reimburse 80% of such employees’ wages, up to a maximum of £2,500 per month. Staff members are not permitted to perform any work for the employer whilst furloughed. Employers are not required to top up the wages to 100% but may do so voluntarily. However, if an employer does not intend to top up employees must consent to the reduced wage unless their contracts state that they may be laid off on reduced pay. The scheme will close in October 2020, and the level of reimbursement that employers may claim will be reduced gradually up to then.
Not surprisingly in such an unprecedented situation many questions have arisen as to the practical application of the scheme, and some of the most pressing have related to the ways in which it affects various types of leave. The following guidance may prove helpful.
Q: Can a furloughed employee take annual leave?
A: Yes, and the furlough period will not be disrupted, but periods of annual leave must be paid at the employee’s normal rate of pay so employers may need to top up what they can claim under the Coronavirus Job Retention Scheme. Where this is impossible employers may refuse requests for annual leave and in certain circumstances employees may be permitted to carry over the entitlement.
Q: Does furlough affect the accruing of annual leave?
A: No. Contracts of employment remain effective during furlough, so any entitlements to annual leave specified in them will be unaffected.
Q: Can employees be required to take annual leave during the COVID-19 outbreak?
A: For an employee who is working the answer is yes, provided that there is no specific agreement to the contrary and that employers give the necessary notice, which must be at least double the length of the required leave. For employees who are furloughed the situation is less clear. Technically it appears that the answer is still yes, but government guidance to employers instructs them to consider whether the employees in question can, in the present circumstances, genuinely be expected to derive the usual benefit from a holiday. The best advice would seem to be for employers not to do this unless absolutely necessary, and even then to make all possible efforts to secure the employee’s consent and agreement.
Q: What about bank holidays?
A: If employees are entitled to bank holidays as part of their holiday entitlement, when furloughed they should receive full pay for any such days or else receive leave days in lieu. Employees not contractually entitled to take bank holidays off are unaffected.
Q: What about maternity or other family-related leave?
A: Further clarification is still needed on several issues here. HM Revenue and Customs is clear that entitlement to leave of this kind is unaffected, and indeed the Coronavirus Job Retention Scheme (CJRS) makes provision for enhanced contractual maternity, adoption, paternity or shared parental pay. However, paragraphs 8.6 and 8.7 of HM Treasury’s direction on operating the CJRS state that the scheme does not cover the payment of statutory maternity pay (SMP) or other family-related pay. These remain the responsibility of employers. So it does appear that employers who cannot cover the costs of SMP (90% of earnings for the first 6 weeks, then either 90% of earnings or the flat rate of SMP, whichever is lower, for the next 33 weeks) may furlough staff whilst they are on family related leave. Staff members reaching the end of their entitlement to maternity pay may be best served agreeing with their employer to end maternity pay and be furloughed, since this would secure 80% of their wages (up to £2,500/month), but it is not permissible to end SMP, be furloughed, and then return to SMP after the furlough period.
Q: Can employers rotate which employees are furloughed?
A: Yes. The minimum furlough period is three weeks, but provided that employers adhere to this there is nothing to prevent them rotating which of their employees are furloughed at a given time.
Q: Does furlough prevent redundancy?
A: Everyone is aware that the current crisis will have profound economic consequences and, inevitably, some businesses will fail as a result. Those that survive may need to reduce or streamline their workforces, so redundancies will be a sad but inevitable reality. Employers are not required to repay any grant received to cover an employee’s wages during furlough if that employee is subsequently made redundant, but there is no requirement for employers to wait for the CJRS to end before making redundancies. Provided that all necessary procedures on consultation and notice periods are followed, the CJRS does not provide any protection against redundancy for employees.
