05 Nov 2020

Furlough extended: Everything you need to know

Furlough extended: Everything you need to know

These times continue to be challenging for all businesses and the pace of change is relentless. We are keen to support firms throughout the multiple phases of lockdown and help them get back to business as usual, as or when that may be.

To that end, we have prepared an update to our series of frequently asked questions bulletins issued previously:

  1. Flexible furlough - what is it and how to use it
  2. Exiting furlough and unfurloughing staff
  3. Making redundancies in a covid world
  4. Changing staff terms and conditions

What is the Coronavirus Job Retention Scheme?

More commonly referred to as ‘Furlough’, this was a concept we had never imagined until March this year. The Coronavirus Job Retention Scheme (CJRS) was a welcome announcement to most businesses when it was announced by the Chancellor back in March, and it has, for many businesses, been a saving grace despite some of the complex calculations involved. The CJRS was due to come to an end on 31st October 2020 and to be replaced by the Job Support Scheme (JSS) but at the eleventh hour, an extension was agreed to 30th November 2020 and then to 31st March 2020.

To be eligible for the CJRS, an employee had to be employed by 23.59 on 30th October 2020 and also on the PAYE payroll on or before that date. The extended scheme permits employers to recover up to 80% or £2,500, whichever is the lower, of a furloughed employee’s salary from the government. This will be reviewed in January 2021.

‘Furloughing’ an employee (putting them on a period of leave) is a change to their contractual terms, even more so if they are to be paid 80% (or less) of their usual pay. Usual employment law principles require that employers obtain agreement from employees on this change, and HMRC previously confirmed that to be eligible for the furlough scheme employers should have recorded the employees’ agreement to furlough in writing.

Employers are still able to “flexibly furlough” an employee, allowing the employee to undertake a degree of work for their employer.

What is “new” in this extended edition of the Scheme?

The extended version of the CJRS has returned the employer contribution level to that which was in place in August 2020 (requiring employers to contribute to the extent of the national insurance contributions to be made on the full payment to employees and pension contributions. This will be reviewed in January and depending on the level of economic recovery, employers may be asked to commence tapering contributions as they did in September and October 2020.

Also, with the review now due in January 2021, the previous “Job Retention Bonus” proposed to employers who retained staff on furlough in an effort to mitigate redundancy figures, has now been removed.

Does an employee have a right to be furloughed?

The CJRS does not confer a ‘right’ for an employee to be furloughed. The scheme is intended to include any business that has been affected by coronavirus. This allows the categories of employees who can be furloughed to include those who may be shielding or have childcare difficulties, even if they were not at risk of redundancy. However, whether an employee should be furloughed is a business decision for the employer, and there is no entitlement for an employee to be furloughed if their employer still has, for example, plenty of work for them to do.

Nevertheless, employers should consider carefully any requests to be furloughed on the grounds of childcare difficulties etc. We have not yet seen how the Employment Tribunal will consider claims arising out of the CJRS or the overall impact of COVID-19, but we do know that the Tribunal always expects an employer to act reasonably.

Does an employee on furlough need to be paid the National Minimum Wage?

No, pay received whilst on furlough does not need to meet the National Minimum Wage unless the employee is undergoing training whilst on furlough or is flexibly furloughed. Entitlement to the National Minimum Wage is only for time spent actually working or training.

Do I have to top up the remaining 20% of salary?

No, but you should ensure that you receive agreement from any employees being paid less than 100% of their normal salary, as a reduction in their salary will almost always be a fundamental change to their terms and conditions of employment. 

Some employers previously chose to top up the remaining 20% (or more) of salary and are still able to within this extension edition. If you choose to do this, you should be aware that you cannot claim back any additional NI or pension contributions you make because you chose to top up, and you cannot claim any pension contributions about the mandatory employer minimum.

How should I deal with holiday entitlement?

Employees still accrue holidays whilst furloughed. They can be on holiday whilst also on furlough leave but they must be paid at their full rate for any time that they are on ‘holiday’. If the employee is furloughed at the time they are deemed to have taken their holidays then the employer can reclaim 80% (capped at £2,500) of their pay during that period. This may be particularly useful given the length of the furlough scheme now means that a full holiday year may be spent on furlough.

Subject to any contractual terms to the contrary, employees can and should be directed to take holidays to ensure there is not a build up on holidays to be taken by the whole workforce when everyone returns to work. If you are directing an employee to take holiday at a certain time, you should give them twice as much notice as the amount of holiday you need them to take

What does the Employer pay?

Aside from any decision to “top up” a furloughed employee’s pay, employers are required to pay 1) 100% pay in respect of any hours worked by the employee during the furlough period and 2) the employer national insurance contributions and employer pension contributions on the furlough pay and can’t reclaim those contributions.

Employment law experts

Aberdein Considine’s national employment law teams assists both individuals and businesses with employment legal matters.

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