Updated 5 April 2020: 8.00am

So, we start another week that looks so very different to our lives just a couple of weeks ago.  A worrying week for us all as we try to protect our loved ones and as we try to ensure our own individual financial well-being and that of the business that we work for.  Many of us are now beginning to get used to a new routine of staying at home for our safety and juggling the needs of our working roles at home, often in the presence of our children and whilst trying to deal with this wholly new concept of furloughing.  That is unless of course you are one of the many essential key workers who are bravely continuing your roles in care homes, hospitals, on production lines for important equipment, working in food shops and manufacturing and delivering much needed goods to our doorsteps to avoid us needing to go to shops to get them.

The purpose of this guide is to provide a thorough round up of where we stand with furloughing, the carrying over of annual leave, interaction with sick leave and the use of other arrangements in order that business can survive at this critical time.  Is your business taking the right steps, making the rights decisions and ensuring that you are using the government’s Job Retention Scheme to protect the employment of your people at this worrying time?

We held two incredibly successful webinar sessions on 26 March 2020.  Typically, almost immediately after the final session, the HMRC published their guidance on the Job Retention Scheme (JRS) which will be used to effect the furloughing of employees across the country.  This guidance has provided the answers to a number of questions, but as you will see from the information below, not all of them.  We still await the launch of the online portal itself which we are hopeful will be up and running by the end of April. 

Our webinars also highlighted the sort of questions that employers need answers to and we will address those common questions in our round up below.

Where do I find government guidance?

All government guidance on COVID-19 is accessible at www.businesssupport.gov.uk.  With reference to more specific matters.

(i) Guidance for employers:

The important guidance that you need to keep track of is available from:

(ii) Information regarding self-isolation

For information on the circumstances in which individuals should self-isolate see the following sources:

(iii) Guidance for vulnerable people

What organisations can claim?

Any UK organisation who has a PAYE payroll system on 28 February can apply to the scheme.  The only exception to this would appear to be organisations that are publicly funded.  The intention is that all public sector employees continue to receive funding and providing public services in the same way as before.  The public funding will continue and accordingly there will not be access to the scheme for those organisations.  There are a number of organisations (such as dental practices) who have closed and have a mixture of private and public income for whom the outcome is not clear at the moment.  Further, more detailed guidance is needed for these organisations.

How much can be claimed?

Employers can claim up to the lower of 80% of usual monthly wage costs or £2,500 per employee, plus the employer national insurance contributions and minimum auto-enrolment employer pension contributions.  The NICs and pension contributions are claimed in addition to the £2,500 cap.

How is it calculated?

If the employee has been employed (or engaged by an employment business) for a full 12 months prior to the claim, the employer can claim for the higher of either:

  • The same month’s earning from the previous year.
  • Average monthly earnings from the 2019-20 tax year.

If the employee has been employed for less than a year, the employer can claim for an average of their monthly earnings since they started work.

£2,500: gross or net?

Gross.  The sum paid to employees during furlough is subject to the income tax and national insurance in the usual way.

What individuals can you claim for?

The scheme covers the following individuals, whether they are employees or workers provided that they were on your PAYE payroll on 28 February 2020:

  • Full-time employees.
  • Part-time employees.
  • Employees on agency contracts.
  • Employees on flexible or zero-hour contracts.

What about contractors?

If the person is self-employed, they are not covered by the Job Retention Scheme and furlough.  They will need to look to see if the separate scheme announced by the government recently provides an financial assistance to them.

What about zero hours contracted people and agency workers?

Although the guidance from the HMRC talks about “employees” a lot, the scheme does cover agency workers, workers and those on zero hours contracts.  The test appears to be simply that the individual was on the PAYE payroll on 28 February. 

Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through the scheme, including where they are employed by umbrella companies.

What if we have already made them redundant?

Employees who were made redundant since 28 February 2020 can qualify if they are re-engaged by their former employer.  There is no obligation to re-engage but there will be no access to the funding scheme if you do not do so. 

What about TUPE?

What happens if individuals transfer to your business after 28 February 2020?  Can you still furlough them?  Unfortunately, this situation is not specifically covered in the guidance, but we are hoping that this is simply an oversight.  There is a concern that if the 28 February rule is applied strictly by the HMRC that these individuals will not be covered by the scheme which could therefore result in a number of redundancies needing to be triggered to those employed in services which have transferred in this window.  However, those individuals were of course on the PAYE payroll of the transferor on 28 February and given the principle behind TUPE legislation (to protect employment linked to a transfer) we are hopeful that claims will be met in full in the normal way for those who have transferred after 28 February.  We are certainly advising clients to submit claims to the government on this basis at this time.

What if we placed them on unpaid leave?

If the individual was placed on unpaid leave before 28 February, the scheme will not apply.  It only applies if unpaid leave commenced after 28 February 2020.  If you bring the period of unpaid leave to an end though there would appear to be no reason why they then can’t be furloughed.  For instance, if the individual was on unpaid compassionate leave before 28 February, you can bring the compassionate leave to an end and then furlough them.

Can we furlough an employee who is taking unpaid leave to look after their young children who are now at home due to school closures?

The principle of the Job Retention Scheme is to protect employment.  Therefore, does it follow that individuals (specifically) or a general risk or redundancy across the business is required to be able to claim? 

This has now been clarified in the latest updated guidance.   The rules published by the HMRC on Saturday 4 April) make state that "employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed. For example, employees that need to look after children can be furloughed."

What if the business has already reduced pay and hours?

This is a tricky one. Some employers have taken an even handed (and fair) approach to employees by agreeing with them to reduce their pay and hours.  However, if this reduction is greater than 20% then they are actually worse off than they would be under the scheme – and of course they will also be working as well. 

You are perfectly entitled to agree with them to place them on furlough.  Once this has happened, and only then, can you then make any claim under the scheme.  For example, rather than having 10 employees working 70% of the time, you will need to have 7 employees working full time and 3 employees on furlough. 

The unintended impact of this rule (that no work can be done during furlough) does mean that it incentivises employers to shut down rather than to try to stay open.  That is of course a health, social and economic issue that the government had made a decision on.

Can I rotate employees on furlough?

The next issue is whether you can rotate employees.  If a business is still operating, but at a reduced capacity, rather than reducing the hours of those employees (under which you cannot get any financial support under this scheme) you will need to reduce the number of employees working.

Using the example numbers above, you can rotate the 3 employees on furlough, but you must ensure that you do so no faster than a 3 weekly rotation as the scheme is only applicable for those who are furloughed for 3 weeks or more.

What if we have an emergency or sickness that requires us to recall a furloughed employee?

Where an employer is running a rotation scheme (as above) they may of course be faced with the situation where they then need more than the planned for number of employees for a number of reasons, whether this be more work than planned for or, of course, sickness or self-isolation requirements of those who are working.  Our template furlough agreement provides a right for you to recall any employee back to work before 31 May.  However, if you do this before they have spent 3 continuous weeks on furlough the business will not be able to claim under the scheme.  It will of course have already contracted with the employee to pay them their 80% and accordingly the business will lose financially as a consequence.  You therefore need to ensure that you retain good records of how long individuals have been on furlough and make business informed decisions before recalling individuals on furlough.

Can we do the same for long-term sick employees?  Can they boost their pay to 80% instead of receiving sick pay (statutory and/or company) or no pay at all?

If an employee is in receipt of statutory sick pay the employer cannot furlough them.  This means that any employee on sick leave of any sort cannot access the 80% payment unless they have already ceased receiving SSP.  But on this the guidance is silent.  It doesn’t state that simply because they have exhausted SSP (therefore been absent for more than 28 weeks) that they are entitled to be furloughed and receive 80%.  This would appear to be an unexpected windfall for the individual.  Therefore, to make payments to them at 80% form the scheme in circumstances where they are not in receipt of pay because of their sickness rather than anything to do with COVID-19 would run entirely contrary to the purpose of the scheme.  Although not specifically prevented under the scheme (at this moment) we would not advise companies to furlough these employees as it is highly likely that any claim for reimbursement will be unsuccessful.

What about maternity leave (and other forms of family leave)?

1. already on maternity leave

An employer can claim enhanced contractual maternity (and other family friendly) pay through the furlough scheme. This suggests that employees can furloughed and on maternity (or other family) leave at the same time. This is in contrast to the position on sick leave.  Employers who have employees on maternity (or other family-related) leave and in receipt of pay in excess of the minimum statutory payment will want to ensure that they make a claim for the difference. 

2. employee returning from maternity leave

If you go back a year or take the average of the past year, then this will clearly give a far lower figure that they would be entitled to under the furlough scheme than would otherwise be the case.  However, the guidance uses the phrase “regular wage” and this arguably should mean the employees wage that they would be receiving on their return.  Accordingly, employers should calculate furlough on the basis of the full regular wage for a woman returning from maternity leave.  The same theory would also apply to anyone returning from a period of sickness absence and/or a sabbatical.

What about those that are extremely vulnerable and “shielding”?

The exception to the rule that those on SSP cannot be furloughed is the provision made in the guidance for the extremely vulnerable individuals who have been instructed to shield themselves.  The NHS has been writing to those affected individuals to ensure that they are aware of the requirement for them to shield themselves from others.

The HMRC guidance states that:

"Employees who are shielding in line with public health guidance can be placed on furlough".

Specific guidance and help for individuals who are extremely vulnerable is available from: https://www.gov.uk/coronavirus-extremely-vulnerable

For the full list of extremely vulnerable individuals, please visit: https://www.gov.uk/government/publications/guidance-on-shielding-and-protecting-extremely-vulnerable-persons-from-covid-19/guidance-on-shielding-and-protecting-extremely-vulnerable-persons-from-covid-19#what-do-we-mean-by-extremely-vulnerable

What if someone falls ill whilst furloughed?  Sick pay or furlough pay?

Some employees may want to be absent due to sickness if the contractual sick pay scheme provides for a higher level of pay than the furlough scheme. They will remain entitled to receive sick pay in accordance with the contractual rules of their scheme. 

This raises a number of practical difficulties.  What evidence will the employer require the employee to provide?  Normal sick notes may not be available from the GP and accordingly the employer will need to be flexible and reasonable about the evidence that is provided to ensure that they are not undermining either the express right to contractual sick pay or breaching the implied term of mutual trust and confidence. 

Another knock on effect of this could be that if such notification of sickness is given and it interrupts the period of furlough before 3 weeks of furlough has been served, then the employer is likely to be prevented from claiming any money under the scheme for them.

Of course, if the sick pay provision is less than 80% then the employee is highly unlikely to contact their employer to inform them that they are unwell.  Clearly, if the employer does not know that the individual is unwell, they would be entitled to continue to pay in accordance with the agreed furlough arrangements.

What if someone has resigned?

The fact that the scheme is only open to individuals who were on the PAYE payroll on 28 February 2020 is causing serious consequences for people who were in the process of changing roles and employers.  We have received a number of calls from worried employers and individuals alike.  Many employers are seeking to delay the start date of new employees because they are not covered by the scheme, but do not actually wish to lose out on the recruited person in the long run.  Of course, the individual will have already handed in their notice at their existing employer and that employer will be very unlikely to want the individual to continue in employment as they may be looking to reduce headcount and cost. 

During the notice period, the individual can of course be furloughed in the normal way, although there is no right or entitlement to this. 

If they have already left employment though the position is less clear.  The guidance states that anyone who was made redundant after 28 February 2020 can be re-engaged and placed on furlough.  It does not make any provision for those who voluntarily resigned.  The position therefore appeared clear, that those that resigned had no protection as they could not seek re-engagement and furlough from their previous employer and their new employer could not offer it either. 

However, during a Q&A session on Twitter on 3 April the Chancellor stated that any individual who was on the PAYE payroll on 28 February but that then left “for whatever reason” could be re-engaged and placed on furlough.  He stated that the guidance will be updated to make this “crystal clear”.  Of course, whether an employer actually wishes to do this or not is entirely up to them.

Can we lawfully make employees redundant whilst the furlough scheme is available?

To make an individual employee redundant lawfully and fairly you must still be able to meet the normal legal tests.  One of these tests is whether there is any alternative to dismissing that individual by reason of redundancy.  Given the existence of the Job Retention Scheme, it is our view that if you dismissed an employee as redundant before 31 May 2020 and they were willing to be furloughed, that this dismissal will be unfair.  This does not mean that you cannot commence redundancy process.  You can undertake all the other relevant consultation requirements of the redundancy, place the employee on furlough (with their agreement) and then revisit the situation at the end of May.  If the scheme ends (as it is currently scheduled to do so) and there remains a redundancy situation, then the dismissal can be affected at this time as the alternative (furloughing) will no longer be available to the employer. 

For those business where they have particular cash flow problems and cannot afford to pay the 80% (limited to £2,500 pm) and then wait for reimbursement form the government, there is the possibility of agreeing with the employee that any payment to them is delayed until the business receives reimbursement, thereby shifting the cash flow problem to the employee but in doing so potentially protecting their employment if either the period that the scheme runs is lengthened and/or the business is able to retain at the end of the scheme.

What if people refuse to be furloughed?

In order to place people on furlough you must reach an agreement with them to do so.  This is not only a requirement of the scheme but also a requirement of contract.  Some employers are able to achieve agreement through collective methods.  If there is a collective agreement with a trade union that is incorporated into individual contracts of employment, then the employer can reach agreement with the union which then binds every individual employee in that bargainning unit.  To check whether this is the case or not you should check that the agreement that you have the trade union and also the individual contracts of employment.

In the absence of this collective approach, you need to be able to agree furlough with each employee on an individual basis.  Simply put, without that agreement you cannot furlough them.

There may be many reasons behind a refusal.  It could be that they cannot afford to take a 20% pay cut, or more.  Those that earn over £37,500 per year will be taking more than a 20% pay cut due to the cap of the scheme being set at £2,500 per month.  If the employer isn’t willing to top up then people that earn more will be personally more significantly affected by reductions in earnings.  If their household income and circumstances are such that this has too significant effect on their ability to meet all their commitments, there is a real possibility that these individuals will refuse to be furloughed. 

Is there a duty to collectively consult?

Because of the nature of the circumstances that businesses find themselves in due to COVID-19 it is very likely that a proposal to dismiss and re-engage on new terms – which then permit the furloughing of the employee – will be fair.  However, it you are proposing to dismiss 20 or more employees at any one establishment you will still be obliged to collectively consult for 30 days (or 45 days if 100 or more).  This is clearly something that most employers will wish to avoid given that this could then result is lost time and money. 

Our advice at this time is to avoid any consideration of dismissal and re-engagement unless and until you are at a stage where you have people refusing to be furloughed.  This reduces (but does not necessarily avoid) the requirement for collective consultation.  If you are in this situation we encourage you to contact us for specific advice.

Holiday and furlough

What holiday accrues during furlough?

The normal statutory holiday (5.6 weeks) will accrue during furlough as normal.  Some employers though have taken steps to provide that contractual holiday which is over and above the statutory entitlement does not accrue.  If you wish to do this, then it must be expressly set out in the furlough agreement with the employee.


Carry over of holiday

New emergency legislation was passed on 26 March to enable employees to carry over their statutory holiday from one year to the next without breaching the normal provision of the Working Time Regulations that would otherwise prevent this.

The carry over of holiday is restricted to the “euro leave” of 4 weeks (not the 5.6 weeks of full UK statutory leave).  It is only to be permitted to carry over that leave in circumstances where the effects of COVID-19 have prevented the taking of the holiday. 

These provisions were almost certainly brought in as a result of many employers’ annual leave years ending on 31 March.  For those employers whose holiday year runs until 31 December this is far less likely to have any real impact because  if the employee/worker had enough time in the remainder of the holiday leave year to take their annual leave once furlough leave had ended then it is almost certain that the new rule on carry-over would not apply. 

Can someone take holiday during furlough?

It has been a long-established principle that when someone is absent due to sickness, they can still book, take and get paid for holiday.  In circumstances of furlough the rules are (unsurprisingly) less clear. 

Taking holiday may be attractive to someone on furlough as it means that they can ensure that their income returns to their normal level of pay.  For those earning more than £37,500 per year this will be a more attractive option. 

However, the problem that may arise is whether by taking annual leave interrupts the period of furlough – which must last for at least 3 weeks for reimbursement to be made.  For example, if an employee is on furlough for 2 weeks, then takes 2 weeks of holiday and then a further 4 weeks of furlough, it may be that the first two weeks of furlough will not be reimbursed. 

We do not have clear guidance from the government on this point and accordingly if any employer grants holiday during a period of furlough there is a real risk that they will not be able to make a claim for this period (which would be the first two weeks of furlough and the 2 weeks of holiday in the above example).  Further, even if the scheme does permit a claim in such instances, employers will need to be mindful that they will still need to meet the cost between the 80% reimbursed and the actual amount required to be paid under the contract for holiday. 

Can an employer force employees to use annual leave after furlough has ended?

Yes it can.  The employer can give notice to take statutory holiday in accordance with the notice requirements set out in the Working Time Regulations.  The notice must be at least twice the length of the period of leave that the worker is being ordered to take (regulation 15(4)(a)). There are no explicit requirements about the form that this notice must take.

If the country is still in a lockdown period after the 31 May (assuming that the scheme ends then) there is a potential argument that if an employer forces annual leave at this time that the employee cannot use it for rest and relaxation because of the constraints of lockdown.  We do not believe that this point is necessarily a strong one and accordingly would advise employers to continue to seek to enforce holiday after the end of the furlough scheme if they need to.

What about pre-booked holidays?

Given the problems that can arise if annual holiday is taken during a furlough period, employers should cancel all holidays that were previously booked by employees.

And bank holidays?

We are entering a period where there are quite a few bank holiday.  We have Good Friday and Easter Monday very shortly and then a further two bank holidays in May.  That is half of the usual 8 public and bank holidays that will occur during the period of the job retention scheme. 

We are advising employers to treat bank holidays in the same way as other pre-booked holidays that fall during this period – that is to ‘cancel’ them and to permit them to be taken at a later date instead.

What can the employee do during furlough?

Can they work for another employer?

Yes, they can.  The updated guidance published just yesterday (4 April) now expressly states that employees can go and work for other employers during their period of furlough.  Our template is already set up to enable this to take place but only specifically with the knowledge and permission of the employer.  Of course, whether you grant permission may vary dependent upon the type of work or employer that they work for.  For instance, you will be perfectly and reasonably entitled to refuse permission if they were planning to work for a competitor.  On the other hand, you may wish to positively encourage employees to work for farmers, food manufacturers and retailers, health care providers etc.

Can they do any work for you?

No, they can’t.  A condition of the scheme is that they cannot do any work for the employer that is furloughing them.  They can though undertake training during this period.  If they do undertake any training you must ensure that they continue to receive the National Minimum Wage during these hours.  This is the only time any employer needs to be concerned whether the 80% that is paid is above the NMW.

What about volunteering?

They can do voluntary work but this cannot be for the employer furloughing them. 

This guidance is correct as at 5 April 2020 and takes into account the updated guidance from the government published on 4 April 2020.  Please check with us and seek specific advice as more information is becoming available on a regular basis.