On Friday the British government announced that, to avoid unnecessary layoffs or redundancies during these uncertain times, they will step in and help to cover the cost of salaries should your business not have enough work for your employees and no way to pay them. When this is all over, and it will be over, your business will need your employees to come back to work so business can carry on as usual. The cost of re-recruiting alone will be a significant burden to your business, and we don’t believe there will be much resistance from employees who are told to go home and not think about work for a little while. We have put together some initial guidance for you and will update you as soon as the information becomes available to us.
What is Furlough Leave?
Furlough Leave is a temporary layoff where the employee remains employed by you but doesn’t come into work for a period of time. If an employee is ‘furloughed’ they are not required to, and should not, carry out any work for you. Furlough Leave is used when business circumstances change and there is a temporary requirement to reduce staffing numbers. Such as now. An employee is not usually paid while on Furlough Leave but it is an alternative to total redundancy and, if done correctly, can be a useful option for businesses to use, especially if they don’t want to lose great staff.
The Chancellor announced, on Friday 20th March 2020, that the government would be covering some of the cost of salaries for those who have been furloughed during the COVID 19 pandemic. This scheme has been named the Coronavirus Job Retention Scheme. This scheme will be available to all UK businesses. It is not quite clear how the scheme will work as yet, but employers will be required to notify HMRC that employees have been furloughed and HMRC will reimburse up to 80% of an employee’s salary up to a cap of £2500 per month. Employers can, of course, chose to top up salaries to 100% should they have the resources to do so. We are awaiting further details on the online portal that HMRC will set up. The funding will initially be for three months, although this may be extended.
The Legal Bit:
If you don’t have a lay off clause in your current contract of employment, you will need to consult with employees and ensure that they agree to being furloughed. As with redundancies, an ‘at risk’ meeting should be held, where you advise the employee that to avoid redundancy, they are at risk of being furloughed. As up to 80% of salaries will be covered, we are not expecting much resistance from median salary level employees. Employees who earn above the median level may not wish to be furloughed, they may not want to, nor be able to, take a cut in their salary. Employment Law at the present time suggests that if employees do not agree to being furloughed, 100% of their salaries will need to be paid until an agreement can be reached, so be prepared to negotiate if you are required to do so. Other alternatives could be short time working or, as a last resort, redundancy. All other employment terms will remain the same during the furlough period, such as holiday accrual and pension and National Insurance contributions.
Employee Selection When designating furloughed employees:
the selection process must be must the same as if you are making redundancies. Employers must have a genuine business reason for selecting employees to be put on leave and must be able to justify that reason in an Employment Tribunal. The reason must not be discriminatory, unless on this occasion someone is classed as a vulnerable person because of their age, a health condition or pregnancy, and you must show a clear process for selection.
Writing to your Employees:
Once you have consulted with your employees and they have agreed to change their employment status, you will need to write to them to confirm this change and give them as much notice as is possible at this time. Should you need assistance with this, please contact us on:
Ashley @heeleyresourcing or call 07841255480