That these are unprecedented times is clear, and keeping pace with the daily briefings from the Government and the impact on your business and staff that the current crisis brings is daunting.
One key and simple piece of advice to keep in mind during the coming weeks and possibly months when dealing with your people is that whilst the usual framework of employment rights and obligations still applies, having open and honest communication with staff is critical to being able to implement any changes swiftly and fairly.
The news on Friday 20 March that employers would be able to access funds to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during the crisis, will provide a safety net for many.
The guidance so far is scant but the aim of this briefing note is to set out what we know so far and answer some initial questions that you may have and provide advice on planning ahead.
What we know:
- All UK businesses are eligible
- The scheme will run for at least three months from 1 March 2020, but will be extended if necessary
To access the scheme you will need to:
- Designate affected employees as ‘furloughed workers’
- Notify your employees of this change
- Note that changing the status of employees to ‘furloughed’ remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
- Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)
Under the scheme:
- HMRC will reimburse to the employer 80% of furloughed workers’ wage costs subject to a cap of £2,500 per month per employee
- This is effectively a ‘grant’ for all employment costs subject to the cap
- Employees cannot undertake any work whilst furloughed
- Employers ‘may’ opt to pay the balance of 20% salary but are not obliged to do so in order to participate in the scheme
- At the moment HMRC does not have a system in place that can be used to reimburse employers but are saying it should be in place in April
The above is what we currently know from the brief guidance for both employers and employees on the Government website; our advice on the implications of this and practical issues that may arise we discuss below, albeit we should have more information as further detail emerges.
The practical implications and what we don’t yet know for sure
- The term ‘furloughed workers’ is not defined nor generally used in employment law as a technical term, so applies in this context only
- It is said to mean employees that might otherwise have been ‘laid off’ but whilst ‘lay-off’ is a technical term, in this context it would appear to be used in a more general sense and so may apply where you were contemplating a technical ‘lay-off’ or redundancies or simply periods of unpaid leave
- Unless you already have a ‘lay-off’ clause in the contract of employment (or in a collective agreement) which is relatively rare, in order to ‘designate’ employees as ‘furloughed’ you will need to communicate and even consult with those affected, as in principle you need agreement
- Practically, if circumstances within the business are such that employees would otherwise have faced unpaid leave or ‘lay-off’ or redundancies with no job to return to, staff are likely to agree to be ‘furloughed’ even if the scheme does not meet all of their salary
- If you are not proposing or are unable to make the 20% top-up, you should also make that clear when notifying
- If you are closing the business for a period and furloughing all staff, which may be the case for some businesses in the travel or leisure and hospitality sectors, for example, that is likely to be more straightforward
- If you are still trading but with reduced business and a need both to reduce overheads and the number of staff required accordingly, you will need to consider how you select those staff to be furloughed in a way that is fair, to avoid scenarios that may give rise to employee relations issues
- The decision to designate staff as furloughed remains in the hands of the employer rather than being something that an employee can request
- The tricky issues that may arise could include where you have workers identified as vulnerable through existing health conditions, those with child care issues due to school closures, those able to work but fearful or reluctant to do so as social distancing becomes even more of an imperative
- It is important to remember that this is not a scheme to pay the wages of employees who continue to work. If you are trading through difficult times and need to retain all of your staff but on reduced hours or pay, the scheme will not apply to meet that salary shortfall for staff
- What, if any, sanctions will apply if the scheme is misused, is yet to be outlined
If you are looking at a range of measures that may now include ‘furloughing’ staff for a period under the scheme, then open and honest communication about the needs of the business at this time, steadying the ship and preserving it and jobs until the current measures in place across the UK abate and trading returns to some degree of normality, will be key to preserving the confidence and goodwill of one of your key assets – your people.
Please note: Nothing in this article constitutes legal advice and we are not liable for any reliance on the information provided. This is a rapidly changing subject, and whilst correct at the time of writing, circumstances may have changed since publication. Please refer to Gov.uk for up-to-date advice on the Government’s response to this issue.
To find out more about anything covered in this article, or to discuss the potential impact of COVID-19 on your business, please contact Kerrie Hunt or another member of Thrings’ Employment and Immigration team.
See our update on statutory self-employment pay (24 March).