Do you still have outstanding questions about furloughing employees? Don’t worry – you’re not alone. The employment team at JMW have recently advised a number of their clients on the Government’s Coronavirus Job Retention Scheme. Based on their experience, there still seems to be some uncertainty surrounding the Government guidance, yet it’s vital that employers understand how to use the scheme to make sure employees are furloughed effectively and in compliance with employment law.
Watch the full replay now via the video module above or read a summary of some of their responses below.
How do you go about choosing who should be furloughed?
Some businesses will decided to furlough all staff but for most, it won’t be the whole team. That can then present tricky issues both legally and in terms of managing employee relations.
Look at the reason you need to furlough some people in the first place. It should apply mainly to functions of the business that are going to be the most affected, where the role is perhaps less required in this environment. That justification will be important when explaining your choices to your employees. It’s a good idea to put your reasons in writing when articulating your decisions to employees so you’ve got a record of why it was done.
If you’ve got a situation where a particular team has a reduced workload but still enough work for half the team, we recommend going through a selection process. You need to be able to objectively justify why you’re choosing certain people to be on furlough and certain others to carry on working.
Employment protections don’t go away because of this situation, so you need everything in writing around the process and how decisions were made, in case you get a situation where you are accused of making a discriminatory decision.
Focusing on the skill sets that are needed and people who are really strong in a particular area that is still moving for the business is a good objective reason for choosing them to remain working while others remain furloughed.
Do you need employees’ consent to put them on furlough?
The simple answer is almost all of the time, yes.
Furlough is basically a brand new employment status – and you’re enforcing that change. You’re asking them not to do any work and you’re also, in most cases, reducing their pay – which are quite fundamental changes to the employment relationship.
Forcing an employee onto furlough without a discussion or getting consent would likely be seen as a fundamental breach of their employment contract.
It’s strongly recommended that you get an employee’s agreement in writing, given that there is some ambiguity in the guidance. Just on an email is fine to give you a paper trail if you ever need it further down the line.
What if an employee objects to being placed on furlough?
We would not recommend forcing that through without getting the employee’s consent.
If an employee does object following that conversation then the first port of call is probably a frank conversation. The reality is that most employers aren’t using the scheme to abuse the system, they’re looking to preserve the long-term future of their business and jobs. Be honest about this with your team. The alternative would be to take that employee through a redundancy process, where they lose the role entirely.
How long can you furlough employees for?
The short answer is you can place employees on furlough for a minimum of three consecutive weeks.
So if you wanted to, if you had employees that may need to work after three weeks, you could bring them back. But it needs to be for those three consecutive weeks at a time and that also ties in with when you can apply for the funding as well.
They can’t do any work for you at all. They can only work on their own personal development, for example going on training webinars. They can volunteer or work for another company (depending on what it says in their employment contract – which still applies), but not your own.
If there are business critical tasks you need furloughed employees to do, they should be working.
Is furloughing completely cost free for employers?
Yes, from a salary perspective because National Insurance contributions and pension are covered by the grant. But beyond the salary, you still have the usual employer liabilities, e.g. paying them to cove a notice of termination, and cost considerations linked to holidays.
What happens with holiday entitlement?
This has been such a hot topic because even the government themselves have said that the guidance is evolving around this.
A business can take the decision not to allow employees to take holiday whilst being furloughed as there is a cost associated with doing so. If you’ve agreed with your employees that you’re just going to pay them 80% or up to the £2,500 per month then if you allowed them to take holiday during the furlough period you would have to top it up to 100%.
So there’s a commercial consideration to be taken really if you’ve got employees who you know are going to return at the end of the furlough period it might be better from a cost perspective to say that they’re not allowed to take any holiday during that period.
However, if you think that there might be a scenario where employees may need to be redundant at the end of the furlough period then it might be better to allow them to take holiday during that period and top up the 20% because otherwise when it comes to making them redundant, and you’re going to have to pay out 100% of their accrued untaken holiday.
So, it’s about weighing up Hhw likely it is to be you’re going to be in that scenario and whether you want to top up the 20% and allow them to take holiday during the furlough or whether you want to just let them accrue it and then take it afterwards if you think there is an a high risk that there will need to be redundancies.
Can you make a furloughed employee redundant?
In theory there is nothing that prevents you from doing so but you should have an explanation as to why you would want to do that given that applying for the scheme is largely free for an employer. It’s designed to try and keep the business going as designed to try and avoid redundancies.
The only scenario I could think of where you might do it beforehand is if the owner decided they want to close the business permanently and do something else.
The thing to remember is that the employees preserve all their employment rights whilst furloughed. So the redundancy process would need to be the same as normal, i.e. following a fair consultation process.
At the end of the furlough scheme redundancies will sadly be a lot more likely as not all industries will pick up immediately.
In that case, if you’ve got employees with over two years’ service, you’d follow the usual consultation process. Make sure you’ve selected them fairly and done a scoring exercise against people in similar roles. Invite them to a consultation meeting and see whether they have any proposals as to how to avoid their redundancy. I think lots of people will say they’re happy to take pay cuts. I think people now will be quite desperate to try and keep hold of their job because the alternative is not attractive. So, they come up with all those proposals. You’re not obliged to agree, but you are obliged to consider.
If after consideration you’ve decided actually you can’t avoid the redundancies then you can make them redundant. There is one school of thought that if you are going to go through a consultation process some businesses might want to start that towards the tail end of the furlough period because if you do it after the furlough period after you’ve qualified, you’ll then have to pay people during the consultation period. In theory you could start the process perhaps two weeks before the end of their fellow period if that is the direction you felt your business was going in to save yourself the money.
What are the rules around how much commission gets paid if someone is on furlough and how is it calculated?
In the employment contract if commission forms part of their pay than that can be included for the purposes of calculating salary for the furlough.
If commission is variable (i.e. it differs every month), you should look at the last 12 months and take an average (or if they’ve joined more recently – an average of the time they’ve been employed). Commission yet to be earned cannot be included – you have to look backwards, not forwards.
The key point is that it has to be a contractual entitlement. If there’s any element of discretion over it, it shouldn’t form part of the calculation.
If I have furloughed members of stuff and I subsequently need them to return to work during their furlough period, can this be done? And if so, how does any refund of the furloughed salaries already paid work?
It’s an interesting question because there’s no standard furlough period. The only rule is that there has to be a minimum of three weeks furlough period for any employee that you apply on behalf of.
What the government isn’t anticipating is that you’ve applied, say, for a two-month period and then and then change your mind. They haven’t built that mechanism into the scheme.
So, our advice would be, if it’s possible if the application hasn’t been made yet, to try and do it in three week chunks to save you an administrative headache.
What you absolutely shouldn’t do is touch any furlough money, though, if you have brought the employees back. If it’s business critical, bring them back but set aside any money you already received from the government for them. Keep it separate somewhere so that you can show that you haven’t used it in any way improperly.
Can you put staff on furlough part-time?
One of the clearest rules around furlough at the moment is that for an employee to be on furlough, they have to be doing absolutely no work whatsoever. And the government hasn’t really moved on that point throughout even though there have been lots of very good practical challenges to that that position.
So the answer is quite simple. You cannot have someone 50% furlough and 50% working.
When’s the last date staff can be furloughed?
There’s no deadline to apply apart from the three week rule. So as it stands with the last day being the end of June, it would nneed to be three weeks before then.
When was the cut-off date for a new joiner to have joined for an employee to be able to claim furlough pay for them?
Initially 28th February but it was moved back to 19th March. You had to have notified HMR in respect of your PAYE and already paid them a salary payment by 19th March.
If I’m furloughed, can I produce videos for my business?
No, this would still count as work for your business. You can’t do any work for the company that has furloughed you. You can only work on your own personal development. You’re still able to join things like company update calls, you just can’t do any work. Depending on your employment contract, you might be able to do work for another company. Volunteering for another organization is also permitted.
Are any of the rules or obligations on either side different if the employer tops up the employee’s salary to 100%?
No. they are exactly the same.
We’ve initially committed to paying 100% of staff salaries but won’t be able to afford this forever. Can we revert back to the 80% government pay-out?
Yes. The best advice is to write to the staff. Make sure you’ve got a paper trail that says as you know, we’ve talked you up for as long as we possibly could, we paid your salary, but unfortunately the business is no longer in a position to continue that. We will continue to claim the 80% and we hope you understand that. That is enough, legally.
These were just some of the questions answered by the team on the webinar. To hear their full responses to all questions, please watch the recording above.
Anita Rai is a Partner and Head of Employment in JMW’s London office.
Anita has over 20 years’ experience in advising across the entire spectrum of employment issues to businesses, ranging from thriving start-ups to professional services firms (including the estate agency and property-letting sectors), as well as senior executives and founders. This gives Anita a unique, and well-honed insight into both sides’ perspectives enabling her to quickly devise powerful tactical strategies to achieve her clients’ goals. Anita is renowned for her intuitive, commercial no-nonsense approach. She is frequently described by clients as being a formidable negotiator who skilfully manages to achieve their end game. She naturally and swiftly builds trusted relationships with clients, many of whom tell her that is she is in their top ten speed dial numbers!
Kate Ledwidge is a Senior Associate in the Employment Team in JMW’s London Office, having joined from an international City law firm.
Kate specialises in providing strategic, commercial legal advice to employers, from fast growth businesses to multi-nationals. Kate has particular experience in dealing with complex employee issues and challenging HR projects, and has advised property and estate agency businesses on tricky HR matters. Kate’s approach is described by her clients as feeling like an extension of their in-house team, because of her focus on understanding their business in order to deliver real value. In addition to her UK practice, Kate has a wealth of experience as an international employment lawyer and provides labour law advice to businesses throughout the world.
Kate Martin is an Associate in the Employment Team in JMW’s London Office, having previously worked in an international City law firm for more than 5 years.
Kate has a significant amount of experience in advising a broad client base of employers, from the technology to construction sectors. Kate’s expertise ranges from advising on sensitive employee mental health matters to restructuring projects and everything in between. Kate is always thinking about the most strategic, pragmatic and commercial way of achieving her clients’ objectives, and her advice is always tailored to the business and its sector – it is never a one-size fits all when it comes to employment and labour law matters. Kate not only has experience in advising on UK employment law matters, but she has also built up extensive experience in providing labour law advice to her clients who have decided to operate in jurisdictions outside of the UK.
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