We aim to provide advice on the various issues and scenarios around the challenge in managing staff during the coronavirus outbreak period in context of Employment Law. In addition, we will explore what government interventions mean for this area.
What is the government’s ‘Coronavirus Job Retention Scheme’? What is “furloughing”?
The scheme was announced by the government on 20th March 2020, with further details published on the 26 March and on the 3rd of April.
The Coronavirus Jobs Retention Scheme will provide a grant to employers to keep their workers on rather than make them redundant. Salaries will be paid at 80% of their current level up to a maximum of £2,500. All UK-wide employers with a PAYE scheme will be eligible. HMRC are working urgently to set up a system for reimbursement. They expect the first grants to be paid within weeks, but businesses will have to fund the initial payments to employees before reclaiming from government later.
“Furloughed” is a new term in this jurisdiction, although it’s a term that is already in use in other jurisdictions, such as the United States, in situations similar to a lay off. The newly published government information describes “furloughed” employees as “employees on a leave of absence”.
The newly published information from the government sets out:
• Who can claim
•Employees you can claim for
• What you can claim
• What you’ll need to make a claim
The newly published information also sets out other details, for example, that you can only submit one claim at least every 3 weeks, which is the minimum length an employee can be “furloughed” for. Claims can be backdated until the 1 March if applicable.
The newly published information confirms that employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer “furlough” to, equality and discrimination laws will apply in the usual way.
The newly published information also confirms that employees that have been “furloughed” have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
In light of school closures in England, who is classified as a key worker?
The key worker list has now been published by government. This sets out which workers are deemed essential to the UK workforce and able to continue to put children in school. The key message from government is that as many children as possible should be staying at home and socially distancing. However, schools will be open to some children if necessary.
The list is long and open to interpretation by employers and schools. For example, It's not crystal clear if one or two parents needs to be a key worker. It does say 'a parent' and is being reported as one, but many schools have been telling parents it will need to be both parents. It also says an employee will need to confirm that they are 'essential' with their employer. However, schools are also being asked to limit their intake. Business should therefore be aware of the need to reduce the number of children and school, ask how 'essential' their worker activity is to delivering core vital services and make sensible judgements with their employees, mindful of individual family circumstances and pressures on schools.
How do I access the funding for furloughed workers?
The Coronavirus Jobs Retention Scheme will provide a grant to employers to keep their workers on rather than make them redundant. Salaries will be paid at 80% of their current level up to a maximum of £2,500. All UK-wide employers with a PAYE scheme will be eligible. HMRC are working urgently to set up a system for reimbursement. They expect the first grants to be paid within weeks, and are aiming to get it done before the end of April. Accessing the scheme will involve firstly designating affected employees as ‘furloughed workers,’ and notifying your employees of this change and then once the new online portal is live, submitting information to HMRC about the employees that have been furloughed and their earnings. Our website will be updated when further information becomes available.
Will redundancies be considered unfair in circumstances where employers could have applied for the ‘Coronavirus Job Retention Scheme’?
The position under the Employment Rights Act is that in order for a dismissal for reason of redundancy to be considered fair, the reason for the dismissal must be redundancy as defined by the Act, and the question whether the dismissal is fair or unfair depends on whether in the circumstances (including the size and administrative resources of the employer’s undertaking) the employer acted reasonably or unreasonably in treating that reason as a sufficient reason for dismissing the employee. An employment tribunal must determine the question ‘in accordance with equity and the substantial merits of the case’.
The availability of the ‘Coronavirus Job Retention Scheme’ might well be considered a relevant circumstance, but all of the relevant circumstances should be taken into account, which could include, for example, the urgency of the business need to make redundancies, the views of the workforce expressed in consultation, the extent to which the details of the scheme are known, and, of course, the extent to which the availability of the scheme would avoid the need to make redundancies.
Again, it is strongly advised that employers who are considering making redundancies seek advice from a specialist employment lawyer or call the Acas Helpline.
Information and advice about managing redundancies in your organisation is provided by Acas here.
Can I “furlough” or lay-off my staff or put them on short-time working, on a temporary basis, in order to get my business through the Covid-19 pandemic?
The government guidance if furloughing categorically rules out having staff working on part time arrangements for this form of intervention. To quote:
“This scheme is only for employees on agency contracts who are not working. If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.”
Any furloughed staff therefore have to be conducting no work for the businesses whilst furloughed. However, the scheme allows furloughing to be revisited every three weeks – which does give businesses some flexibility to bring labour back into use if working within these time frames.
The government web pages, and those of Acas - the Advisory, Conciliation and Arbitration Service, are a starting point for employers and employees seeking advice in relation to Coronavirus (COVID-19).
Acas provides advice for if the employer needs to close the workplace: https://www.acas.org.uk/coronavirus/if-the-employer-needs-to-close-the-workplace
As Acas explains, a lay-off is when employees are not provided with work by their employer, and the situation is expected to be temporary. Short-time working is when employees are laid off for a number of contractual days each week, or for a number of hours during a working day.
Whether an employer can lay-off staff or put them on short-time working depends on the specific terms of the employment contract. As Acas goes on to explain, employers have a general right at common law to tell employees not to turn up for work (although some contracts of employment may provide otherwise) but they do not have a general right to decide, unilaterally, not to pay their employees, or to reduce their employees’ hours and pay them less, because work is not available. Employees can be laid off without pay, or put on short-time working, where there is a specific term in their employment contract allowing the employer to do so. That term may be an express term in the employment contract, or there may be an agreement that covers the issue which is incorporated into the individual employee’s contract of employment, or the term may be ‘implied’ if the employer can show, by clear evidence, that the right has been established over a long period by custom and practice. Whether or not an employer has a contractual right to lay-off or introduce short-time working is a question that would ultimately be decided by an employment tribunal (or court).
However, as Acas also explains, parties may agree to alter the employment contract terms so that the lay-off or short-time working is by mutual agreement.
The government’s ‘Coronavirus Job Retention Scheme’ now provides an option for employers and employees to agree changes to the employment contract so that employees may be placed on “furlough” and, in certain circumstances provided for by the scheme, the employer may recover 80% their usual monthly wage costs through the government scheme. The newly published information from the government confirms, however, that if an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme.
What if there isn’t a contractual right to “furlough” or lay-off employees or introduce short-time working?
If an employer has no contractual right to “furlough” employees, lay-off employees or introduce short-time working, a failure to pay wages during a period of “furlough” or lay-off or short-time working would amount to a breach of contract. As Acas explains, in those circumstances, the employee has four main alternatives. They may choose to accept the breach of contract and treat the employment contract as continuing, while claiming a statutory guarantee payment (on which, more below). They may sue for damages for breach of contract in the civil court or, in certain circumstances, in an employment tribunal. They may claim before an employment tribunal that there has been an unlawful deduction of wages under the Employment Rights Act. Or, they may claim that the employer’s action amounted to a dismissal (constructive or otherwise), giving rise to a potential claim of unfair dismissal and/or, if the employee is eligible, redundancy pay.
If the “furlough” or lay-off, or period of short-time working goes on for long enough, can employees apply for redundancy and claim redundancy pay?
Again, the terms of the employment contract will be relevant.
However the statutory scheme under the Employment Rights Act permits an employee to apply for redundancy and claim redundancy pay where they have been laid off or kept on short-time working, in the circumstances prescribed by that statutory scheme. That scheme permits an employee to apply for redundancy and claim redundancy pay if they have been laid off or kept on short-time working for four or more consecutive weeks (as defined), or for a total of six or more weeks in a period of 13 weeks, where no more than three of the weeks have been consecutive. If all the prescribed circumstances apply, the employee will be eligible for a redundancy payment as if they had been dismissed for redundancy. The same qualifying conditions apply in these circumstances - for example, the employee must have at least two years’ qualifying service. There is a prescribed process for employees to make claims and employers to contest those claims. An employer may have a defence available if, at the date of service of the employee’s notice of intention to claim (“NIC”), it was reasonably expected that the employee would, not later than four weeks after that date, enter into a period of employment with the same employer of at least 13 continuous weeks during which they would not be laid off or kept on short-time for any week – the relevant criterion here is what was reasonably to be expected at the date of service of the employee’s NIC – not whether business has improved by the date of any employment tribunal hearing. The law is unclear as to whether an employer can defeat a claim under the lay-off and short-time working scheme by making an offer of suitable alternative work.
The newly published information from the government regarding the ‘Coronavirus Job Retention Scheme’ states that employees that have been furloughed have the same rights as they did previously which includes rights against unfair dismissal and to redundancy payments. It states that when the government ends the scheme, employers must make a decision, depending on their circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
The statutory provisions of the Employment Rights Act are complex and the provisions of the ‘Coronavirus Job Retention Scheme’ add an additional layer of complexity. It is strongly advised that employers who are considering placing employees on “furlough”, lay-offs or short-time working seek advice from a specialist employment lawyer or call the Acas Helpline.
I’ve heard of “statutory guarantee payments” – what are they?
The Employment Rights Act also provides for a statutory scheme for guarantee payments aimed at employees (as defined) who are laid off. The statutory scheme offers some, limited wage protection: the current maximum is £29 a day (from 6 April 2019) with entitlement limited to five days in any period of three months. To qualify, an employee must have been continuously employed by the employer for at least one month. The statutory scheme applies where employees are piece workers who are not paid if there is no work, or where the employer has a contractual right to lay off without pay: the statutory provisions relating to guarantee payments do not in themselves give employers any right to lay off employees. There are certain excluded categories of employees. An employee may bring a claim in an employment tribunal for the whole or part of a guarantee payment they believe their employer has failed to pay.
The scheme applies where the employer fails to provide work on a day on which the employee would normally be required to work under their contract, and the failure must be caused either by a diminution in the requirements of the employer’s business for work that the employee is employed to do, or by some external occurrence that affects normal working – which could well be interpreted to cover situations arising out of the Covid-19 pandemic. Employees cannot claim in relation to days on which they were not normally required to work, for example, in relation to any day on which they would have been on holiday in any event, or off sick. There are other circumstances in which an employee will not be able to make a successful claim, for example if the employee has unreasonably refused an offer of suitable alternative work or has not complied with reasonable requirements to ensure that their services are available. Guarantee payments are payable only in respect of ‘workless days’ i.e. days (as defined) on which an employee is provided with no work at all – so they are not available to employees in situations of short-time working.
Claims for statutory guarantee payments may overlap with claims for statutory redundancy payments based on lay-off: if a lay-off lasts long enough, the employer may be liable to pay guarantee payments and a redundancy payment in respect of the lay-off.
Employees who are dismissed for asserting their statutory rights have protection under the Employment Rights Act.
Again, the statutory provisions are complex, with the provisions of the ‘Coronavirus Job Retention Scheme’ adding an additional layer of complexity. Again it is strongly advised that employers who may have obligations to pay statutory guarantee payments to their work force seek advice from a specialist employment lawyer or call the Acas Helpline.
What does it mean, “When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way”?
The starting point is that the Equality Act 2010 sets out nine “protected characteristics”: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation, and there are four main types of discrimination: direct, indirect, harassment and victimisation. The area of disability discrimination is more complex: there are two additional types of discrimination which apply solely to this protected characteristic: failure to make ‘reasonable adjustments’, and discrimination ‘arising from’ disability.
An employer could breach the Equality Act if, for example, they applied a criterion for deciding who to offer furlough to, which was indirectly discriminatory.
Acas provides a substantial amount of guidance on equality and discrimination law, for example its guidance document, “Equality and discrimination: understand the basics”.
There is also a substantial amount of advice and guidance provided by the Equality and Human Rights Commission.
Again, it is advised that employers who are making decisions in relation to placing employees on “furlough” seek advice from a specialist employment lawyer or call the Acas Helpline.
Will I need to top up the other 20% of pay for furloughed workers?
You can fund the difference if you wish but there is no obligation to do this under the scheme.
Is there a duration attached the furloughed status?
The scheme will continue for 3 months currently but will be reviewed by the government. We expect that you will be able to recall employees before 3 months should your business require them. The minimum term for an employee to be furloughed is 3 weeks. The scheme is backdated to 1st March2020 but only for employees who may already have been affected prior to the announcement on 20th March.
How will holiday entitlement and pay be treated during the furlough period?
Whilst an employee is furloughed, no other payments, such as holiday pay should be made. The employee is in effect temporarily ‘laid off’ as opposed to permanently laid off. Holiday leave will continue to be accrued during the furloughed period.
Can we use the scheme for staff whose start date has been deferred or where offers have been withdrawn?
No. You can only furlough employees who were on the payroll as at 28 February 2020.
Can we deduct pension, and other voluntary deductions from furloughed workers pay?
Employees will continue to make automatic enrolment contributions on qualifying earnings unless they have elected to opt out or have ceased savings into a workplace pension plan.
I have a member of staff currently on maternity leave. Can I put her on furlough and reduce how much I pay her?
Statutory maternity pay (‘SMP’) is governed by the Social Security Contributions and Benefits Act 1992. The amount of SMP is calculated on the basis of the salary actually received during the 8-week period ending immediately before the 14th week before the expected week of childbirth. As such, if an employee has already commenced their maternity leave, then the amount which they are entitled to receive will have already been determined. It would not be permissible to reduce the amount to which they are entitled by statute by seeking to put them on furlough. However in theory there is nothing to prevent you placing an employee on furlough who is on maternity leave. The government guidance on those on maternity leave is that: "If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.”
Thus it would appear that if your business offers enhanced contractual maternity pay, then it would be possible to furlough that employee in order to receive financial assistance with the payment of any enhanced maternity pay. However at present it is not entirely clear how this would work in practice. There is nothing in the guidance which would prevent a woman on maternity leave from agreeing to be furloughed, thus bringing her maternity leave to an end. This would likely prevent her from returning to her maternity leave at a later date.
Can furloughed workers be rotated back into the business?
As it is a separate claim for each period furloughed workers can be brought back into work on a gradual basis as required by the business recovery within the time parameters of the scheme (currently 3 months). Unless the government elect to extend the scheme other action may need considered beyond the initial term.
I have a member of staff who is now unable to come to work because they have childcare responsibilities looking after school or pre-school age children who can no longer go to school or nursery. Can I furlough them?
Previously the government guidance on this was unclear, but the latest government guidance from the 3rd of April makes it clear that you can furlough staff who are unable to work because of childcare responsibilities. The government guidance states clearly: “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.”
I am a Sole Director of a Limited company, can I furlough myself?
The government has now made clear that Directors of Limited Companies can furlough themselves. They can claim 80% of the income they paid themselves as income whilst a Director to the Company, up too but not exceeding the £2500 monthly threshold set out in the scheme guidelines. Directors cannot claim any dividends paid to themselves as income.
The requirements of economic inactivity within furloughing have been slightly loosened to allow Director’s too to fulfil their legal responsibilities as Directors under the Companies Act. The government guidance here is as follows:
“As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.
Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.
This also applies to salaried individuals who are directors of their own personal service company (PSC).”
How will this period impact my staff’s annual leave allowances at the end of the year?
BEIS have announced that rules on carrying over annual leave are to be relaxed to support key industries during COVID-19. Workers who have not taken all of their statutory annual leave entitlement due to COVID-19 will now be able to carry it over into the next 2 leave years. More information can be found here.
How to I carry out a Right to Rent and Right to Work check during the coronavirus outbreak?
Since 30 March 2020, Right to Work checks have been temporarily adjusted to make it easier for employers. Until further notice, employers do not need to see original documents and can complete Right to Work checks over video calls. Prospective workers are now able to submit scanned documents, rather than originals, to show they have the right to work. Checks continue to be necessary and it is an offence to knowingly employ or let property to anyone who does not have legal immigration status in the UK. Once the temporary changes end, employers will be asked to carry out prescribed checks on existing employees who started work during the pandemic. See here.
Where can I find more information on coronavirus and pensions?
If an employee is furloughed during a bank holiday are they entitled to take extra holiday when back to work or should they be paid full pay?
Yes this is correct – leave entitlement whilst an employee is furloughed will rollover.
If furloughed workers do not book any holiday time their statutory minimum holiday entitlement of 5.6 weeks per year will accrue while they are furloughed. The exact amount will vary depending on how much leave the employee has already taken. Employers can ask for employees to agree to any contractual (as opposed to statutory) holiday not to accrue during furlough.
Special provisions govern the current situation which mean that workers can carry-over up to four weeks’ holiday into the next two holiday years. It is thought that employers can alternatively insist employees take holiday during the furlough provided the appropriate notice is given and that employers would then have to pay the holiday pay in full and could claim for the 80% grant towards this. Employers compelling employees to use their holiday entitlement when they can only leave their house for limited purposes may be unpopular with employees. The interrelationship between leave and furlough is legally complex and has not been addressed in official guidance as yet.