Designating a person as ‘furloughed’ is an important step in claiming financial support through the Coronavirus Job Retention Scheme (CJRS), which promises to cover 80% of employment costs for an employee (capped at £2,500 per month).
Furlough is a new term used to describe the unique position that an employee will find themselves in while on the CJRS.
There remains uncertainty amongst employers about what this new term means and how a person is designated as furloughed.
To help provide some clarity we have tried to answer some common queries about the steps need to move an employee to furlough.
Q: Who can be furloughed?
The scheme applies to employees on a leave of absence, referred to as ‘furloughed workers’. These are employees who are on the payroll, but who might normally be laid off or made redundant due to a lack of work.
Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:
- full-time employees
- part-time employees
- employees on agency contracts
- employees on flexible or zero-hour contracts
To be eligible for the subsidy, an employee must not undertake work for or on behalf of the organisation. This includes providing services or generating revenue.
However, they can undertake other voluntary work or do training as long as it does not generate income for their business.
- Employees shielding in line with public health guidelines or who need to stay home with someone who is shielding, if they cannot work from home and would otherwise be made redundant;
- Employees who cannot work owing to caring responsibilities;
- Employees with more than one job who remain normally employed in their other employment;
- Directors of limited companies, including those who are directors of their own Personal Service Company, who may continue to carry out only their minimum statutory duties while furloughed;
- Off-payroll workers supplying services through a Personal Service Company in the public sector; and
- Salaried members of limited liability partnerships (LLPs).
Q: Can a company director be furloughed?
Yes, they can, but the furlough process itself is different for company directors and LLP members. Company directors can be furloughed following a decision of the board.
Meanwhile, the furlough of an LLP member may require an agreement between the LLP and the individual member concerned or a variation of the terms of the LLP agreement. The reference salary for the scheme will be the member’s profit allocation.
Q: Can I bring back redundant employees and those that have left and furlough them?
If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages through the scheme.
Q: How do I communicate this change in employment status?
Employers should discuss a change of employment status with their staff and make any changes to the employment contract by agreement.
An employer must write to their employee confirming that they have been furloughed and keep a record of this communication as it may be required as evidence in order to make a claim.
It may be necessary in some cases to negotiate an agreement with employees. If this is necessary then legal advice should be taken.
REMEMBER – Existing employment legislation remains unchanged and should be observed and followed to prevent a tribunal claim being brought by an employee.
Q: What happens if I want to furlough a large number of workers?
Employers look to furlough 20 or more employees will need to undertake a collective consultation with their workforce.
Although clear guidance isn’t available on this process yet, employers are being encouraged to follow a similar proves to a redundancy consultation. Employees should be given time to make a decision and respond to you once a consultation is launched.
Q: What happens if an employee doesn’t want to be furloughed?
Unfortunately, where a person doesn’t want to be furloughed, they may either need to be laid off or made redundant. Businesses should take care when doing this not to discriminate or create grounds for a claim for unfair dismissal.
Q: Can a person ask to be furloughed?
Employees cannot request to be furloughed. The scheme is only intended for those who would otherwise be made redundant. If that person’s job needs to be retained by the business then they cannot be furloughed.
However, employees who are shielding due to self-isolation guidelines or those who are caring for another, such as a child or vulnerable adult, can be furloughed.
Q: I don’t want to or can’t furlough staff members, are there any alternatives?
Not every business may want to furlough staff members and, in some cases, such as a person hired after 28 February, they may not be able to.
Under these circumstances, they can consider:
- Reduction in hours or pay
- Withdrawal of performance-related pay, such as bonuses
- Temporary lay off
- Short term working
- Unpaid sabbaticals
- Use of annual leave
It is important that you seek legal advice if you are unsure of what steps you should be taking to undertake any of these alternatives.
The portal for submitting information on furloughed workers for the CJRS opens on 20 April 2020. For more information about the steps needed to furlough a worker, please contact us.