COVID-19 or 'coronavirus' has thrown up a myriad of questions for employers. Here we want to share with you some that we have been asked and how we have answered them so far.
The guidance from government is still sketchy so we have had to fill in some of the detail working from experience and first principles. We updated this article, in accordance with new government information, on Monday 6 April, 2020.
Frequently asked questions
- Can I carry on operating my business?
- What if my staff refuse to come to work?
- What if my staff refuse to stay at home?
- What is the new furlough scheme?
- What is the difference between furlough, redundancy and lay off?
- What can be claimed through the scheme?
- Do I have to top up the payments with the remaining 20% of pay?
- When will employees be eligible for the scheme?
- Does the furlough scheme cover all my staff?
- What steps do I take to put staff on furlough?
- What if a member of staff refuses to go on furlough?
- Can I rotate staff through furlough?
- Can I ask staff on furlough to undertake work for me?
- What about holiday and sick pay during furlough?
- Can I ask for volunteers for furlough?
- Can I reemploy staff who I have already made redundant?
- Can I mass furlough staff?
Can I carry on operating my business?
Certain businesses were mandated to close on 23 March 2020 (1) and others are entitled to carry on operating. If you do continue to operate you will need to ensure that you do so as safely as you can. As an employer, your normal duty continues to safeguard, so far as is reasonably practicable, the health, safety and welfare of employees. This will now include ensuring that staff practice social distancing (2).
Review your workplace carefully and consider practical measures like allowing staff to travel outside rush hour, moving desks further apart and placing temporary markers on the floor to indicate the 2 meter distance.
You will also need to factor in your duties to others such as clients, customers and suppliers.
What if my staff refuse to come to work?
You will need to explore the reasons for this carefully. Employees may be ill or self-isolating under government guidance (in which case they are likely to be eligible for statutory sick pay and possibly company sick pay depending on their contracts). They may also have concerns about contaminating vulnerable relatives or may have caring responsibilities (including for school age children).
The Government confirmed on 4 April 2020 that its furlough scheme (see below) is available for staff who are unable to work because of caring responsibilities.
Where possible, explore the potential for home working and other solutions and do not be too quick to assume that staff are taking advantage of the situation.
Employees who tell you that they won't come to work because they consider it too risky may also be protected both by the legislation relating to whistle-blowers and potentially other specific legislation protecting those who believe themselves to be in danger that is 'serious and imminent' (3).
What if my staff refuse to stay at home?
If you do not believe that you can keep your staff safe at work, then requiring them to stay at home is a lawful and reasonable order. If they refuse, then this is a disciplinary matter.
What is the new furlough scheme?
The details of the Coronavirus Job Retention Scheme are still limited, but according to details published to date (4), the scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. It is designed to support employers whose operations have been severely affected by coronavirus (COVID-19) and the HMRC portal is expected to be up and running by 30 April 2020. Employers can use this scheme anytime during this three month period.
In order to use the new portal employers will need to be enrolled for PAYE online.
What is the difference between furlough, redundancy and lay off?
Furlough is a short term leave of absence taken pursuant to the Coronavirus Job Retention Scheme. The concept has previously not been used in UK employment law.
Lay off and redundancy are often used interchangeably, but actually have different meanings in law. However, 'lay off' (5) (and its sister provision 'short-time working') are technical terms which describe an employer's contractual right either to send employees home on unpaid leave where there is a temporary cessation of work or to reduce their working hours (and pay). Clauses entitling employers to do this are common in some industries, so do check your contract carefully to see if you have this provision. If you do have this provision and wish to operate it, certain detailed technical rules apply. The scheme is unlikely to be attractive to employees as the new furlough scheme is much more generous.
Redundancy is a form of dismissal that arises in an actual or anticipated situation where the employer no longer has enough work for employees to do or a business or workplace is going to close (6).
Redundancies involving 20 or more employees at one establishment in a 90 day period are referred to as 'collective redundancies' and specific consultation rules apply.
What can be claimed through the scheme?
The scheme allows employers to use a portal to claim a grant for 80% of furloughed employees' (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated employer national insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
The revised guidance states that wage costs will include regular payments to staff including overtime, fees and compulsory commission but not discretionary or non-cash payments and not taxable benefits.
Where there is a salary sacrifice arrangement in place it is the post sacrifice salary that will form the basis of the 80% calculation. Where salary sacrifice is used to make pension contributions a salary sacrifice arrangement will limit the amount of pension cost that employers can claim through the scheme, unless the employer and employee agree to vary the salary sacrifice arrangement.
The £2,500 is the gross figure and employees will need to pay PAYE and employee's NI on this figure.
Grant claims will start from the day the person starts a furlough period, not for example when the decision to furlough them is made. Grants will be reduced pro rata for employees who are furloughed for only part of a pay period.
Do I have to top up the payments with the remaining 20% of pay?
The Government guidance makes it clear that whilst this is up to you and will not be a requirement of the scheme itself, you need to take account of your existing legal obligations to your staff under their contracts of employment. Few contracts are drafted in a way that enables an employer to impose a pay cut unilaterally. Proceeding without explicit agreement about reducing pay also runs the risk that staff might bring deductions from wages claims, even if they appear to have accepted the furlough arrangement itself.
See below 'What steps do I take to put staff on furlough?' for more detail about obtaining consent.
When will employees be eligible for the scheme?
When it was originally announced on 20 March 2020, the government referred to the scheme being available to employees who were 'otherwise at risk of being laid off'. This was widely understood to be employees who were at risk of redundancy. In updated guidance published on 4 April the Government recognises that businesses may not all be affected in the same way by COVID-19. The revised guidance makes it clear for example that a claim can be made in respect of staff who cannot work because of caring responsibilities resulting from COVID-19.
Given however that HMRC may well audit claims for reimbursement under the scheme and it is designed to protect those businesses 'severely affected by coronavirus', it may be wise for management to document their decision making, ensuring that they refer to their business being severely affected and that the staff who are put on furlough were otherwise at risk of being made redundant or were unable to work for other COVID-19 related reasons, such as having to look after young children.
Does the furlough scheme cover all my staff?
The scheme will be available in respect of staff who were already on your payroll for PAYE purposes on 28 February 2020. Provided they are paid through a PAYE payroll, this may include:
- full-time and part-time staff, as well as staff on agency contracts and other flexible or zero-hour contracts;
- staff on fixed term contracts. The new guidance is also explicit that you can extend the fixed term of a furloughed fixed term employee without breaching the terms of the scheme;
- directors, office holders and LLP members;
- staff employed by individuals, such as nannies;
- apprentices, who can continue with their training during a furlough period provided that they receive at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage whilst undertaking training; and
- staff who have already been made redundant or stopped working for you since 28 February 2020, if you decide to rehire them. This suggests that staff who have resigned of their own accord but apply to be rehired would be eligible for the scheme.
It will not cover self-employed staff, for whom the government has announced a separate scheme (7).
What steps do I take to put staff on furlough?
Step 1: Select staff
Bear in mind that furloughed staff cannot do any work for you whilst on furlough (except for some training) and that you have to furlough staff for a minimum of three weeks at a time.
In some cases it may be obvious whom to select, eg employees who cannot perform their roles at home and are no longer needed in the work place or where the workplace has closed. In other cases, where you have seen a drop off in work and need to select some employees amongst a group of employees, we suggest developing fair and non-discriminatory furlough selection criteria similar to the ones used in a redundancy situation. For other staff, it may be more appropriate to agree reduced hours and pay rather than putting them on furlough, but bear in mind that staff who are working (even for limited hours) are disqualified from the furlough scheme and may therefore feel unfairly treated. You may want to make sure that anyone whom you ask to continue to work is at least as well off as anyone who is furloughed.
Step 2: Consider whether you need staff consent
This will depend on whether you have a contractual right to send staff home with no work to do and no pay.
If you do not have a contractual right to do this (and most employers do not), then you will need consent. We anticipate however that consent will be forthcoming from most employees where employers are agreeing to top up the minimum furlough reimbursement available from HMRC to 100% of the employees' salary and will be covering any other employee losses, such as the value of benefits, bonuses and commission. If all of this is going to be covered, even if consent is not forthcoming, the risk of claims is low, because staff will not have suffered any losses.
As discussed above, if you are not intending to top up in this way or there are likely to be some financial losses to employees then you will need employees consent to this variation of their contract. This process will involve discussing the options (which are likely to be furlough or redundancy) and then documenting that discussion.
You should set a clear deadline for responses to any request for consent. If staff are adamant that they will not agree to a pay cut you may need to consider entering into redundancy discussions. Imposing a pay cut unilaterally runs the risk of unlawful deduction from wages claims, and potentially breach of contract claims from some employees.
Step 3: Document the new arrangement
The revised guidance states that to be eligible for the grant employers must confirm in writing to their employee that they have been furloughed. A record of this communication must be kept for five years.
We recommend a short letter documenting the furlough agreement and in circumstances where you are varying the contract and not topping up, or making any other changes to the contract, you should ask for a copy of the letter to be signed and returned to you.
What if a member of staff refuses to go on furlough?
If you have no contractual lay off clause (see above), then you have two options:
- make them redundant instead, but bear in mind that this will involve the cost of redundancy payments and notice pay.
- impose the variation by means of a dismissal and an offer of re-engagement, but seek specialist advice on how to do this appropriately.
Can I rotate staff through furlough?
Yes, the minimum length of furlough is three weeks. You can put staff on furlough for three weeks, then take them off furlough and bring them back into the work place / ask them to work at home. This may well be a fair way of dealing with a team in circumstances where you are facing a longer shut down.
Can I ask staff on furlough to undertake work for me?
No, staff on furlough cannot provide services or generate revenue for you, even on a voluntary basis. However, during furlough they can undertake volunteering for other organisations (including pursuant to the NHS volunteering scheme announced on 24 March 2020 (8)). They can also undertake training for the purposes of their work for you, provided that if the training is of value to you, you must make sure that they are receiving at least the National Minimum Wage for the hours spent in training. The National Minimum Wage will not otherwise apply to furloughed staff.
What about holiday and sick pay during furlough?
The revised guidance does not deal with holiday but in our view holiday continues to accrue during furlough. The rate at which it is paid will depend on whether the member of staff works regular hours and whether the contract has been validly varied to reduce the rate of pay. The calculation will be more complex for someone who works variable hours.
There is no explicit guidance on what happens if a person falls sick during furlough, but the guidance does say that a person on furlough is still eligible for statutory sick pay. This implies that the person should be paid under the normal sick pay rules in the contract of employment and it may be that staff need to be switched out of furlough and onto sick pay if they fall ill. Further guidance on this is awaited.
Can I ask for volunteers for furlough?
We don't see why not as this is good practice in redundancy situations.
Can I reemploy staff who I have already made redundant?
Yes, if they were made redundant after 28 February 2020.
Can I mass furlough staff?
Yes, there is no upper limit on numbers of staff you can put on furlough.
If the discussions about furloughing staff involve 20 or more employees in one establishment, you might have to consider whether at some point in the process you need to consult collectively (see the meaning of 'Redundancy' above). This could arise if redundancies are a real possibility, or you cannot obtain staff agreement and think you may have to dismiss and rehire.
You will need to take advice if you are in this situation to avoid potentially expensive penalties for failing to consult properly.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.