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Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis. The scheme will cover wages payable from 1st March 2020 and will be in place for three months initially. All UK businesses are eligible.

 

What is a Furloughed Worker?

 

Furloughed is when employers ask employees to take temporary leave of absence due to the needs of the employer, but the employee is kept on the payroll.

 

It is understood, to qualify for this scheme, employees should NOT undertake work while they are furloughed.

 

The government’s comments appear to suggest that grants would not cover the wages of those employees working a reduced schedule due to the virus.

 

What will you need to do?

 

You will need to designate affected employees as ‘furloughed workers’ and notify the employees of this change to the terms of their contract.

 

Please note changing the status of employees remains subject to existing employment law and, depending on the terms of each employee’s contract of employment, may be subject to consultation.

 

You will then need to submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will be releasing further details in due course).

 

What will you receive?

 

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.

 

Employment Law Issues to Consider

If you have a contractual right to lay off staff, this will often only provide an entitlement to minimal payments under the statutory guarantee payment scheme.  It appears that under these new emergency measures, businesses will instead be able to lay off stay as being furloughed and instead pay them 80% of their salaries (subject to the cap of £2,500 pcm).

 

In the absence of a contractual lay off clause in the employee’s contracts of employment, employers who are considering making redundancies, should consider instead whether to furlough their employees with either a top up 20% payment so no deductions are made, or no top up payment.

 

If an employer lays off employees without a contractual right to do so, this will usually constitute a breach of contract.  However, this may not be the case if employees are laid off work, but do not suffer financially as a result.  This is because most employees do not have an implied right to be provided with work, but do have an implied right to pay. Additional considerations will need to be given for those employees who do have an implied contractual right to be provided with work as employers may not be able to impose furlough on those employees, even on full pay.

 

If an employer wishes to furlough employees, they should undertake the following steps:

 
  • Consult with employees and explain why the change is needed;
  • Listen to the concerns of employees and address any questions they may have;
  • Undertake a fair selection process; and
  • Obtain each individual employees’ agreement to the change to the terms of their employment contract in writing
 

An employer who imposes a contractual change without the employee’s express or implied agreement is likely to be acting in breach of contract and the employee will have the choice as to whether to accept the change, stand and sue or resign and claim constructive and unfair dismissal.  It should also be noted that for a contractual variation to be legally binding, some benefit (‘consideration’) should pass to the employee.

 

Other issues may also arise in relation to losses relating to enforced non-performance of work, e.g. commission and bonus payments and whether such payments are contractual or not.

 

Although it is not compulsory to use this scheme, it can serve as an alternative to a lay-off situation while helping both employees and workers to cover the many costs that are arising as a result of the outbreak. There are also no restrictions to be put into place; businesses of all shapes and sizes will be able to benefit from this.

 

Lamb Brooks Employment team are available to assist you with any questions you may have regarding developments related to the COVID-19 outbreak.

 

Call us on 01256 844888 or email enquiries@lambbrooks.com. Alternatively, you can speak to our online chat assistant, who is available 24/7 on our website.

 

Other articles you may be interested in reading:

April Employment Law Changes

Coronavirus: What Employers Should be Doing to Protect Their Staff

Home Working Procedures During the Covid-19 Pandemic

   

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice.  The law may have changed since this article was published.   Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.