Furlough leave – What is it? How is it implemented?

Furlough Leave is a word used to describe temporary “leave” or a “sabbatical” due to the special needs of an employer which may be due to economic conditions.

We are currently being asked to advise and assist many employers and employees as Furlough Leave is becoming used as a measure to help businesses ride out the economic crisis created by Covid-19.

The Coronavirus Job Retention scheme recently introduced by the Government provides grants to cover 80% of the salary of PAYE employees who would otherwise have been laid off during this current Covid-19 crisis. A key feature of the scheme is that employees must be on “Furlough Leave” rather than dismissed by the employer.  To be classed as on Furlough leave, an employee must be sent home by an employer, it is not available where the employee continues to work.

To claim under the scheme employers will therefore need to firstly select and designate affected employees as ‘furloughed workers’, and notify employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to consent and/or negotiation.

What steps must an employer take to put employees on Furlough Leave?

  1. Decide which employees to designate as furlough employees – there must however be a fair and lawful selection to avoid the risk of grievances and/or employment claims;

  2. Notify those employees of the intended change – the wording of such letter/email should be carefully drafted so as to adhere to existing employment laws and achieve the required objective;

  3. Consider whether it needs to consult with employees whether individually or in some cases employee representatives or trade unions (i.e. if there is 20 or more employees) – collective consultation may be required if 20 or more employees which has strict rules to be complied with to avoid claims. There may the possibility of using the special circumstances defence which we recommend you take advice upon.

  4. Agree the change with the furloughed employees. Most employment contracts will not permit an employer to reduce an employees pay, provide them with no work and change their employment status without agreement and consultation and consent may therefore be required for which we can assist with.

  5. Confirm the employees’ new status in writing. Ideally, the employer should advise how long it expects furlough leave to continue, however this may be difficult due to the current economic climate.  Employers may wish to put employees on furlough leave for an initial period, subject to review.

  6. Submit information to HMRC about the employees that have been furloughed and their earnings through the new online portal via HMRC; and

  7. Ensure that the employees do not carry out any further work whilst they are furloughed.

Can an employee request an employer to put them on to Furlough Leave?

An employee can request this but an employer does not have to agree.  It is an employer’s decision which employees to place on furlough leave if any.  It seems that it is also the employer’s decision whether to place employees on furlough leave or make them redundant.

Potentially redundant employees do not have a right to require their employer to place them on furlough leave as an alternative to redundancy however, it is hoped that many employees will see the new scheme as preferable to business closure and making redundancies.

It is currently unclear whether refusing to place an employee on furlough leave and making them redundant could amount to an unfair dismissal at the present time.

Does an employer have to top up the remaining 20%?

The COVID-19 guidance for employees currently states that “your employer could choose to fund the differences between this payment and your salary, but does not have to“.

Withholding 20% of an employee’s salary, will however, amount to breach of contract and unlawful deduction of wages unless the employee gives their consent.

A commonly held view at the moment is that it is expected that the majority of employees will consent since furlough leave is a better alternative than unpaid leave, lay-off, or redundancy.

If you require advice and/or assistance about Furlough Leave; the Coronavirus Job Retention scheme and/or are an employer that need helps with notifying and communicating with employees about the above or if you encounter difficulties with employees in this situation, please contact us on 0845 287 0939 or submit your enquiry online.

Farleys Solicitors LLP specialise in employment law & HR for businesses and employees. If you or your business requires HR & employment law advice and support in relation to the current Covid-19 / Coronavirus situation and/or in relation to any other specific area for example; contracts of employment, staff handbooks, absence from work, home-working, apprentices, recruitment, restructures, redundancies, lay-off; short-time working; disciplinaries, grievances, employee exits, settlement agreements; and Employment Tribunal claim or defence and representation.

Please note: the information contained within this article is correct at the time of writing. As the COVID-19 situation develops, guidance is subject to change and, while we will do our best to give you up to date information, it is always advisable to speak with a solicitor for specific advice.