Furlough leave is an entirely new concept to employment law in the UK and a measure to help businesses ride out the economic crisis created by Covid-19.

The Coronavirus Job Retention Scheme recently introduced by the Government to provide 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. The period of furlough must last 21 days in order for the pay to be reclaimed from HMRC.

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 an employee remains subject to existing employment law and, depending on the employment contract, may be subject to consent and/or negotiation.

Our quick summary of steps an employer must take:

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

  2. Notify those employees of the intended change – be careful with the wording!

  3. Consider whether it’s necessary to consult with employees – either individually or in some cases employee representatives or trade.

  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. Consent may therefore be required which is something we can assist with.

  5. Confirm the employees’ new status in writing – You must have agreed in writing that the employee is to cease all work. 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.

  7. Ensure that the employees do not carry out any further work – whilst they are furloughed. This is important as HMRC will not consider an employee furloughed if they are found to have worked for the employer or anyone connected with the employer and will recover sums paid out if an audit reveals this.

Down the track

From an employer perspective, after this crisis there is likely to be an increased focus and desire to update contracts of employment and staff handbooks. This may include introducing express furlough leave clauses and related conditions to pay and benefits, such as holiday accrual and pay. They may also wish to introduce or beef up express lay off, short time working clauses, by way of example.

Home working policies are also an option to consider in terms of making them more robust.

Unfortunately we are seeing redundancies as a result of coronavirus and we expect these to continue, alongside restructuring. For any advice on employment matters in relation to COVID-19, if you encounter difficulties with employees in this situation, please contact us on 0845 287 0939 or email us.