Furloughed Workers and the Job Retention Scheme
The Government has introduced a Job Retention Scheme for Furloughed workers. The term Furloughed refers to being sent home with no pay due to having no work. The term isn’t common in UK law as we have legislation around “lay-off”. In the UK “lay-off” means to send employees home / reduce their hours due to having a reduction in demand with or without pay dependent on contract. If it is without pay then then they can receive statutory lay-off pay of £29 per day for 5 days in any 3 month period (bugger all!) If the individual is on lay off for 4 consecutive weeks or a total 4 weeks in 6 then they can request to be made redundant.
The Governments Job Retention Scheme is designed to reduce redundancies; therefore, it only pays out for those that are sent home and are not working. Hence why they have used the term Furloughed and not “lay-off”. They have however, insisted that to implement this you must follow existing legislation around “lay-off”.
What is that Legislation and what are they offering?
Firstly, an individual is only eligible for a payment if they have had one month’s continuous service (paid through PAYE) prior to the lay-off. They must also be sent home and must not be conducting work from home.
To implement the lay-off you must have a lay-off clause in your employment contract (rare – more common in manufacturing organisations). If you have the clause you can simply enforce it as per your policy.
If you don’t have a contract clause then you must consult with your employees in order to gain their agreement. You must ensure that they individually sign a lay off agreement also. In normal circumstances the consultation period needs to follow a process and if more than 20 employees are impacted you would need to collectively consult, however given the current circumstances we believe that it is only practical to short cut this process. Ultimately your justification is valid, they will receive at least 80% of their salary for staying safe at home and they will not ultimately be made redundant which is the alternative option.
How do we get the money and how much?
HMRC are currently working on this and your Accountant / Payroll provider will update you as soon as they have the data. It is likely that there will be some form of refund process through the HMRC website. They have promised that this is imminent.
They have currently offered to pay for 80% of a furloughed employee’s salary (capped at £2500 per month includes NI and Pension). You do not need to make up the 20% but you can choose to do so if you can afford it.
Employees with less than a month’s service will not receive any government support therefore you can either pay for this yourself or you can terminate their contract (following a process).
Please be aware that employees on lay-off still accrue statutory holiday (FT 28 days inclusive of bank holidays). You can insist that they take pre-booked holidays. You will pay full pay for their holidays and then back on lay-off after. Alternatively, if you can’t afford that then they can accrue holiday and take later in the year.
Bank holidays are as normal. If they normally work them then they will be on lay-off. If they don’t or you are shut then you can opt to pay for the bank holiday day and the day reduces their overall accrued entitlement.
Should you need them to complete work duties from home or return to work you can do this. They will come off their lay-off and return on their normal salary.
We expect that there to be stringent anti-fraud measures and we warn all business owners that in the event of abuse of the system, they should expect public naming and shaming for what will be, after all, a form of illegal profiteering from a national crisis. We expect heavy penalties to follow for those who abuse this benefit.
Please contact us if you need any further help with agreements, support and advice.