In this guide I explain the government’s furlough leave scheme.
Under the Coronavirus Job Retention Scheme (the furlough leave scheme), employers are receiving grants for employees who are furloughed, placed on temporary leave and not working.
The scheme has been extended until 30 September 2021.
In order to be eligible for the grant employees have to be furloughed because of circumstances arising as a result of the coronavirus.
Who can apply for furlough leave?
Any UK organisation can apply to furlough employees including businesses, charities, recruitment agencies and public authorities.
Agreement to be placed on furlough leave
Unless the employment contract allows for the employer to place employees on temporary leave, employees must agree to being furloughed. Employees are likely though to agree given the alternative scenario such as redundancy. Employers must confirm to employees that they have been furloughed and keep written records for five years.
If the employer is varying the contracts of twenty or more employees the employer will need to carry out appropriate collective consultation obligations,
If employees refuse to be placed on furlough leave employers could consider other options, which might include the redundancy route.
What can employers claim for furlough leave?
From 1 July 2021 the government will pay 70% of wages up to a maximum cap of £2,187.50 for the hours the employee is on furlough leave.
From 1 August 2021 the government will pay 60% of wages up to a maximum cap of £1,875 for the hours the employee is on furlough leave.
For claims from 1 July 2021 employers must top up employees’ wages to make sure they receive 80% of their wages (up to £2,500) for the hours they are on furlough. The caps are proportional to the hours not worked.
Employers are not obliged to top up salaries further. However, if the employer does not wish to pay the employee their full original salary the employer will need to get agreement from the employee.
The government has indicated that furloughed employees shall continue to accrue holiday leave in accordance with their employment contract and may take annual leave while being furloughed. Notice is required if an employee wishes to take statutory holiday. The notice that the employee has to provide needs to be at least twice as long as the length of the period of leave asked for. If an employer provides the correct notice, an employer can refuse the holiday request. The required length of minimum notice is as many days ahead of the holiday as how many days that the employer is not allowing.
Employers will have to pay statutory annual leave entitlement of 5.6 weeks’ at the normal rate of pay or where the rate of pay varies, calculated on the basis of the employee’s average pay in the previous fifty two working weeks. This means employers being required to top up salaries when employees take statutory holiday leave during furlough leave. The employer and employee, however, can agree to vary holiday entitlement above the statutory minimum entitlement.
Employers may require employees to take holiday during furlough leave. The notice that the employer needs to provide must be at least twice the length of the holiday.
Generally, employees are not able to carry over statutory holiday to the next year but there are some exceptions, such as due to maternity leave or sickness. Also, where it is not reasonably practicable for the worker to take some or all of the statutory holiday due to the effects of coronavirus the untaken amount may be carried forward into the following two leave years.
Selection for furlough leave
If employers decide to put part of the workforce on furlough leave it will be important to carry out a fair and objective section criteria. Employees could allege discrimination.
For periods starting on or after 1 May 2021 employers can claim for employees who were employed on 2 March 2021, as long as the employer has made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021, notifying a payment of earnings for that employee. Employers do not need to have previously claimed for an employee before 2 March 2021 to claim for periods starting on or after 1 May 2021.
Employers may allow employees back to work part-time. Employers will be required to pay for the hours the employee works and the hours not worked are to be covered by the furlough scheme.
If the employment contract permits employees to work for other organisations, furloughed employees may do so.
An employee receiving sick pay cannot be placed on furlough leave, though could be furloughed after that time.
HMRC has confirmed that statutory and contractual notice periods will not be covered by the furlough leave scheme from 1 December 2020.
How does an employer claim for furlough leave?
Employers can claim by using the government’s online portal.
This guide is intended for guidance only and should not be relied upon for specific advice.
The government has published detailed guidance.
Do check mattgingell.com regularly for updated information.