Coronavirus Update: Advice on Furlough Leave

DLP are fielding hundreds of calls about Furlough and are providing the below guidance.

On Friday 20 March, Chancellor Rishi Sunak announced a Furlough Leave scheme to fund salaries for staff who would otherwise be laid off due to the COVID-19 outbreak in the UK.

First, Furlough is only for staff who are not working and who would otherwise be laid off. The purpose of Furlough Leave is to save jobs not subsidise working employees.

What is Furlough Leave?

• Furlough Leave is initiated by employers. Employees cannot request Furlough Leave.
  • The law (ie process) hasn’t changed. Only the payments are new. Think of it as layoffs with partial pay (or full pay if you choose).
• Employers identify employees to be placed on Furlough Leave and notify affected employees.
• Furlough Leave can only be initiated when there is no work.
  • An employee on Furlough Leave cannot work for their employer.
• Furlough Leave can be done with either (a) a relevant clause in the contract or (b) with employee agreement.
  • So, the first step is to get agreement from the employee or use a clause in the contract that allows the employee to be laid off.
• Once the employee has agreed (or you have activated the relevant clause), you should formalise Furlough Leave in writing.
• After Furlough Leave is formalised, the employer will notify the HMRC.
  • HMRC are in the process of setting up a portal for Furlough Leave notifications, which we believe will be available soon.
• Furlough Leave provides 80% of an employee’s salary up to £2,500 per month.
  • We don’t yet know if this includes pension, commission or holiday etc
  • Payments will be made for the first three months and will be reviewed for extension if necessary
• Employers can make up the additional 20% of salary if they choose.
  • In reality this may not be necessary as employees are likely to agree to be at home without working in return for 80% of their salary as opposed to being made redundant and terminated

The word Furlough doesn’t mean anything in prior law but is defined as a leave of absence. This could have easily been referred to as ‘home leave’ or ‘isolation leave’. Don’t get hung up on the term.

The purpose of Furlough Leave is to save jobs—but not to support work. Furlough Leave is a layoff with pay as opposed to a termination.

FREQUENTLY ASKED QUESTIONS

Can Furlough Leave be abused?

There is much debate about whether this is a secure scheme; ie how will Government know an employee is not working given that the employee might know a claim was made in their name?

There seems to be opportunity for abuse but hopefully this will be addressed when the legislation is finalised.

What issues are foreseen with Furlough leave?

The obvious issues are that when an employer needs skeleton staff it may choose its best staff to stay on and others to be laid off. This could lead to less successful staff working hard, arriving at the office and worrying about being effected. This is likely to lead to issues and potential discrimination / unrest with no obvious answers.

Can Furlough leave be backdated?

Payments can be backdated to those who were on payroll at end of February and can be claimed from 1st March (see below how to deal with those already laid off)

How do I deal with those already laid off?

Those who have been laid off should be contacted immediately to confirm that they are ‘reemployed’, their layoff is rescinded, and Furlough payments will be backdated.

This is just a brief update on what we know so far, and is subject to change but hopefully will help in the next few days.

Government published additional guidance on 26 March.