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  • Alexandra A

14 Questions Answered about 'furlough'

During uncertain times, we try all our best to give you some clarity and the support needed.

Therefore, your 'Furlough' questions have been answered:

Q1 - Who is the scheme applicable to?

· All UK employers can use the scheme.

· Employers must designate staff to become furloughed. They can apply this designation to anyone on their payroll ie anyone under PAYE. That includes zero-hours contracts.

· However, it doesn’t cover freelancers and other contract workers (i.e. those hired under a contract to deliver services rather than under a contract of employment).

· HMRC will give the employer a grant to cover (some of) the cost of the furlough. The employer will continue to pay the furloughed worker, but not necessarily in full (see Q3 below)

Q2 – What is a furloughed worker?

· Furlough isn’t a status with legal significance or precedent under UK employment law (at the moment). The best definition is that it is a temporary but mandatory suspension from work.

· Furloughed employees cannot do any work on behalf of their employer whatsoever.

· Unlike being made redundant, the furloughed employee has an expectation to return to work, either on a specific date or when specific conditions are met

· Furloughed employees should retain their employee benefits.

· Furloughed employees should retain their employment rights, so they cannot be made redundant without consultation process, and have a presumptive right to return to their current job role. They can also look for another job (and with your permission, could take on a second job)

Q3 - What level of the cost will the grant cover?

· A grant to reimburse 80% of all furloughed workers wage costs, up to a cap of £2500 per month.

· There is no obligation on the employer to make up the remaining 20% wages “but they may choose to do so”

· Zero hours / variable hours contracts calculation likely to be based on average earnings over a prior 12-week period or similar.

· It’s important to note that even with staff under furlough, there will still be salary costs for the employer to bear:

· Employer’s National Insurance Costs

· Employer’s Pension Costs

· The cost of any other employee benefits packages such as private medical insurance

· The cost of any salary that would fall above the £2500 cap for any higher-paid workers

· The cost of 20% if you decide to retain employee salaries at their current levels

Q4 - How long will the scheme last for?

· The scheme start date is 1st March

· It is currently designated to run for 3 months (so to the end of May at least).

· No guarantees beyond that, and I imagine a range of changes will be quickly made to the legislation if it is going to extend beyond June.

Q5 - How do I decide who to furlough and who not to furlough?

· Like redundancy, there needs to be a clear business rationale to furlough somebody – i.e. some demonstration that there is no work for the employee to do at this time.

· You will need to consider what skills you need to still retain in the business during this unusual time.

· Clearly some employees will be more willing to consider being furlough than others (some of which will depend on the level of salary you as an employer are willing to cover) – where there is a pool situation it might be reasonable to ask for volunteers for furlough, although you would still have to have a selection process for this, based on the business rationale.

Q6 - Should I just select employees who are in the health high-risk category?

· Like redundancy, there needs to be a clear business rationale to furlough somebody – i.e. some demonstration that there is no work for the employee to do at this time.

· You can’t select staff you think would benefit from furlough, as this would be potentially discriminatory behaviour and could lead to a discrimination claim.

· The decision has to be based on the needs of the business, not of the individuals concerned.

· If you have staff in a health high-risk category then you will need to manage this under a risk assessment process to support the worker to work as appropriate.

Q7 - Can an employee request to be furloughed?

· An employee can ask to be furloughed, but it is entirely up to the business to decide whether to make someone furlough. That decision has to be based on the needs of the business.

· Nor can you make the decision under an ‘on request’ basis only as this may deprive some staff of being able to access the scheme.

Q8 - Why don’t I just move my people to part-time hours instead?

· Clearly there are lots of benefits in ordinary circumstances to do this, in terms of keeping staff involved and engaged but at reduced cost and hours.

· The furlough grant offer skews this decision – there is a now financial gain for both employees and employers by going on to furlough in order to keep them in the business.

· The downside of furlough is that you will have a mix of retained staff (existing hours or reduced hours), and furloughed staff (paid but not working). The impact upon people’s mental health if not working needs to be thought about, as does the sense of fairness between those who are furloughed and those who are kept working, especially if salaries are preserved.

Q9 – When do I give the staff notice of furlough? What if I have already made staff redundant?

· If you have already made staff redundant, then you should contact those staff and offer them the alternative of furlough instead (which presumably they’d have to accept to make this valid)

· The grant presumably will apply from the date of the change of employment status, so it makes logical sense to move staff to furlough as quickly as possible to access as much grant as possible.

Q10 - What kind of notice do I need to give staff?

· Although there is not a lot to go off, it appears that you have to consult with staff to change their employment status to furlough.

· Perhaps the best approach is to consider furlough as an alternative to making a staff member redundant. Under the redundancy process, you would ordinarily follow a consultation process to consider alternatives and ultimately agree on the change of employment status with the employee.

· I’d, therefore, suggest that as a minimum you must have a formal conversation with the employee, stating something along the lines of: “due to loss of activity your job would ordinarily be at risk of redundancy, but instead we would like to put your job into furlough status for the time being. You can have an expectation to return to work, either on a specific date or when specific conditions are met”

· I’d also suggest minuting this meeting, or documenting this conversation in writing straight afterwards and sharing that with the employee.

Q11 - What evidence will HMRC require to prove that staff are furloughed?

· Unknown, but reiterate the point that the scheme has been established as an alternative to redundancy. So the evidence I’d expect you’d have to provide would be that there is no work for the furloughed staff member, that you have consulted with the staff member and formally made them furlough, and that they have not done any work for the business whilst under furlough.

Q12 - Is it okay to keep in contact with staff whilst they are furloughed?

· Reiterate the point that the furloughed worker is not working, so you cannot ask them to do any work.

· It would seem reasonable to remain in contact with the employee via personal email addresses etc for social and wellbeing reasons – and because you will need to keep them informed of when conditions are likely to change that they can come back to work.

Q13 - When will the grant be paid, and how?

· Although initial mention from the government was to make payments by the end of April, no systems and processes have yet been put in place, it might be more realistic to expect payments by the end of May.

· The grant is paid to the employer, not the employee.

· The employer will need to continue to operate a payroll to pay the furloughed workers.

· This is likely going to cause some businesses a cashflow issue (salaries out before grant comes in)

Q14 - We are about to recruit someone – can we continue to take the person on to the payroll at the agreed date, and immediately furlough them?

· Logically yes, this would seem to be within the spirit of the legislation being proposed – however, there are risks to doing this, if the legislation when it does get published, excludes such arrangements.

· HMRC will want to avoid abuse of the scheme, such as employers bringing ‘bogus’ employees on to the books just to furlough them and claim the grant.

· In the situation in the question, you will be able to evidence a recruitment process that predates the furlough scheme, so that should be okay, but there are no guarantees your grant application will succeed. If the scheme rules end up requiring you to demonstrate employee earnings in February or March to successfully make a claim, then again there is a risk you won’t get the grant funding.

Closing remarks:

· Consider the financial impact of the different staff options: retaining staff but reducing their hours, furloughing them, or making them redundant.

· Consider the cash flow impact of the options presented.

· Consider the impact on staff morale and team cohesion over the long and short term of any decisions

· And whilst no-one can claim to be an expert in this field at this moment, we’re happy to try and help and advise you as best we can.

Disclaimer: These are just expressed opinions about the matters based on past HR and finance experience, so please do not take this as professional advice. (Matthew Brown, 25th March 2020)