What does it mean to be furloughed?

The UK government recently announced financial support to employers, so they can pay their staff during the COVID-19 lockdown. Kate Palmer of Peninsula explains what is meant by ‘furloughing’ and how employers can access the Coronavirus Job Retention Scheme.

Furlough Coronavirus Job Retention Scheme

What does furlough mean?

‘Furloughing’ means putting employees on a temporary leave of absence where they do no work but are still retained on company books to be brought back to work when needed.

What is the Coronavirus Job Retention Scheme?

The government announced its plans for financial assistance to help employers retain employees during the coronavirus outbreak a fortnight ago. It’s called the Job Retention Scheme and under the scheme, employers place their employees on 'furlough'.

The guidance sets out that organisations will need to designate which of their workforce will be furloughed employees and then submit that information to HMRC, along with each employee's earnings. Information will be able to be submitted through an online portal.

Employers who furlough staff will be able to obtain a grant from the government to cover 80 per cent of furloughed employees' wages, to a maximum of £2,500 per employee per month. It is expected that the first grants will be paid by the end of April 2020, and they will be backdated to 1 March 2020. The scheme is initially intended to run for three months but may be extended.

Who is covered by the Coronavirus Job Retention Scheme?

All businesses can access the Job Retention Scheme, whether the virus has severely impacted the company or not. This is true regardless of the size of the business and the sector it operates within. For workers to benefit from the grant, they must have been on the organisation's PAYE from at least 28 February 2020.

All workers in this position are eligible, including those on zero-hour or temporary contracts. Workers who were made redundant prior 28 February can also be re-employed and placed on furlough instead. The grant will still cover their wages for this period.

New guidance from the government has also confirmed that employees can get new work for a different employer while they are on furlough. However, their employer’s policy on this will still apply, and this may place restrictions on someone finding a second job. Existing rules will likely mean that second jobs which create a conflict of interest will be excluded, and employers would be advised to put in place additional rules that require employees to be available when the employer needs them back in.

The position on employees who have been advised to ‘shield’ has also been cleared up by the government. Shielding is where an employee has been advised by the NHS to stay at home for 12 weeks and avoid face to face contact due to a health condition. Guidance now states that people who are shielding can be furloughed where they cannot work from home and would otherwise have to be made redundant.

What is the process for furloughing?

The guidance states that the ability to furlough an employee depends on their contract. It is not likely that employee contracts will include a specific right to use furlough, however contracts may contain a right to lay off employees on no pay already. In either case, even when there is a right to lay off, it is still advisable to gain the employee's agreement to furlough to avoid any confusion in the future.

When faced with potential redundancies, a period of leave with 80 per cent pay may seem an attractive option to employees. If an employer has already taken the step to utilise lay off, they can get in touch with those employees and agree to change their status from lay off to furlough. They still wouldn't be provided with any work, but their pay arrangements would be changed from nothing, or the payment of statutory guarantee pay, to 80 per cent wages.

Workers should not undertake any work for the organisation while on furlough that amounts to making money for it or providing services to it. If workers are asked to undertake training while on furlough, they should be paid in line with the national minimum wage even if this is above the 80 per cent.

Can I force an employee to be furloughed?

Employers need to designate employees as furloughed, which means it is their choice. However, if businesses are not placing everyone on furlough, they should consider carefully who it should be and whose skills will continue to be in demand through this challenging period.

While it may be assumed that the best thing to do is furlough those employees labelled as high risk by the government, forcing them on to furlough without their input, and therefore forcing them on to 80 per cent wages, may result in discrimination claims from those who allege they were made to do it because of their age, disability or pregnancy.

Where employees need to be selected for furlough, it may be best to ask for volunteers across the workforce. If any high-risk employees, who had previously been risk assessed as fine to still be in work, put themselves forward, it may well be appropriate to choose them first. There does not appear to be a maximum or minimum number of employees who can be furloughed.

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About the author

Kate Palmer is Associate Director of Advisory at global employment law consultancy at Peninsula.

See also

What does the COVID-19 'lockdown' mean for UK employers?

How UK businesses can support the fight against Coronavirus (COVID-19)

Government announces new carry-over and holiday leave regulations for workers

Find out more

COVID-19: guidance for employees (GOV.uk)

Image: Getty Images

Publication date: 2 April 2020

Any opinion expressed in this article is that of the author and the author alone, and does not necessarily represent that of The Gazette.