There is lots of information online regarding what support and information there is available for businesses during the Corona Virus outbreak, much of it is hearsay and gossip. Clare Fowler and Danny Smith, from our Employment Law department, answer some frequently asked questions in regards to what employers can/must do in relation to employees during this crisis.
Advice updated 15.04.2020
What is furlough and will it apply to my business?
A term taken from the United States, furlough is a process whereby your employees do not carry out any work but are paid. Prior to the current crisis, there was no such thing as “furlough” in the UK, but the Government has introduced a Coronavirus Job Retention Scheme (“CJRS”), otherwise known as furlough, a scheme where staff can be sent home and be paid by the Government up to 80% of their current salary (capped at £2500).
It is unlikely that you will have a contractual right to place your staff on furlough and under the latest Treasury Directive to HMRC you must obtain their written consent. Failure to do so may otherwise constitute a breach of contract if you implement furlough and reduce their pay accordingly, and it could also mean you are not eligible for the 80% grant. It is important to work with employees during this crisis, many of them will be concerned about their jobs. Placing staff on furlough could stop you having to go through a redundancy process and if the alternative is dismissal, most employees in practice are likely to agree.
Further information about the practical steps to furlough staff is contained within the latest Government guidance here – https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-businesses-through-the-coronavirus-job-retention-scheme
More detail is being added to this guidance all the time so it is worth regularly reviewing it. It now deals with the position of apprentices, those who are not employees in the legal sense but paid through PAYE (such as some Directors and office holders), and those who were dismissed after 28 February. The guidance now clarifies they can be rehired whatever the reason for dismissal (not just redundancy). It also makes explicit that if an employee has two jobs they can be furloughed from one and continue in the other, and if they are furloughed from one job they can start another job if their contract permits (but could not then be furloughed from that).
A further update has clarified that all staff on payroll from 19 March 2020 will be eligible for furlough (previously this was 28 February), that employees on all types of work visa can be furloughed, and that employees transferring to a new employer under TUPE can also be furloughed by the new employer. Importantly, it is now clear that it is not just employees who would otherwise be made redundant who are eligible for furlough, but anyone “affected” by coronavirus. This appears to give employers significant discretion when deciding who to furlough.
However, the guidance still doesn’t deal with whether annual leave can be taken whilst furloughed and if so at what rate it should be paid, although unofficial HMRC guidance in the form of a tweet suggests that annual leave can be taken and should be paid at full pay. That does not mean that employers can require employees to take all their annual leave during a period of furlough as this would defeat the object of the Working Time Regulations and is contradicted by the temporary provision that up to 4 weeks annual leave can be carried forward (exceptionally) into the next two years. The exception to this could well be Bank Holidays – it is likely that employers could require employees to take these as holiday if they are part of their contractual holiday entitlement although they would need to be paid in full.
It has also now cleared up that someone who falls ill whilst on furlough can (but does not have to) be swapped to SSP for the duration of their illness. And someone who is already ill and receiving SSP can be furloughed instead. This irons out some of the potential unfairnesses widely discussed in the first few weeks of the scheme.
Employers should note that the minimum period for which an employee can be furloughed is 3 weeks.
Despite government proposed support, I still need to make some staff redundant, can I still do this?
Yes. The law has not changed in regards to redundancy and the usual rules and processes continue to apply. You may wish to seek specialist advice before undergoing a redundancy process to limit exposure of the business and to ensure that the process is carried out lawfully. You will need to have a credible explanation as to why government funded furlough was not a suitable alternative to redundancy.
Do I have to pay my staff if I choose to close down my business to prevent the spread of the virus
You should consider asking your staff if they agree to be on furlough (see answer above). If you cannot afford to pay them the alternative would be dismissal for redundancy. You would need to pay notice and accrued holiday pay, and statutory redundancy payments. You will also need to re-recruit when the pandemic subsides if you intend to re-open your business.
Can I make staff work reduced hours/accept a reduction of pay
You will need to consult and work together with your employees. Unilaterally reducing employee’s hours or pay could amount to a breach of contract and may result in your employees resigning and claiming constructive unfair dismissal.
Can I stop my employees using their holiday allowance during the Coronavirus outbreak, or require them to take holiday?
Employers have a legal obligation to allow their employees to take their holidays during the year. However, they also have the legal right to refuse requests for holiday due to business reasons (as long as they are not preventing the employee to take their holiday completely). Therefore, it is possible to decline holidays and to refuse them for a period of time. For example, it is common in the hospitality industry to have a “holiday ban” during key trading times of the year i.e Christmas. This is likely to be found in the staff handbook or the annual leave policy.
If you are going to decline a holiday you need to give at least the same amount of notice as the holiday leave requested – so if someone has asked for a day’s holiday you need to give them a days’ notice that you are not allowing it.
The Government has recently announced an amendment to the Working Time Regulations allowing employers to permit rolling over annual leave over the next two holiday years. Unfortunately, the government’s updated guidance on furlough does not clarify whether or not employees can be required to take holiday or whether it should be refused during furlough, what happens about pre-booked leave, or the rate at which it should be paid (although see above for a “tweet” from HMRC that suggested leave could be taken at the employee’s request and should be paid in full). The safest way of dealing with this for now is probably to honour existing leave and pay it in full if at all possible, adding the length of the holiday to the minimum 3 week furlough period. If you cannot afford to do this, you should try to agree with your employee that the holiday will be cancelled, they will continue on furlough, and be able to take the holiday later on. They may agree to this if the alternative is redundancy
If a member of staff should be self-isolating can I send them home i.e suspend them?
All employers have a legal obligation to ensure their workplaces are safe. If an employee is at work who should be self-isolating then you may wish to consider asking them to work from home. If they do not wish to work at all then they can claim statutory sick pay or the furlough provisions may apply.
What if an employee complains that the workplace is unsafe?
You need to make sure all your risk assessments are up to date to take account of Covid19. If you consider you have taken whatever steps are necessary to implement government guidelines and your workplace is safe, you need to ensure this is carefully documented. Raising a concern about safety could in some circumstances be whistleblowing, and even if it is not employees and workers must not be dismissed or subjected to a detriment because they have raised genuine safety concerns. So you need to listen to the concerns and reassure the employee(s) concerned. If they continue to complain or refuse to work you should take legal advice before taking action against them.
What if an employee wants to work from home but I don’t want or need them to?
You may have legitimate concerns about safety, insurance cover, data security and the amount of work available, as well as about your employee’s wellbeing. You should set out clearly why you don’t want them to work and what the alternatives are. These may be furlough or redundancy. You may be able to agree that your employee carries out a different role that they could do from home on a temporary basis. You will have to make decisions based on individual circumstances and business need. You must avoid making decisions based on an employee’s “protected characteristics” (gender, race, disability, age, pregnancy, sexual orientation, religion/belief, gender reassignment, marital status) or, for example, the fact that have previously raised grievances. Keep a record of the rationale behind decisions you make during this difficult period to avoid claims of unfairness or discrimination later on.
What if an employee refused to work from home when I have asked them to?
Try to understand the employee’s concerns – if they don’t usually work from home they may feel they don’t have the right equipment or sufficient privacy at home, or lack confidence or training. If there don’t appear to be any legitimate concerns and the employee would simply prefer to be furloughed, they could be failing to obey a reasonable management instruction and you could treat this as a disciplinary issue. Again, clear record keeping is important – why do you need them to work from home, what assistance, guidance and reassurance have to provided to them, and what are the alternatives?
What if I need some staff but not others to continue working – how do I deal with complaints of unfairness?
This comes back to having a clear rationale for which roles are needed and why. Some staff may be vital for business continuity and to ensure there is a workplace for everyone to return to eventually. You could (but do not have to) consider incentives for people you identify as required to continue working. These do not have to be directly financial, but could include additional holidays once restrictions have been lifted. If you are considering offering this you should take financial advice on any tax implications for you and the staff concerned.
What if someone who is working falls ill and is only entitled to SSP whilst those who are not working still get 80% of their pay?
This does seem particularly unfair – but the legal position is just that. It would be up to you as an employer to decide whether to exercise discretion to enhance their pay in those circumstances or transfer them to furlough. It appears that the employer’s discretion on who to furlough is wide and doesn’t only extend to employees who would otherwise be redundant.
Do I have to pay pension contributions while someone is on furlough?
Yes. HMRC’s updated guidance issued on 4 April also clarifies that the reference salary (by which the 80% rate of pay is calculated) should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary. Where the employer provides benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.
Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.
Both the Apprenticeship Levy and Student Loans should continue to be paid as usual. Grants from the Job Retention Scheme do not cover these.
What if I have asked someone to work from home but the amount of work available starts to dwindle?
At present it seems as if you could discuss furlough with an employee at any point during which the scheme is in place, which is initially for 3 months, so you can keep this under review.
What are the possible issues I should be aware of if people are homeworking?
You need to carefully consider whether people can safely work from home or not, including an assessment of:
- Insurance – will they be covered by your insurance whilst working at home?
- Safety – do they have a safe environment to work in?
- Equipment – do they have the right tools for the job?
- Data security – can this be guaranteed? It’s far from ideal to allow employees to download work data onto their personal devices.
- Assistance – what do they do if something goes wrong?
- Performance – how can you monitor performance? Do you need them to notify you of start and end times, keep a diary, submit work to you for approval?
- Wellbeing – can you make sure someone is checking in with employees regularly so they feel supported?
If I put an employee on “furlough” can I still ask them to pick up bits of work when necessary?
The government guidance available to date specifically says that if you are on furlough you should not work for your employer. It is not clear what the penalty is but you may risk losing the funding for that person’s furlough.
Both Danny and Clare offer free consultations for businesses to discuss your specific needs, and If you would like to discuss your business with them you can email Howells to make an appointment at [email protected], visit our website or call us:
Sheffield: 0114 249 66 66
Barnsley: 0122 680 51 90
Rotherham: 0170 936 40 00
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