On Friday 27 March 2020, our founder Florence Brocklesby took part in a Coronavirus Legal Q&A webinar hosted by Stephenson Law. The webinar covered a range of urgent legal issues arising from the current emergency, including the government’s Job Retention and Self-Employment Income Support Schemes, rights and obligations of landlords and tenants and the impact of the crisis on commercial contracts. You can watch the webinar here.
We were inundated with questions on the employment law implications of Covid-19, many of which will be relevant to thousands of employers and employees across the country. Florence has answered the ones we were unable to get to during the webinar below.
We hope the guidance provided below is helpful, but in this fast-changing environment it cannot be definitive and should not be treated as legal advice. The answers provided below are correct to the best of my understanding as at 28 March 2020. Please take legal advice on your specific circumstances.
What is furlough? What is the Job Retention Scheme?
The government’s guidance for employers on the Job Retention Scheme is at https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme.
The draft legislation to implement the scheme (if any) has not yet been published, so answers below are based on my current understanding of the guidance.
The guidance states that the scheme is designed to support employers whose operations have been severely affected by Covid-19, so I would urge employers to be cautious in looking to apply it in other scenarios, such as where the business would have made redundancies for unrelated reasons, or to re-hire employees who have recently left the business for other reasons and would now like to furloughed.
As an organisation, can we make it a voluntary furlough?
Can people volunteer for furlough or must it be company-driven decision to remove the role?
If furloughing a portion of an office-based team, presumably it is OK to take into account the ability of team members’ ability to work flexibly / remotely while the office is closed? What support is an employer obliged to give to help employees work remotely? (IT hardware etc.)
How do we select for furlough – for example, if we have three employees fulfilling a function but only need one to work?
Can you let people volunteer to be furloughed?
An employer is under no obligation to furlough employees (although a failure at least to consider this option could potentially make a redundancy at this time unfair).
In some instances, it will be clear who should be furloughed, e.g. where a restaurant or shop has closed, it would be sensible to furlough staff employed in that location.
Where a business is considering furloughing a proportion of its workforce due to an actual or anticipated general downturn in business, however, it will need to consider how to choose whom it offers to furlough. Asking for volunteers is certainly a valid option, and as you are asking employees to agree a significant change to their terms, this will often be the most sensible option.
Where the business will be working remotely, it is also valid to take into account individuals’ ability to work remotely, whether this is due to the nature of their roles, their skills or their caring or other responsibilities; however, employers should absolutely not make assumptions about these, e.g. that a mother of young children will be unable to work. Clearly – given the need to move quickly – employers will not be able to undertake a detailed or lengthy selection and consultation process, but the key things are (i) to identify and apply objective criteria, which could include the nature of the role performed, experience, skills and cost amongst other factors; and (ii) to document at the time how this was done. I would also caution, if redundancies are subsequently required after furlough ends, that employers should not automatically select those who have been furloughed for redundancy as this is likely to be open to challenge.
If employees are going to be working remotely, ordinarily employers would need to provide all equipment required and undertake a health and safety assessment of the home-working environment, as well as consider the data protection implications. In the immediate emergency circumstances, in practice we would expect to see flexibility around this initially, e.g. employees being willing and able to log in remotely from their personal devices, but if the situation becomes the “new normal” employers will need to turn their minds to these more mundane but nonetheless important issues.
On the Job Retention Scheme, what is your interpretation of what the £2,500 would include? i.e. is this gross salary + ERS NI + ER pension?
Is the max £2,500 during furlough, gross or net?
Do employers have to pay NI and tax during furlough?
Do employees have to pay NI and tax during furlough?
Is it possible to stop paying PAYE and get a holiday on this?
Updated government guidance makes it clear that employers can recoup 80% of salary, up to £2,500, plus employer NI and the minimum employer pension contribution on this sum. The 80%/£2,500 is a gross figure, and will be subject to income tax and employee NI in the usual way. Employer NI will also be payable but reimbursed by HMRC. Businesses can defer VAT, but not PAYE, although those that cannot meet their tax obligations due to coronavirus are encouraged to contact HMRC to agree time to pay.
If we furlough a salesperson, can we ask them to do non-sales related tasks to support the business?
If we reduced a current full-time employee to part-time (so they are only completing 50% of their role) would we be able to use furlough scheme to pay and reimburse for the lost 50%?
No. Employees on furlough cannot perform any work for the business. If you would like to benefit from the scheme, you will need to furlough some employees and keep the others in the current hours (or agree to reduce working hours and pay).
I have an employee whose probation period would end during furlough. Should I extend probation while on furlough or do it before?
Does furlough count towards probation?
In principle, probation periods will end on the date stated in the employment contract, but clearly it would be sensible to include in these employees’ furlough agreements that their probation will be extended by the time spent on furlough.
How long would it take from submission to approval to payout in terms of the furlough scheme?
How long will it be until we receive the Government’s furlough payout?
This is not certain, and the HMRC portal for furlough claims is not yet built, but the government expects the service to be available by the end of April.
If someone started on 27th Feb and missed payroll, can we still classify them as a furlough employee?
No, furloughed employees must have been on your PAYE payroll on 28 February 2020.
I am an employee of two years and was made redundant at the beginning of the month. My MD is reluctant to furlough me because I will have to remain under my existing contract which she feels makes are liable for example she has to give me a month’s notice. Secondly – will she be compelled to keep me on after the furlough period?
If you were on the payroll on 28 February 2020, and you lost your job due to Covid-19, your employer can (but is not obliged to) re-hire you and place you on furlough. You would remain employed on your previous terms, except where you agree otherwise – the most obvious example being that you might agree to a salary reduction while on furlough. However, you could also agree other contractual variations, such as a reduction in your notice period (subject to the statutory minimum of one week if you have employed for a month, and then one week for every full year of service up to twelve years). Your employer would be able to make you redundant during or after the furlough period, but would need to follow a fair process and give notice in doing this.
In terms of furlough and pay – who are the groups that the Government has ‘left behind’?
While generally recognised as a heroic effort to save thousands of jobs, clearly a scheme of this magnitude brought in at speed won’t cover everyone. In particular (while it isn’t 100% clear) I don’t believe it covers employees who are made redundant due to factors other than Covid-19, despite the fact that their prospects of finding new roles will be significantly reduced during the crisis.
The £2,500 cap will also mean that some higher-paid furloughed employees receive significantly less than their usual salaries (unless their employers choose to pay more than they can recover from HMRC), but this is by design, as these individuals are believed to be better able to take the hit. It should be remembered that many affected individuals will be able to reduce outgoings temporarily, e.g. by taking advantage of the rent or mortgage holiday, and reducing or eliminating childcare and commuting costs.
If you agree with an employee for them to go on furlough, can you offer them online courses to pursue development interests that they have previously expressed an interest in?
Yes – this is expressly provided for in the guidance for employers. However, to avoid falling foul of the rule that furloughed employees should not work, in my view you should not instruct them to undertake training, except any that is mandatory, e.g. to fulfil professional CPD requirements (and in that case you will need to ensure pay for time spent training is at the national minimum wage even if furlough pay is below it generally).
Can we recruit in the same team but at a different level e.g put on furlough the head of department?
In principle I think this should be allowed, e.g. if you can afford, or need, lower-paid more junior employees but can’t afford the more senior team member. Many businesses will almost certainly need to increase some teams while placing others on hold. In practice, however, where you are looking at doing this in one team, it might be worth considering asking the head of department to agree a temporary change of duties and reduction of salary instead. If not, I could see some risk, if HMRC audits your furlough claim, that they will say you should have done this instead of claiming the grant at the same time as hiring. However, there is no guidance on this point.
We’ve cut all our salaries and put one employee on furlough. We are also agreeing a lower salary for this furloughed employee. Can we reduce the person’s salary for furlough? If we do when does that new salary start? We’ve basically come to a situation with this employee that we can’t afford their salary during the crisis so need to reduce their salary and furlough the employee. Would we have to put them back on their original salary after furlough?
Can you legally ask employees to take a temporary pay cut?
While some employers are topping up the Government grant to keep furloughed employees on full pay, clearly others can’t afford to do this. In this case, employers should seek to agree a temporary pay cut for the furloughed employees, so that they will only be paying them sums covered by the government grant. Typically, the pay cut would start when the furlough starts and end once they are back in their role, but of course, if other staff are still being paid less once the furlough scheme ends, you will want to look to agree a pay cut with the employee coming out of furlough too.
You can ask employees to take a pay cut, but generally any change to contractual terms should be by agreement. In principle, if an employer imposes a pay cut, employees are entitled to resign and claim to have been constructively dismissed. While in practice I would expect it to be rare for employees to resign in the current environment, clearly agreeing measures to support both the business and employees during this time is preferable where possible.
I have a number of people on worker contracts paid through our payroll. They work variable shifts of hours. Is furlough available to them to protect some level of their income?
The scheme is available to any employees paid through PAYE – the guidance does briefly mention “workers” but appears to apply to employees only. However, it does cover employees with variable income, and you calculate the sum payable as follows:
- If the employee has been employed for a full twelve months prior to the claim, you can claim for the higher of either:
- the same month’s earning from the previous year
- average monthly earnings from the 2019-20 tax year
- If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
- If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
Will the furlough arrangements be available after the end of April -e.g. if we put the team on three-month furlough starting 1st May?
The scheme is currently stated to be in place until 31 May 2020, although it may be extended in future. So it would be sensible to state in any furlough agreement that the furlough may terminate if the scheme terminates.
Do employees accrue annual leave during furlough and at what rate is it accrued? I.e. normal salary or 80%/£2,500?
Employees will accrue annual leave, and to avoid I would suggest that employers require them to take it pro rata during a furloughed period. Payment in lieu of holiday is usually only paid on an employee leaving the business, and I can see an argument that leave accrued prior to furlough should be payable at 100% of salary.
Self-Employment Income Support Scheme
The government’s guidance on the Self-Employment Income Support Scheme is at:https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme. Again, the draft legislation to implement the scheme (if any) has not yet been published, and while I hope the guidance provided below is helpful, in this fast-changing environment it cannot be definitive and should not be treated as legal advice.
Can childminders claim under the sole trader scheme if they are also a teacher?
The answer is that it depends. If you are a self-employed individual, with trading profits of less than £50,000 and more than half of your income coming from self-employment, and you have filed a self-assessment tax return for 2018/19 (or do so by 23 April 2020), you will be eligible.
Regarding the Government support for self-employed announced yesterday am I right that company owners that pay their income through dividends are ineligible? If so, why is that (on the basis that tax is paid, both corporate tax and income tax)?
The Self-Employment Income Support Scheme covers sole traders and partnerships, not company owners. As with the Job Retention Scheme, while the Income Support Scheme will provide much-needed support to thousands of self-employed people, it won’t cover everyone, and those who trade through a company may well slip through the gaps. In principle, if company owners are paid through PAYE they can benefit from the Job Retention Scheme, but in practice many will need to continue working in the business, so will not be eligible to be furloughed. The scheme has been criticised for failing to support these small business owners, and it is possible that further measures to benefit them will be announced in due course.
Many parents of babies and toddlers are having to work as well as look after their children in the absence of other childcare options i.e. nurseries/grandparents etc. What rights do they have for special leave other than annual leave?
In the initial stages of the crisis, generally both employers and employees are showing flexibility and understanding. As we are likely to move into a period of homeworking being “the new normal”, however, arrangements will need to be formalised. Potential options include:
- Employees with responsibility for a child, who have one year’s continuous service, are entitled to unpaid parental leave of up to 18 weeks for each child under the age of 18. This must be taken in periods of a week subject to a maximum of four weeks (unless the child is entitled to disability living allowance).
- Employees also have the right to take time off for an “urgent family reason” such as when a dependent falls ill, to make care arrangements for a dependent or because or unexpected disruption or termination of care or to deal. In usual circumstances, this would only cover a very short period of leave.
- Employees are also entitled to request flexible working arrangements.
- Annual leave can be used.
- Additionally, in the current crisis, employees with caring responsibilities may consider asking to be placed on furlough where appropriate.
However, with many employers and employees looking at a prolonged period of home-working with no childcare, it is critical for employers and employees to communicate about their needs and options. In many cases, a practical solution will be to agree bespoke temporary changes in working practices, such as a reduction in working hours or a change to working times to enable parents to alternate work and childcare.
I think this is a question to which employers and employee will be turning their minds in the coming days and weeks, and I would like to cover it in more detail in our Coronavirus Legal Q&A next week, on Friday 3 April at 9.30 am. This will also cover commercial, data protection and litigation issues. You can sign up to the next session by emailing our friends at Stephenson Law at firstname.lastname@example.org