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Update on Coronavirus Job Retention Scheme

Since the chancellor’s first announcement about the coronavirus job retention scheme, the government has been releasing further details about the scheme on a regular basis.

The latest guidance is available here. This has increased understanding for employers and employees but there are still some areas of confusion and uncertainty.

We have set out below our thoughts on some tricky issues that have arisen for our clients and contacts.

 

Can furloughed employees obtain paid work elsewhere whilst furloughed?

The latest guidance on this suggests the answer may be yes.

The position for employees with multiple jobs is set out clearly in the guidance. For employees furloughed from their sole job the position is less clear although the latest government guidance states “If contractually allowed, your employees are permitted to work for another employer whilst you have placed them on furlough.”

This would suggest that furloughed employees could actually receive greater than their normal income by working in a new job whilst also being paid by their “main” employer during furlough leave in accordance with the scheme.

 

When calculating furlough pay, are benefits such as car allowance and overtime included?

The critical question is what agreement relating to pay has been agreed between employee and employer?

The contract of employment, as may have been amended when the employee agreed to be furloughed, will govern what pay is owed to the employee by the employer.

On the question of whether benefits such as car allowance and overtime can be reclaimed from HMRC by employers under the scheme, the latest guidance released states: “You can claim for any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.”

This would suggest car allowance and overtime payments due in the period whilst an employee is furloughed can be reclaimed from the scheme but the overall cap of £2,500 per employee per month would still apply.

 

Can employers that are still operating and are not contemplating redundancies or lay-offs because of coronavirus still furlough employees?

Potentially yes. Employers who are not using the scheme can legitimately furlough workers in some circumstances. Examples include where employees:

  • Are unable to work as they are shielding in line with public health guidance
  • Are unable to work from home and you would otherwise have to make them redundant
  • Are unable to work because they have caring responsibilities resulting from coronavirus e.g. employees who need to look after children.

 

Is there a minimum or maximum furlough period?

Any employees who have been furloughed must be furloughed for a minimum of three weeks.

Employees can be furloughed more than once e.g. they can return to work following a period of furlough leave of at least three weeks and then be furloughed again for at least another three weeks.

There is no maximum period of furlough although the scheme through which employers can reclaim certain wage costs through HMRC is currently only scheduled to last until 31 May 2020. Although the chancellor has said this could be extended if required.

 

Can I ask or require employees to take annual leave/holiday whilst they are furloughed?

This is a grey area. Ordinarily, employers can require employees to take annual leave on specific dates provided sufficient advance notice is given (the notice must be at least double the length of the period of annual leave e.g. two weeks’ notice of a period of one week’s annual leave).

The one certainty appears to be that annual leave will continue to accrue during a period of furlough. In addition, employees will be entitled to carry-over (to be used in one of the next two annual leave years of their employer) any unused proportion of the first four weeks’ of their annual leave entitlement (the first four weeks being the annual leave that arises as a consequence of the Working Time Directive) where it was not reasonably practicable to take it in the employer’s annual leave year as a result of the effects of the coronavirus.

The upcoming Easter weekend will create a dilemma for many employers who have furloughed workers at 80% pay, or the monthly cap of £2,500, where those employees would ordinarily be on annual leave on Good Friday and Easter Monday.

Firstly, are those employees on annual leave on those two days? If so, does this mean they should receive “normal pay” for those two days? Until further guidance is released or legislation is drafted we can only speculate.

 

For more information or bespoke advice on how your business may be able to utilise the Scheme, please contact a member of our employment law team or click here to send an email.

Posted on April 6, 2020

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