Contracts, Covid -19 and the latest Government Employment Advice
If your company’s employment contracts have a lay off clause or if lay off is custom and practice in your industry, you can require employees to go on furlough leave. If your employment contracts do not contain a lay off clause, you need to seek to agree with your employees for them to be furloughed. I expect the majority of your employees will be keen to be furloughed on the basis that, if furloughed, they stay at home doing no work and receive 80% of their wages.
The advice from the Government is that employers should pay employees for March and April and then claim back when the HMRC Portal is up and running. We believe that it may take between 6 and 8 weeks for the HMRC Portal to be ready for employers to inform the system which of its employees are furloughed. If paying wages during this time is not going to be financially viable for your business, then the Government suggests that businesses should take out a loan to cover employees’ wages or alternatively, ask the employees to defer their pay until the furlough leave grant is received from the Government, however asking employees to defer wages is a last resort on the basis that "but for" the employees agreeing to defer payments, they would be at risk of redundancy and/or sent home on no money.
Government guidance on Friday 27th March 2020, clarified that in addition to the 80% of wage costs up to a cap of £2,500 per month, employers will also be able to claim back the associated employer NICs and minimum auto enrolment pension contributions on that wage. This is obviously good news for both businesses and employees alike.
Regarding employees who receive the National Minimum Wage and the fact that the 80% payment will take the employee’s salary under the National Minimum Wage. The guidance received today (Friday 27th March 2020) is that employees in these circumstances can be paid less than the NMW as a result of receiving 80% rather than 100% of wage. However, employees are entitled to be paid the NMW for any time spent training.
To be eligible for furlough leave, the employee must have been on the payroll on 28 February 2020. If they were hired later, they are not eligible. Anybody who was on the payroll on 28 Feb 2020 and has since been made redundant can however be rehired and put on the furlough leave scheme.
Furlough leave must be taken in minimum blocks of three weeks to be eligible for the grant. There is nothing in this guidance which prohibits rotating furlough leave amongst employees, provided that each employee is off for a period of at least three weeks, noting that the employee must not carry out any work whatsoever during that three week period. However, they are able to undertake training and do volunteer work during this time provided they do not provide services to or make any money for their employer. This suggests that Directors who carry out essential payroll/other functions would be able to furlough for three weeks, come off furlough to carry out work and then restart furlough leave. This further guidance also seems to help address the problem of there being three employees in a department but only one is required to work resulting in the other two being furloughed, on the information received today (Friday 27th March) an employer would be able to rotate the staff to be furloughed, ie three weeks on six weeks off for three employees.
Please see the Government link below giving full details on how to claim through the Job Retention Scheme.
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