Furlough Leave for Employees

How does the Coronavirus Job Retention Scheme work?

  • Furlough Leave now runs to the end of September 2021.

  • HMRC will pay employers 80% of a furloughed worker’s pay up to a cap of £2,500 per month.

  • HMRC will cover the associated Employers’ NIC and minimum automatic employer pension contributions.

  • The scheme applies to employees who were on the payroll as of 28 February 2020 and not receiving Statutory Sick Pay then.

Do founders/executive staff and directors qualify as employees under the scheme?

  • Yes. But remember, who will run the business if everyone is stood down?

  • It’s important to the survival of the business that you identify who to furlough – only place on furlough leave those who are not key staff, those who you can survive without for the next few months.

Do I still need to make pension contributions for employees who have been stood down?

  • If on furlough leave, HMRC will cover this under the CJR Scheme.

Will holidays accrue for workers who are furloughed?

  • Furlough leave is an entirely new concept to employment law in the UK. However, it seems likely that the 5.6 weeks leave under the Working Time Regulations 1998 would continue to accrue during furlough leave.

Are employees permitted to take pre-arranged annual leave while furloughed?

  • Yes, if the employment contract continues during the furlough then employees’ rights in terms of annual leave will be unaffected.

Will it be an unfair dismissal if an employer makes someone redundant rather than placing them on furlough leave?

  • It is difficult to determine whether an employment tribunal would find such a dismissal to be unfair at this stage. Whether or not such a dismissal is considered unreasonable will depend on the particular circumstances of the Company.

  • Employers dismissing a number of employees should take care that such dismissals are not discriminatory in nature.

Furlough Leave for Non-Executive Directors

  • You may wish to ask any paid directors to delay their invoices.

  • Any directors are duty bound to act in the best interests of the Company, so they should be willing to agree to a payment plan or temporarily stand down (so long as board quorum is still possible without them).

Furlough Leave for Founders

Can founders furlough themselves?

  • If they’re a PAYE employee then, yes, the can be furloughed just like any other employee.

  • It’s important to note that while they’re furloughed they can’t work for the company, which means the company effectively goes into hibernation until they unfurlough themselves.

  • While they’re furloughed they can still (and must) continue to perform any statutory obligations, such as filing annual returns for the company, etc.

Furlough Leave for Gig Economy workers

  • It’s important to honour any outstanding invoices for services provided (you should have had the funds to pay them when the work was first agreed).

  • Work agreed to but not yet started can be placed on hold/delayed for a few months.

  • Agree payment plans for anything outstanding, put any new work on hold, and let them know a timeframe if you can.

  • You’ll need these workers again in the future, so it’s important not to sour the relationship – remember this current situation is temporary.

  • Keep in mind that gig economy and self-employed/freelance workers have had the least amount of guidance during this time, and aren’t as well protected under the new Coronavirus measures that the government has put in place – lead with empathy here.

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