What is Furlough Leave? (Updated)Natalie Lewis
What is Furlough Leave?
Furlough basically just means “leave” or “a sabbatical”.
To be classed as being on Furlough, the employee must be sent home and must not work. It is not available to employers where the employee continues to work.
Which employers can claim it?
Any employer whether you are a sole trader, partnership, Ltd Company or LLP can claim. The only criteria are that you have employees and that you send them home and they do not work.
Can an employer insist on putting someone on Furlough?
Yes, if you have a clause in the contract which allows lay off or short time working, then no consent is required.
If there is no lay off clause in the contract, technically consent will be needed. However, if an employee refuses to consent to be sent home on Furlough, then they risk being made redundant. Therefore, the employer could make an employee redundant if they refuse, provided they have selected for it fairly.
How do you select for Furlough?
I’d advise that you use a shortened version of a redundancy selection i.e. use some form of objective criteria. These criteria might be from productivity records or previous appraisals or asking managers to fill in a score matrix based on skills, culture fit and behaviours. The reason for this is that if an employee refuses Furlough, the employer could then select them for redundancy and the basis would already considered a fair selection process.
Can we put people on Furlough part-time and allow them to work part-time?
Furlough is to be used when there is no work for an employee to do therefore it is unlikely that they could be allowed to work part-time. In the event that there is some work available, it would be advised to consult with the relevant individuals and negotiate reducing their working hours in the first instance, with the agreement to make this for a limited time.
Employees on Furlough must not get another paid job with another employer (in most cases).
How will Furlough be paid?
Furlough payment will be based on February 2020 payroll figures (gross), it is understood that National Insurance contributions will be covered by the government. The employer will be able to claim 80% of an individual’s wages (as a grant), up to a cap of £2,500 per month. This is on the agreement that the employee does not work.
At this stage the portal has not been set up yet. It seems likely that the employer will need to find the cash to pay the first payment in April and then they’ll be reimbursed for this sometime May but subsequently the money will be paid to the employer who will then pay the employee. Delayed payment may be written into the Furlough agreement if necessary where cash flow may be tight.
Does the employer have to top up the 80% wage to 100% for a Furloughed employee?
No. You can choose to do so but you are not obliged. Just be aware that there is a future risk of a claim for unlawful deduction of wages, I have a feeling that the risk is small and the chance of the employer losing such a claim is also small but to avoid the risk, you should attempt to get written consent from an employee to the terms of the Furlough. I’d suspect that in these circumstances, it won’t be hard given the alternative would be redundancy.
If an employee refuses Furlough can we make them redundant?
Yes, see my answer above.
What is the process for getting our money back?
The government is setting up an online portal. It is not up and running yet but I’ll aim to update you as things move on (it as been suggested that this will be available by the end of April).
Your next steps if you’re considering Furlough for some or all of your work force are:
- Select your employee(s) for Furlough
- Gain written consent to 80% pay (I can provide you with relevant letters)
- Send the employee home and tell them that they should not work (rather like Garden Leave)
- Register for the Furlough Pay using the online registration portal (when this is up and running)
What are the limits regarding Furlough pay?
Furlough pay will be 80% of normal wages but there will be a cap of £2500 per month. This is the figure being paid to the employee, not the normal wage. The cap will include pension and NI contributions.
This is a legal process as effectively the employer is changing someone’s contract, albeit temporarily, so you must get professional support and the paperwork in place to instigate Furlough.
Remember that any form of illegal profiteering from a national crisis will result in heavy penalties.