The “Flexible Furlough Scheme” and other employment issues arising from the coronavirus crisis

Posted: July 14, 2020

We first wrote about the new flexible furlough scheme in June 2020. This came into effect at the beginning of July.

Under the original furlough scheme, an employee had  to be furloughed for at least three consecutive weeks. During this time, the  furloughed employee was not allowed to carry out any work for his employer.

Under the new flexible scheme, an employer has almost total discretion to agree working arrangements with its employees. For example, an employer could require an employee to work for two days a week and then have the employee furloughed for the remaining three. Under this system, the employer would have to pay the employee as normal for the time they worked and could only claim a grant for the time that the employee was not working.

A key difference between the new flexible furlough scheme and the old scheme is the requirement to have a furlough agreement setting out the new working pattern. Even if an employer has existing furlough agreements in place, new agreements are required if employers plan to take advantage of the new flexible scheme.

Crucially, written records of agreed working times and the updated furlough agreements must be retained for at least five years. It is expected that HMRC will be investigating employers to ensure compliance when the furlough scheme formally ends in October this year.

At Simkins, we can assist with preparing furlough agreements and we can also review existing measures to ensure compliance.

It is important to note that an employee can only be furloughed now if they have previously been furloughed for at least three consecutive weeks (other restrictions also apply).

Further changes to come

As we have noted in previous articles, the furlough scheme will become progressively less generous until it ceases  at the end of October 2020 (assuming that it is not extended further).

Currently, the Government will cover up to 80% of an employee’s salary (capped at £2,500 a month). In addition, the Government offers support with Employers’ National Insurance (“ENI”) and pension costs. From August 2020, the support for ENI and employee pensions will end. From September 2020, the Government will only cover 70% of an employee’s pay (capped at £2,187.50 a month); in October 2020, this will be reduced to 60% (capped at capped at £1,875).

Employees cannot agree to pay reductions to match the reduction in Government support. For example, an employee who currently receives £2,500 a month while furloughed must continue to receive £2,500 a month after August, with the employer making up for the shortfall in the Government grant. One of the reasons that many redundancies are currently being announced is that furloughing employees will soon represent an increased cost to employers. Employers are already liable for the cost of topping up holiday pay during furlough, as discussed in previous articles.

Redundancies

When, on 25 June 2020, the Government published a new treasury direction on the furlough scheme, the following paragraph caused some concern:

“2.2 Integral to the purpose of the CJRS [Coronavirus Job Retention Scheme] is that the amounts paid to an employer pursuant to a CJRS claim are used by the employer to continue the employment of employees in respect of whom the CJRS claim is made whose employment activities have been adversely affected by the coronavirus and coronavirus disease or the measures taken to prevent or limit its further transmission

There has been some speculation (including from national newspapers) that employers may not be able to furlough an employee that they are planning to make redundant. However, the general consensus is  that this is not the case. Previous treasury directions have all made it clear that an employee can be furloughed while on notice – it goes without saying that an employee on notice is not staying at the company. Accordingly, any rule that says employers can only furlough employees they intend to retain would be a significant U-turn. In any event, it would be difficult for HMRC to prove that an employer had decided that an employee was going to be made redundant (bearing in mind that employers have a duty to look for suitable alternative roles).

While we believe that furlough and redundancies are not incompatible, redundancy remains a complex process. In particular, we would always recommend seeking legal advice before carrying out any large-scale redundancy process.

Returning to work

Understandably, some employees are still very reluctant to return to work due to the risks of Covid-19. With this in mind, it is vital that employers carry out detailed risk assessments.

If an employee reasonably believes that their workplace is unsafe and is dismissed for refusing to come in, that dismissal could be automatically unfair. Employees could also potentially bring whistleblowing claims if dismissed after raising health and safety concerns.

If you are not sure whether you have taken appropriate steps to manage safety in your workplace, please do get in touch.

Andrew Lloyd, Associate, Simkins LLP

Susan Thompson, Partner, Simkins LLP