Coronavirus: Your furlough questions answered

Experts answer key FAQs about the tricky decisions businesses need to make around furloughs and offer guidance on the job retention scheme.

The coronavirus outbreak has hit UK businesses hard, and many face difficult decisions when it comes to the continued employment of staff. 

For example, British Airways wrote a memo to all staff earlier this month telling them to expect layoffs as a result of the virus, and Gatwick Airport announced it planned to cut 200 jobs in response to grounded flights. Swedish fashion retailer H&M said on Monday (23 March) it was considering laying off tens of thousands of workers worldwide temporarily as it worked through interruptions to its business. 

To support struggling businesses, and their employees, the government last week (20 March) announced the Coronavirus Job Retention Scheme, offering employers grants from HMRC to cover 80 per cent of the wages of staff who are on the payroll but not working because of the outbreak, up to a maximum of £2,500 per worker per month.

With guidance on the scheme updated by the government yesterday, here are employers' most pressing questions answered.

Do I have to prove the business is facing financial hardship to access the scheme?

Since the legislation is still fairly new, there is currently no specific ‘test’ to prove the business is facing financial hardship. However, Angela Brumpton, partner at Gunnercooke, explained employers will need to prove the outbreak has negatively impacted their business in order to qualify.

“You will have to show that you are shutting down the business or that some staff are not needed,” Brumpton said. “So the test is: would that worker or employee have been otherwise laid off or made redundant? If the answer is yes, then you qualify for the scheme.”

She said the business case for applying to the scheme must be genuine as HMRC has said it will be on the lookout for any businesses abusing it.

How many staff can I furlough, and for how long?

There is currently no limit on the number of staff that can be furloughed, and employees can only be furloughed for the duration of the Job Retention Scheme, which lasts for three months starting from 1 March 2020.

The scheme could also be extended if the government deems this necessary.

Do I need employees’ consent?

Yes, employees must be consulted and agree to be furloughed as it is a change to the terms and conditions of their employment and therefore still subject to existing employment law.

How should I decide which staff to furlough?

Brumpton said it should be fairly easy to spot which sections of the business are being hardest hit in the wake of the outbreak, and this would help employers decide which staff to temporarily lay off. “If you have some work for staff, they do not qualify for furlough,” Brumpton explained.

“But it should be fairly obvious which staff can be furloughed because you will have no work for them at this time.”

But there may be cases where employees become resentful that they are classified as ‘essential’ and continue working while others receive money for not working for a period of time. Others may be upset at being furloughed, so it’s a tricky matter to gauge, Brumpton said.

She advised employers to discuss all options with staff, keep in contact with employees and be as transparent as possible about the situation at hand.

Are part-time workers eligible?

Yes. Employees on a full-time, part-time, agency, flexible or zero-hours contract are eligible for the furlough scheme. Any employee must have been on the company’s PAYE payroll from 28 February 2020.

The scheme also covers any employee who was made redundant since 28 February 2020, if they are rehired by their employer.

What if the employee has more than one job?

If your employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.

Can staff still work for me or another employer while furloughed?

To qualify for the scheme, staff cannot continue to work for the employer while furloughed. The grants also do not cover the wages of employees who work reduced hours due to the virus.

On the question of whether staff can work for another employer, Ranjit Dhindsa, partner and head of employment, pensions, immigration and compliance at Fieldfisher, explained that while workers are furloughed an employment relationship still exists, so staff should not be working for anyone else during those contracted hours.

However, Dhindsa said staff may be able to work for another employer as long as it does not breach these contractual obligations.

“If at the weekend you want to volunteer or work somewhere else like in a grocery story, that would be fine as long as it is outside your ‘normal hours’,” Dhindsa explained. “But when you go back to work, you have to make sure the working time regulations aren’t being breached, you oblige by your contractual hours and that you’re getting enough rest.”

My business can’t wait until the end of April for the grants to arrive, what are my options?

Shazia Khan, partner at Irwin Mitchell, said there are several options available to businesses unable to wait for the first payments from the scheme, including a number of coronavirus grants and loans for businesses to facilitate cash flow. But failing that, bosses and HR will need to have conversations with staff about the possibility of changing working arrangements.

“It’s about consulting with your staff and coming up with a solution that works for everyone, which could be a reduction in hours or pay,” Khan said. “You can ask staff to take unpaid leave, but this needs to be agreed by the employees, and many people can’t afford to take that option.”

What happens if I still can’t afford to take staff back on at the end of the furlough period?

When the government ends the scheme, employers must make a decision, depending on their circumstances, as to whether employees can return to their duties.

If staff are not needed or the business cannot afford to take staff back on, the government guidelines suggest it may be necessary to consider termination of employment or redundancy.

I made redundancies before the scheme was announced, is it possible to take these employees back on and pay them under the scheme?

The government guidance says the scheme does cover employees who were made redundant as a result of Covid-19 since 28 February 2020, if they are now rehired by their employer.

If staff were made redundant for any reason besides a downturn in business as a result of the outbreak, the scheme does not cover them.

My organisation had been planning a restructure before the outbreak, should I use this scheme to delay these non-coronavirus related redundancies?

Dhindsa said it depends on the reason behind the restructure: “If the reason for the restructure has nothing to do with the outbreak then no, because the scheme is only for downturns in work because of coronavirus.”

This article was first published by People Management.

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