Navigating the grey areas of the furlough scheme

Experts give advice on areas of the UK government’s job retention scheme that are still unclear.

The UK government’s job retention scheme, allowing employers to claim 80% of furloughed employees’ wages up to £2,500 per month per staff member, opened for claims on Monday (20 April). HMRC reported that the portal received over 140,000 claims in the first day, covering more than one million furloughed workers. 

A recent survey by the British Chamber of Commerce suggested 70% of UK firms planned to furlough at least some staff, meaning many more are likely to make claims through the scheme between now and its planned closure date of the end of June. 

However, as is to be expected with any new scheme implemented in such a short space of time, there are grey areas that employment experts and HR teams are still trying to analyse and interpret. 

C&IT's sister publication People Management spoke to employment law experts about these areas, soliciting their advice on navigating the ambiguity.

Fixed-term contracts

The guidance is clear that members of staff on fixed-term contracts are covered by the furlough scheme so long as they are on the payroll. But there has been some confusion over whether employers can choose to extend these contracts and keep these workers on their payroll – and subsequently on furlough – if their contracts end while the outbreak is still ongoing.

“Employers may choose not to extend fixed-term contracts on their expiry, even for workers who are on furlough,” advised Alex Watson, director and employment lawyer at Fieldfisher. “However, employers should be mindful that the non-renewal of a contract will be deemed a ‘dismissal’ for employment law purposes and there will need to be a fair reason for the non-renewal.”

“The guidance also states fixed-term contracts that ended on or before 19 March 2020 will not qualify for the grant once they have ended,” said Angela Brumpton, partner at Gunnercooke. “However, paragraph 5 of the Treasury direction provides that, as long as the employee appeared on a return to HMRC made on or before either 28 February or 19 March 2020, and their employment did not terminate before that date, and they are furloughed properly, an employer can claim reimbursement of wages following re-engagement.”

Annual leave

Holiday pay has been a hot topic since the scheme was announced, with Brumpton noting that little guidance was available on the issue until very recently. “HMRC has now updated its guidance to say that employees can take annual leave without breaking furlough,” she said. “Although any period of holiday must be paid at full rate, with the employer topping up the grant to 100% of normal pay”. 

However, it is still unclear whether employers can require staff to take annual leave while furloughed. “The government has updated its guidance for employees (but not employers), which states that employees will continue to accrue annual leave while on furlough and they are entitled to take leave during this time,” said Laura Kearsley, employment solicitor at Nelsons. But Kearsley noted the guidance was still silent on whether an employer can compel staff to use their annual leave. 

“Some commentators take the view there is nothing wrong with this approach in principle (although it may be unpopular), whereas others disagree,” said Brumpton. “The safest course of action at the moment would be not to force holiday on staff until further guidance is forthcoming.”

When it comes to bank holidays, these need to be treated as holiday (and therefore full holiday pay given) if the employee in question would usually have been off work, said Kearsley. If the employee would normally have worked on a bank holiday, however, this can be counted as a regular furlough day. 

Redundancies and disciplinary processes 

The government guidance is clear the furlough scheme is intended to prevent redundancies that would have otherwise happened because of coronavirus. However, employers have expressed concern about not being clear whether making redundancies elsewhere in the business could affect their right to claim through the furlough scheme.

Redundancies unrelated to the coronavirus pandemic can continue in the usual way, even while other staff are furloughed, advised Brumpton. But Jennifer Smith, partner at JMW Solicitors, warned that “care should be taken to ensure a fair process is used and that the option to furlough has been considered as a reasonable alternative to dismissal, in order to reduce the risk of unfair dismissal claims”.

Smith alo highlighted that a furlough grant cannot be used for redundancy pay. When it comes to disciplinary action, while there is no reason why an employee undergoing a disciplinary process could not be furloughed, Brumpton advised employers to resolve any disciplinary actions before furlough leave commences where possible. There is still a question mark over whether an employee attending a disciplinary hearing while furloughed would constitute them carrying out work for their employer, for example. 

Long-term sick pay

There is conflicting information currently on whether an employee on long-term sick pay could be moved on to furlough. The government guidance suggests this is possible, while direction from the Treasury states an employee cannot be furloughed until a statutory sick pay (SSP) period has ended. 

Smith advised the three-week minimum furlough period meant short-term illness or self-isolation should not be a consideration in deciding whether to furlough an employee. But the guidance does go on to state employers are entitled to furlough employees who are on sick leave, “suggesting that employers have the choice whether to keep an employee on sick leave or place them on furlough, where they are sick at the point furlough is being considered,” she said. However, she also advised caution, and emphasised that Treasury advice should take precedence over government guidance where there is a direct conflict.

Kearsley said that in limited circumstances, furloughing an employee on long-term sick leave could be possible. “If you want to furlough a group or division of employees for business reasons and some are currently on long-term sick leave, you can furlough the whole group, and any sick employees will be furloughed and no longer receive sick pay,” she said. 

Watson noted the guidance suggested this was possible, but added: “If sick pay exceeds the furlough grant, employers will need to discuss these changes with the absent employee and may need to consider topping up any shortfalls of pay.”

Maternity leave

The initial guidance was unclear on whether employees on maternity leave needed to bring that leave to an end before being moved on to furlough, or whether either statutory maternity pay or enhanced maternity could be claimed through the scheme.

However, the latest guidance states that employers can claim for enhanced maternity pay through the furlough scheme, suggesting that employers can furlough employees on maternity leave, said Smith. She explained that if an employee on maternity leave agreed to be furloughed, then employers would be able to reclaim statutory maternity pay in the normal way. They would then be able to claim for any enhanced contractual pay on top through the furlough scheme.

Submitting claims 

HMRC has said the job retention scheme portal can manage up to 450,000 claims per hour. Brumpton said many of her clients found the process to be more efficient than expected, although sometimes users were blocked from submitting applications if the site was busy. 

However, questions have been raised over what an employer should do if they realise they’ve entered incorrect data after making a submission, with HMRC guidance suggesting there may be no opportunity to revisit an application once submitted. Employers are also only permitted to make one claim per pay period, so it would not be possible to add employees to a furlough application after it had been filed. 

“The best advice is to do your homework and get your application right so as not to delay or prevent much needed payments being made to you,” Brumpton said. She advised contacting HMRC as soon as possible if an organisation believed it had submitted incorrect data. 

This article was originally published by People Management.

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