We’re being asked a lot of questions by clients about what the government’s Covid-19 business support measures are. We’ve got access to the same information clients have but here’s our view on what we think the guidance means:
What the guidance means
A furloughed employee (pronounced [fur][low]’ed) is one where he/she retains employee rights but is not required to perform any work. It is a lot like paid leave.
The Government has said that it will pay employers 80% of furloughed employees wages, up to a maximum of £2,500 per month, together with the employers NIC contributions and auto-enrolment contributions.
Furloughed employees may defer up to 4 weeks unused leave into the next 2 leave years.
What the guidance does NOT mean
It doesn’t mean that employees can work during the period they are in the furloughed state. According to the guidance, furloughed employees CANNOT WORK whilst they are in the that state. The government HAS NOT offered to pay 80% of your employees’ wages whilst they stay at work. the measure is designed to stop SMEs making their employees redundant.
Does it apply to directors of limited companies?
Yes although the benefit will likely be limited due to the low salaries directors often take. The guidance has been updated. Directors can furlough themselves but must not do any revenue generating work.
Does it apply to workers with irregular hours?
Yes. An average monthly amount in the past year or shorter period if they have not been employed a year must be calculated to determine the claim amount. The key thing is that these workers must have been on the payroll in February (even if not paid in February).
How to access the scheme
HMRC have built a web portal where employers can record which employees they have furloughed. It can be accessed by a government gateway account.. We have made claims for many of our clients already.
Employers can link to government advice here. The dedicated HMRC helpline number is 0800 0159 559 but you can expect a long wait.
What are the employment issues?
Changing the status of employees to a furloughed worker is subject to existing employment law. Where an employee’s contract contains a layoff or short term clause employers should be able to place employees on furlough leave. Where there is no such clause, it is best advised to get agreement from the employee.
Additionally, a 20% reduction in salary will be a change in terms and conditions of employment. Where employers are not topping up the government payment, they should also seek agreement from the employee.
To avoid difficulties after the outbreak is over, we recommend that employers get agreeent from their employees and make sure that this is documented.