Furlough - what we know now and what we still don’t

On 20^th March, the government announced the introduction of ‘Furlough Leave’ as part of the Coronavirus Job Retention Scheme (CJRS), to allow businesses to retain employees whom they would otherwise have to “lay off”. 

The initial government guidance on Furlough Leave was somewhat limited and left many unanswered questions. However, over the last few weeks, the guidance has been revised and added to, most recently on 9 April 2020.

This article summarises the clarifications up to 9 April 2020, together with key outstanding questions about furlough.

WHAT WE KNOW NOW

Furlough and sickness

Although previous guidance made clear that employees who were on sick leave/self-isolating and receiving SSP could not be furloughed (until they ceased receiving SSP), it was unclear what should happen if an employee became sick while on furlough.

Fortunately, the latest guidance has clarified the position, which is as follows:

• If an employer wants to furlough an employee for business reasons, it can do so, even if that employee is currently off sick. (NB Short term illness/self-isolation should not be a consideration in deciding whether to furlough an employee, however.)

If you decide to furlough a “sick” employee, they should receive furlough pay, rather than sick pay.

• An employer can also furlough an employee who is off on long-term sick leave (although they are not obliged to do so).
• If an employee becomes sick while on furlough, they are entitled to SSP as a minimum. It is up to their employer to decide whether to:
  • keep them on furlough leave and pay; or
  • move them on to sick leave and SSP.

NB If an employer moves an employee on to sick leave and pay within a 3-week furlough period, this will “break” the furlough and the employer will not be eligible for the grant for that period.

Given that the government is funding all furlough pay (assuming an employer is paying 80% up to £2,500) but employers have to pay SSP (subject to possibly reclaiming 2 weeks’ SSP), it seems unlikely that employers will choose to move employees who become ill during furlough onto sick leave/pay.

• An employer can claim back from both the CJRS and the SSP rebate schemes for the same employee but not for the same period of time (subject to satisfying the terms of both schemes).

For example, if an employee is off sick on SSP for 2 weeks and then you furlough them for 3 weeks, you could claim a rebate of 2 weeks’ SSP and then the CJRS grant for 3 weeks.

Furlough and TUPE

Although HM Treasury confirmed on 6^th April 2020 that the CJRS would apply to employers who took TUPEd employees after 28^th February 2020, this was not reflected in the government guidance so people were wary of relying on this.

Fortunately, the latest guidance confirms that a new employer can claim under the CJRS in respect of employees who TUPE transferred to them after 28^th February 2020.

Furlough and Visas

The latest guidance also confirms that grants under the CJRS are not counted as “access to public funds”, so employers are able to furlough employees on all categories of visa.

Furlough and Returning from Statutory Leave

For any employees who return from statutory maternity, paternity, shared parental, adoption, sick leave or parental bereavement leave after 28^th February, employers should calculate their “wages” based on their gross salary, not the pay they received whilst on statutory leave.

Furlough and Working for Other Employers

Previous guidance made clear that a furloughed employee:

• cannot do any work for their employer whilst on furlough but can undertake training or do volunteer work, provided they do not provide services to or make any money for their employer; but
• can work for another employer, subject to the terms of their employment contract.

The latest guidance further clarifies that employees cannot work for organisations that are “linked or associated” to the employer, as well as not working for the employer, when on furlough.

Furlough and Payroll Consolidation Schemes

The latest guidance has also confirmed that businesses that engaged in payroll consolidation schemes after 28^th February can place employees on furlough.

WHAT WE STILL DON’T KNOW….

The main area which remains unclear is the interrelation of furlough and holiday, as the government has still not issued official guidance on this. However, I summarise below the position as far as we understand it…!

Do employees accrue and can they take holiday while on furlough leave?

• Employees accrue holiday, as normal, during furlough.
• Employees on furlough can still request and take their holiday in the usual way, including bank holidays (based on ACAS non-statutory guidance).
• On 8^th April, HMRC Customer Support suggested that taking bank holiday will not break the furlough period.

However, until we have official guidance, we cannot guarantee that taking holiday within a three-week furlough period will not “interrupt” this and, therefore, risk the government grant. As such, it is safest to avoid an employee taking holiday within the first 3 weeks of furlough, if possible.

What should I pay for any holidays taken during furlough?

ACAS guidance is silent on how holiday should be paid. However, there have been the following contradictory tweets from @HMRCcustomersupport:

• “If an employee is on holiday or has a scheduled Bank Holiday while on furlough, they are entitled to still receive this holiday. Employers must ensure that any employee on holiday or a Bank Holiday is paid their full salary for that period of holiday”; and
• “They would be paid at furlough rate for the Bank Holidays if contracted to be paid on Bank Holidays and currently furloughed”.

Although HMRC tweets are not binding (and are, in fact, contradictory), our view is that the approach in the first bullet point is likely to be adopted. The safest approach will, therefore, be to pay employees 100% / “normal” pay for the recent bank holidays and any other taken during furlough and then adjust this in due course, if required.

In addition, whilst official guidance has not specifically confirmed that the government grant can be used towards holiday pay, we consider this is likely to be the case. If so, this will be very helpful for an employer’s finances. If not, an employer will be in no worse a position by allowing an employee to take holiday during furlough, as an employer would have to pay 100% whenever it is taken.

Can an employer make employees take holiday during furlough, e.g. to prevent them banking and using this when things return to normal and the employer needs them at work?

Under the Working Time Regulations, you can require workers to take holiday by giving them twice the period of notice as the period of holiday you want them to take. In theory, the same principle should apply during furlough leave, although this has not been formally confirmed in government guidance.

However, whilst it may be reasonable to require employees to take some leave during furlough (e.g. to prevent everyone carrying forward substantial amounts of holiday and then seeking to take it when normal life/business resumes and full staff levels are needed), employers should tread carefully in light of the government’s decision to allow employees to carry forward holiday which they can’t reasonably take due to COVID-19 and ACAS’s guidance on this carry forward, which suggests that people might be prevented from taking holiday due to being on furlough.

Whatever decisions you make about holiday and furlough while final guidance is awaited, keep a clear paper/audit trail of the decision, how you made this and your justification/rationale, in case employees bring claims regarding furlough and holiday further down the line.

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.