Furlough - updates and clarifications

A quick note to update you on the latest information received regarding furlough pay. Further guidance was published on Friday 3rd April 2020, and here are some of the key matters to arise:

  • NEW/CLARIFIED – employees placed on furlough can start a new job. On the one hand surprising as it allows an employee to potentially earn 180% of salary and seems to go against the message of staying at home. However, I think the idea is to allow essential roles to be recruited e.g. delivery drivers, agricultural labourers etc.
  • CLARIFIED – employers will be able to reclaim – wages, past overtime (it is assumed contractual/compulsory overtime), fees and compulsory (contractual) commission. Employers will not be able to reclaim discretionary bonus, tips, discretionary commission or benefits in kind such as health insurance. Note - the period of claim starts from the date furlough is deemed to commence not from the date the notice was sent.
  • CONFIRMED – you can furlough employees multiple times thus allowing rotation of the workforce.
  • NEW – furlough must be confirmed in writing and the record must be kept for five years – this will be an anti-fraud measure. For directors – if placed on furlough it would be worth minuting this fact in a board minute.

We are still unclear on:

  1. The exact meaning of statutory duties for directors if on furlough. Eminent employment barristers think that this is very limited activity i.e. filing of accounts or attendance at an AGM i.e. the very basic level, so confirming our thinking here at WCL. However we will wait to see.
  2. Annual leave – if an employee takes holiday during furlough – what should they be paid? There are various arguments at present, but the safest route as of today’s date is probably this:
  • Reclaim 80% of the wages etc under the furlough scheme;
  • Top up 20% of the wages where that holiday falls within the first 4 weeks of holiday entitlement. This is because the first 4 weeks of holiday fall under EU regulations and these are wider than our working time regulation requirements. If the holiday entitlement falls in the final 1.6 weeks, the 80% should be fine. If it is in the contractual holiday element – it will be up to the employer to negotiate the pay level.

We are indebted to Sarah Whittock, Whittock Consulting, for this update. This is a fast changing landscape, so please take advice before acting.

Categorised: Business Risk

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