COVID-19: Furlough update

Posted on 06 April 2020

In an ever changing employment landscape, the Government has published its third round of guidance on the Coronavirus job retention scheme, providing further welcome clarification for employers. With the Government under increased pressure to address some of the questions left unanswered by previous guidance, it goes some way towards alleviating a number of those concerns. However, it is notable that the guidance remains silent on the treatment of holiday during furlough leave, an important issue that continues to vex employers. The Government may have side-stepped the problem for now - perhaps relying instead on the most recent, and somewhat cryptic, guidance from Acas - but there will come a point soon where further explanation of the issue of holiday and furlough can no longer be avoided.

Below we set out a short summary of the key points arising out of the latest iteration of the guidance, together with our updated FAQs for employers.

  • The guidance mirrors a statement made by the Chancellor on Friday 3 April, namely that if an employee has left their employment on or after 28 February for whatever reason (so not limited to redundancy as per the previous guidance), the former employer can, if it chooses to do so, take them back and immediately furlough them under the scheme. This will help protect those employees between jobs, who may have had their job offers withdrawn or deferred and who are not eligible for furlough with their new employer.
  • In a surprise move, the new guidance suggests that an employee may seek new employment with another organisation during furlough, as long as their employment contract does not prevent them from doing so. It remains the case that furloughed employees must not do any work for the employer who has furloughed them.
  • The new guidance also confirms that those who are unable to work because they have childcare responsibilities resulting from the coronavirus  (due to the closures of schools for example) or because they are shielding in line with public health (or need to stay at home with someone who is shielding) can be furloughed. The same applies to apprentices, who may continue with the training element of their apprenticeship during furlough (as long as the time spent training is paid at the minimum wage). The guidance also deals with furlough leave for employees on fixed term contracts, whose contracts can be renewed or extended during the furlough period.
  • The job retention scheme also applies to individuals who are paid through PAYE but who may not be considered employees in the traditional sense. They include office holders such as salaried company directors who may continue to fulfil their statutory duties, but only insofar as necessary, and salaried LLP members. In either case, and in addition to the usual individual agreement, there may need to be a formal board decision or decision by the LLP to enable furlough to take place.
  • And in what seems to be a departure from previous guidance, employers can claim for regular payments that they are obliged to pay employees, such as past overtime and compulsory commission payments (but not discretionary commission or bonus payments). The cost of benefits, whether or not through salary sacrifice schemes, should not be included in the reference salary that forms the basis for furlough pay, and the guidance states that where an employer provides benefits to furloughed employees this should be in addition to the salary paid under the scheme.

Turning finally to holiday, which is not mentioned at all in the government guidance and so clarity is still awaited on this, recently revised Acas guidance deals with it in part. What appears clear is that holiday accrues during furlough and that the taking of holiday during furlough leave is permissible. What is not clear however, is the rate of pay that is payable during the holiday period – is it the 80% (or capped) pay under the furlough scheme, full pay or somewhere in between? This is one of the questions that still remains unanswered. Until the next round of guidance perhaps.

On a non-COVID-19 related point there are a number of employment law changes coming into force today. Click here to read the update we published on 5 February. 

Practical guidance for COVID-19
Read the latest COVID-19 related updates on our hub.

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