Mishcon Academy: Digital Sessions podcast - Guidance for Employers

Posted on 22 April 2020

Will Winch      

In this episode, what should employers be prepared for if their staff are now working from home.  How do you navigate the government advice on furloughing staff? And how are you best able to protect your business so that we all have jobs to return to when this is over?

Hello and welcome to this, the first of our Mishcon Academy Digital Podcasts.  I'm Will Winch an employment lawyer at Mishcon de Reya and I'm joined by my colleague Sharon Tan to discuss some of the most topical issues for anyone employing people during the current COVID-19 crisis.  We are speaking from our respective houses and this whole thing is being recorded over the internet, observing social distancing rules.

Sharon, what are some of the questions you have seen client's grappling with since the start of this crisis?

Sharon Tan      

Thank you Will.  This is clearly an unprecedented situation for everybody and one of the biggest challenges for businesses, it's hard to deal with the uncertainty that we all face because nobody knows how long this is going to go on for and that makes it incredibly difficult for businesses to plan so the fact that the government have stepped in to provide the Coronavirus job retention scheme is a really good thing because it's providing a safety net for everybody whilst we wait and see how things pan out during the course of this pandemic.  Having said that it has obviously given rise to lots of questions about how it operates in practice because it’s a new thing nobody has ever had to deal with before.

Will Winch      

I think the word furlough has become the new proroguing word of the year.  You're talking about the job retention scheme though so let's have a bit more detail about it.  So what is it and how does it work.

Sharon Tan      

It's a scheme designed to ensure that employees are paid even though their employer hasn’t got any work for them to do and it comes in the form of a grant from the government who reimburses employers for up to 80% of the salary costs that they incur for employees who have been placed on furlough that’s subject to an overall cap of £2,500 per month for each effected employee and in order to qualify, the employee needs to have been employed and on payroll as of 19 March this year.  Whenever the coronavirus job retention scheme was first announced the date that was in play was 28 February and that was recently changed, I think within the last week or so to 19 March following some political pressure.

Will Winch      

I understand that if you are an employer who made a decision based on the 28 February, you can still change your mind up to 19 March.  In terms of the salary, how does the salary get calculated?  I'm thinking in particular of people on say zero hour contracts but also for employees with a normal permanent job?

Sharon Tan      

It's a very good question because as you say everyone has got different salary constructs.  For those who are on a fixed salary, it's quite straight forward.  You just take the salary they were entitled to receive as at 19 March, but for those who are on a variable income where their income varies month to month, you take the higher of the earnings that they have received over the last 12 months on average or you give them the amount that they received in the corresponding calendar month in 2019, whichever of those is the higher.  You also then have elements of remuneration aside from salary, so things like commission and bonuses.  Those can be included if the employer is obliged to pay them regularly discretionary amounts are not however included.

Will Winch      

Okay and if you have got an employee who is salary sacrificed some of their salary what happens about them?

Sharon Tan      

Again, a very good question.  You have to ignore the amounts that have been sacrificed for the purposes of this scheme clearly in a salary sacrifice arrangement an employee elects to give up a portion of their salary in order to obtain an alternative benefit and what the government has said is that you can't use any part of this grant to subsidise the benefit that has been provided in lieu of the salary that has been sacrificed.

Will Winch      

Okay, so you are stuck with the lower salary after you have sacrificed.  Now, if you're self-employed, can you then claim under this scheme or is this just for employees.

Sharon Tan      

This one is just for employees.  There is a separate income protection scheme for the self-employed.  What you can do if you are in a personal services company is you can claim for the salary element that you paid yourself but you can't claim for any dividends that you have paid via that personal services company.

Will Winch      

And you have to be an employee at the moment?  You were taking about 19 March being the trigger date, but if you had fired someone or you yourself been made redundant since 28 February or up until 19 March can you in those circumstances as an employer reinstate someone who has been dismissed?

Sharon Tan      

You can yes.  The government has said it's possible for employers to bring back employees who have been made redundant before the relevant date but it’s not mandatory.  So it's a matter for employers to agree with their former employees.

Will Winch      

If you are on furlough, the idea being I guess that you don’t do any work whilst you are in furlough, but are you allowed to do any work if you have been furloughed?

Sharon Tan      

You’re not allowed to do anything that would generate any sort of revenue or income for your employer so you're off the books and you’re not actively working what you can do is you can undertake some training during a period of furlough leave and from the employer's perspective they need to ensure that if an employee undertakes any training that they receive at least the national minimum wage in respect of any such time that means that if their furlough leave pay falls short of that, it will be incumbent on the employer to top them up.

Will Winch      

So there you are, you're at home been put on furlough, you're not allowed to do any work for your employer, can you work for anyone else while you are on furlough?

Sharon Tan      

It depends on what your contract of employment says.  If you were able to do that before you were put on furlough leave, i.e. if you were able to work for somebody else, then that remains the case.  You can't work for the employer who has furloughed you, but if you for example had another job with another employer alongside that and that employer hasn’t furloughed you, then you can certainly continue to work for them.  What you also can do, is you can volunteer through this pandemic.  So for example, if you want to go and volunteer for the NHS and you've been furloughed, that's not going to jeopardised any payments under the coronavirus job retention scheme.

Will Winch      

So you've said if your contract doesn’t allow you to do so then you can't, but can you agree with your employer to amend your contract so that you can go off and work for a delivery company say or go and take some other job if you haven’t already got two jobs to start with can you go and find something else to supplement your income in those circumstances?

Sharon Tan      

It does look at though it is going to be possible for employers and employees to mutually agree to amend the contract in that way so that somebody can do that yes.

Will Winch      

We've talked about employees getting 80% of their salary and it being capped to up to £2,500 so are they then entitled to the rest of the salary?  What happens to that?

Sharon Tan      

Yes, they are unless the employee agrees to take home a lesser amount, but it's important to note that the scheme doesn’t require the employer to pay that additional amount in order to access the job retention scheme.  As far as the government is concerned that's a matter between the employer and the employee.

Will Winch      

So you are going to need to get the consent of the employee if you want to vary the terms of the contract.  So what happens if the employer can't then afford to top up the salary?

Sharon Tan      

As I say then that's a matter for agreement between the employer and employee and in order to lawfully avoid repaying the difference, the employer will need to get the consent of the employee to vary the terms of their employment contract.  In addition, if the employer intends to make redundancies if the answer is no, in other words if the employee refuses to consent to taking home a lesser amount, then the employer will need to look at collectively consulting with it's workforce if 20 or more employees are likely to be affected by what they are proposing that would involve at a very high level notifying the government, arranging for election of employee representatives if they don’t already have those in place and then engaging in a collective consultation process.

Will Winch      

What does the scheme do to exist in employment law?  Does it change things in any way?

Sharon Tan      

Absolutely not.  It does nothing to change existing employment law.  In fact the government has said this scheme is expressly subject to existing employment law.  It is merely an economic grant from the government and so in implementing the scheme and operating it in practice employers will need to make sure that they do observe all existing employment laws and are in compliance with them.

Will Winch      

When you set about who you are thinking to furlough, how should you choose who is going to be furloughed?

Sharon Tan      

Employees may need to look at implementing selection criteria if they only need to furlough some of their staff.  It may be that certain members of staff would welcome the opportunity to be furloughed.  For example if they have got childcare commitments and are just finding it too difficult to manage everything but that's a matter of dialogue and the employer in implementing the furlough scheme needs to very careful not to discriminate and the way they go about selecting people.  Whilst there may be a desire for example to protect older workers or to make it easier for those with childcare issues, employees should be very careful about requiring them to be put on furlough as it may be discriminatory and amount to unlawful treatment.

Will Winch      

When you are choosing to put someone on furlough, is there any particular thing that you need to do?  Is it just a matter of telling the employees that they are now furloughed or do you need to do anything else?

Sharon Tan      

As I said earlier if you are going to pay employees less than 100% of their normal salary then it’s been clear from the outset of this scheme that you would need to secure their consent.  What wasn’t clear at the beginning was whether you needed to get the agreement of the individual if you were still prepared to pay 100% salary and the government has clarified within the last week that you do in fact need the agreement of any employee that you want to furlough regardless of whether you want to top up or not.

Will Winch      

There's been a lot of conversations about holiday that I am aware of, in terms of whether employees can or cannot take holiday.  What's your view?

Sharon Tan      

It's a very interesting question as far as the government is concerned,  they don’t think that the holiday regime has changed, what has changed of course is they have enabled those  for whom it's not reasonably practicable to take holiday to roll forward any such holiday for another two years but that I think is intended, as the language says, be limited to those for whom it is not reasonably practicable.  Outside of that, it looks as though the general rules apply in relation to holiday and so what that means is that employees ought to be able to take a period of holiday during furlough leave and if they do, the employer will have to top them up to 100% of their pay, even if the employee has agreed to take furlough leave at 80%.  By the same token, employers can require employees in the normal course to take holiday on predetermined dates as long as they give them twice the advance notice as the length of the holiday that they want the individual to take.  So if you wanted an individual to take two days holiday, you would need to give them four days advanced notice and we think that those same rules are likely to still apply.

Will Winch      

So it's not going to be the same for an employee on sick leave, we think?  You know, you can't ask an employee to those circumstances to take holiday but we think that it is slightly different on the furlough.  Now if you are an employee, can you insist on being furloughed? 

Sharon Tan      

No, it's a call for the employer to make.

Will Winch      

And when the employer has made a decision on put you on furlough, are they then stuck with that or can they take you off furlough and rotate you with other people if necessary?

Sharon Tan      

The government has said that an employee needs to be furloughed for at least three weeks before the furlough grant applies so you can't furlough someone for a week on a week on week off rotation, but what you could do is to have three weeks on three weeks off or perhaps more practically, if people are paid monthly then you could have a month on and a month off by way of rotation.  Again, do be careful when you select people for this to make sure there is no unlawful discrimination.

Will Winch      

If you have been furloughed, does that mean you are going to be safe from redundancy or can an employer make decisions about redundancies even when staff are off on furlough?

Sharon Tan      

Employers can.  The fact that someone has been put on furlough doesn’t affect an employer's ability to make redundancies at a later date if it considers it necessary to do so in the normal course as always an employer will need to consult with individuals potentially with representatives of employees as well before making redundancies as is required by current employment legislation.

Will Winch      

Well for now, let's wrap up there.  I would like to say thanks so much to Sharon Tan for joining me for the first of these Mishcon Academy digital sessions podcast.  I'm Will Winch and in the next episode my college Alex Rhodes will be looking at how businesses are responding to COVID-19 and the importance that social value will play in success in the post crisis world.  The Digital Sessions are a new series of online events, video and podcasts all available to mishcon.com and if you have any questions you would like answered or suggestions of what you would like us to cover, do let us know at coronavirus@mishcon.com.  Until next time, take care.

Mishcon Academy: Digital Sessions are a series of online events, videos and podcasts looking at the biggest issues faced by businesses and individuals today.

Join Partner Sharon Tan and Legal Director Will Winch as they navigate the complexities that employers face in the current climate. This Mishcon Academy: Digital Sessions podcast covers the current guidance for employers including how and when to access government support such as the Coronavirus Job Retention Scheme. Listen now.

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