The Chancellor of the Exchequer announced on Friday 20 March that he is setting up a new “Coronavirus Job Retention Scheme” (the “Scheme”). As part of the Scheme all UK employers are being offered access to “a grant to cover most of the wages of people who are not working but are furloughed and kept on payroll, rather than being laid off.”
This note is correct at the time of writing, 10am on Monday 23 March. The issue, at present, is that the detail behind the Scheme is very limited. More guidance providing clarity on the Scheme is expected in the coming days and we will update schools when this is forthcoming.
Who is covered?
Any employer in the country – small or large, charitable or non-profit – will be eligible for the Scheme.
What is available to schools?
“A grant to cover most of the wages of people who are not working but are furloughed and kept on payroll, rather than being laid off.”
What does “furloughed” mean?
This is not a term which currently exists or applies in employment law in England and Wales. The concept of furlough leave, as outlined in the guidance, is new and clearly designed for the exceptional time we are currently in.
In the context of the Scheme, there is no legal definition of furlough yet, but the Scheme is about subsidising the wages payable to an employee who has been sent home by the school and who is not working remotely. The employee should not undertake any work for the school while furloughed.
As far as we are aware, it will not be lawful to impose furlough on an employee. The guidance suggests that the decision to furlough an employee needs to be agreed with them in accordance with existing employment law (unless there is an express contractual provision allowing an employer to remove work unilaterally, which would be highly unusual in a school context). This would mean an initial period of discussion with the employee with a view to, ideally, agreeing the change with them. The expectation, however, would be that most employees would agree if the alternatives they are presented with are either redundancy or to receive no pay.
We have no detail as yet as to how furlough would work in practice, how and if an employee would resume normal duties and if any notice is required
Is furlough different to laying off staff?
In employment terms, yes.
The ability to ‘lay off’ staff is very limited and is subject to an existing contractual (or collective) provision. This would be unusual in a school context in our experience. We understand that the term ‘laid off’ used in the guidance is meant in the more general sense i.e. their employer lets them go because they can no longer afford to pay them, or for another economic reason. A furloughed employee however has the expectation that they will return to work after a defined period, or on satisfaction of a certain condition. They are usually not paid while on furlough but as they retain their employment, they will retain their benefits whilst they are away from work as well as their continuity of service.
What will the Scheme cover?
The grant will cover 80% of the salary of retained workers up to a total of £2,500 a month. Schools can opt to top up salaries further if they choose to. It is unclear whether this includes pension contributions or other benefits.
As we understand it from the limited guidance, the Scheme only applies to employees. It does not apply to workers or the self-employed at the present time.
Does it apply now?
Yes the Scheme is available now and will be backdated to 1 March 2020. The Scheme will initially be open for at least three months.
How does it work?
The Government is still setting up the Scheme and expects to pay the first grants “within weeks” and “before the end of April”.
In order to access the Scheme, the Government guidance (which is available here) provides that employers will need to:
- designate affected employees as “furloughed workers”;
- notify the employees of this change (subject to existing employment law and, depending on the employment contract, negotiation); and
- submit information to HMRC through an online portal (which is yet to be set up).
What don’t we know yet?
A lot! There are many unanswered questions in relation to the Scheme and we are expecting further clarification imminently. It does, however, offer employers a possible alternative route to the need to make redundancies or to lay off staff during the crisis.
We anticipate some initial issues that may arise from implementation of the Scheme would include how to deal with employees on short-time work; exactly what aspects of an employee’s pay goes to make up that £2,500; and how to plug into the Scheme if you’ve already made employees redundant or laid them off in response to the outbreak of Covid-19. We also do not know the terms of the grant and whether it is expected that it will be recovered at some future point in time.
What about our contractual arrangements?
They are still relevant. You can’t impose furlough on an employee, as far as we know, but very few employees are going to resist if it’s offered when the alternative is redundancy. If you have a proper lay-off clause in your employment contracts, you will need to check that you can still use the Scheme. There may be guidance on this point issued in due course.
This is not a ‘silver bullet’ for schools. Teaching staff who might make up the bulk of ongoing staff costs are less likely to be furloughed because they are needed to deliver the virtual curriculum as well as pastoral support for pupils. The ability to furlough might be useful for support staff however, there are a significant number of clarifications needed. By way of a simple example, a school has five cleaning staff and decides that temporarily it only needs two. How does the school select those two staff? Must it be based on sound business reasons? How do we evidence this and if you are the cleaner who is not chosen (i.e. has to work), are you able to challenge the decision not to be selected? Is there a method of rotating staff?
We suggest schools should not consider furlough in isolation but should consider this issue alongside other employment options such as reducing hours and pay as well as redundancies.
We will keep you up to date as soon as additional clarification on the Scheme is forthcoming.