Following Discrimination Laws While Furloughing Employees
While the Coronavirus Job Retention Scheme is a lifeline for many UK companies, it is important to understand the process behind the policy. How can your business get the most out of the scheme while avoiding legal pitfalls?
As the coronavirus pandemic continues to cause unprecedented disruptions to businesses across the country, many employers have already taken advantage of the Government’s Coronavirus Job Retention Scheme (‘CJRS’). Below, Nick Hobden, partner at Thomson Snell & Passmore describes the intention of the scheme and how it works from a legal perspective.
Under the scheme employers are able to use a portal to claim 80% of furloughed employees’ usual monthly wage costs, up to a limit of £2,500 pre-tax, plus the Employer National Insurance contributions and minimum automatic enrolment employer pension contributions. The calculation will be based on the higher of the pay paid in the same period in the previous year or average monthly earnings from the 2019-20 tax year.
Provided an employee was on the PAYE payroll on 19 March 2020 (revised from the original date of 28 February), even if they were laid off, made redundant or resigned afterwards and left their employment, provided they are reinstated, the scheme can be used to cover their wages irrespective of the type of contract they are employed under, including full-time employees, part-time employees, and employees on flexible or zero-hour contracts. But not employees placed on short time working.
In order to be eligible for this scheme, the employee must not undertake any work whatsoever for their employer. If the employee has agreed to be working reduced hours or for reduced pay, because of this crisis, rather than existing part-time employees, they will not be eligible for the scheme, but they are able to take part in volunteer work or training as long as it does not provide services to or generate revenue for their employer. In an update to the Government guidance on 4 April, employees can work for another employer if their furloughing employer agrees or their contract of employment allows them to work elsewhere. This would result in them receiving a top up of their reduced income from furlough. Not a bad outcome of this scheme!
In an update to the Government guidance on 4 April, employees can work for another employer if their furloughing employer agrees or their contract of employment allows them to work elsewhere.
Businesses of all sizes from across the private sector have already furloughed employees, with research from the British Chamber of Commerce showing that 44% of businesses expect to furlough at least 50% of their workforce. There is no limit on the numbers of staff that can be furloughed, with some furlough numbers running into several thousand. The new guidance permits directors of companies to be furloughed provided they only fulfil their statutory duties like passing board resolutions. Personal service company directors can be furloughed too, although they are likely to be paid mainly in dividends. Salary only, not dividends, can count toward the grant from HMRC. The scheme also extends to apprentices as well as office holders.
The Furlough Process
While the Government has sought to make the process for furloughing employees as quick and simple as possible, it is vital that senior leadership teams do not knee jerk and rush the process, as this could lead to potential issues down the line.
The first step is to consider if furlough is appropriate for your business. This could be because your operations have been severely affected by coronavirus, where employees would otherwise be at risk of lay off or redundancy, or for any of your employees who have been advised by their GP to self isolate due to being extremely vulnerable.
If furloughing employees is appropriate for your business, the next step is to identify which roles can be furloughed. Employers must take care to not discriminate when doing this, such as to furlough one gender exclusively. However, under these circumstances it is not necessarily discriminatory to offer furloughed leave to employees identified by the Government as ‘vulnerable’ and who are at increased risk of severe illness from coronavirus, such as but not limited to those aged 70 and over, those who have heart conditions, those who have had organ transplants anyone instructed to get a flu jab as an adult each year on medical grounds such as bronchial conditions and those who are pregnant.
Those who are sick and self isolating because another member of their household is ill with the virus should not be furloughed during their period of self isolation. When an isolation note has been issued by NHS111, an individual qualifies for statutory sick pay from day one and company sick pay if they are entitled under their contract of employment to receive this benefit. When their isolation finishes, they can be furloughed.
A really important point to keep in mind is that employee consent to being furloughed must be obtained. Consider your alternative for any employees who do not consent. Identify if a lay off or short time working clause is included in contracts of employment. If so, your plan B is likely to be imposition of unpaid lay off or short time working. If not, your plan B may need to be making redundancies.
It may be worth seeking volunteers to be furloughed. However, if not enough volunteers come forward and you need to furlough more than 20, then if you consider there is a risk that 20 or more may refuse consent; and your plan B for those who refuse is dismissal for refusal to furlough or redundancy, you will need to conduct a collective consultation with unions if you have recognition agreement or via elected employee representatives.
Hopefully, however, given the current situation, employees will agree to be furloughed. Agreement needs to be given in writing. Issue furlough agreement letters to be signed and returned by furloughed staff evidencing their consent to being furloughed. Allow them the opportunity, before signing, (or give their agreement by email if your systems cannot apply their electronic signatures) to raise queries with HR or their line manager. You will need to keep a record of each employee who agrees to be furloughed and how much you have paid them for 5 years.
A really important point to keep in mind is that employee consent to being furloughed must be obtained.
Key Points for Consideration
As well as deciding which roles are to be furloughed, there are also a number of other points for leaders to take into consideration.
- Are you going to top up the Government contribution to pay 100% of salary? There is no obligation to do so, but some businesses are doing so as a gesture of good will towards employees.
- How long will furlough last? The minimum period is three weeks and the maximum is to the end of June 2020, unless the scheme is further extended by Government.
- With the above in mind, decide if furloughed employees are to be rotated on at least a three week on, three week off basis.
- Will you allow employees to secure employment elsewhere, even if there is a prohibition on working for another employer in their contract of employment?
- Alternatively, consider unpaid volunteering work they can do or what training they can undertake that does not rendering services for your company and or generating revenue for your business.
Businesses need to be very aware of potentially discriminating against employees who have protected characteristics.
For example if there is no danger of a disabled person being at higher risk of catching the virus by attending work and being able to engage in social distancing, then selecting them for furlough particularly if you will not support their pay at 100% through the furlough period and only pay them 80% or up to £2,500, when they earn over £37,500 per annum, then you run the risk of a discrimination claim.
Similar considerations would apply in respect of pregnant employees or older employees as there could be potential claims of sex/maternity or age discrimination. Although it is likely that you could objectively justify putting these groups on furlough where there is legitimate aim of protecting health and safety of these employees.
If you are going to use furlough, make it clear to your employees why this has to be done and how your business may not survive without this measure being taken – with help from Government. Be prepared to have discussions with your staff to get their agreement first. Don’t unilaterally impose furlough, unless you have a lay off clause in their contracts of employment. Because you need their “buy in” and loyalty.