News Update

Updated Guidance: ‘Furloughed Workers’ Coronavirus job retention scheme

Since the Coronavirus Job Retention Scheme (Scheme) was introduced on 20th March 2020, employers have been grappling with some difficult questions about how the Scheme will operate in practice. Questions such as , “Who is covered by the Scheme?”, “What amounts to ‘wage costs’?” and “Does placing an employee on furlough leave have an impact on their immigration status?”  have  been crossing the minds of many.

A number of these questions remained unanswered by the fairly high-level guidance issued by the Government on 26 March (see our article). However, the weekend finally brought some all-important clarity when the Government updated its guidance. You can read the updated HMRC guidance on the Coronavirus Job Retention Scheme here, and the Home Office guidance on the impact of COVID-19 on Tier 2, 4 and 5 sponsors here. We address each set of updates below.

Coronavirus Job Retention Scheme

Details of the updated guidance can be found here.

Below is a summary of some of the key points of clarification provided in the latest updated Guidance to the Scheme:

  • Former employees can be re-employed and placed on furlough leave, regardless of why their employment terminated, as long as they were on the employer’s payroll on 28 February 2020.
  • Furloughed employees can take up jobs with different employers, subject to the terms of their employment contract(s).
  • Meaning of wage costs. The latest guidance has confirmed that the HMRC’s grant will cover basic salary, past overtime, fees and compulsory commission payments. However, employers will not be able to recover the cost of any discretionary commission or bonus, tips or any non-monetary benefits. Benefits provided through salary sacrifice schemes are excluded from the reference salary, although employers could allow employees to make changes to their salary sacrifice scheme on the basis that the COVID-19 pandemic amounts to a “life event”.
  • Who can be furloughed? The update detailed different categories of workers who could be placed on furlough leave, including:
  1. Company directors and other office holders. Even though they are still permitted to fulfil their statutory duties, furloughed company directors must not undertake any other work that they would ordinarily carry out, particularly work that could generate commercial revenue or providing services on behalf of the company.
  2. Agency workers, as long as they are paid through PAYE. Such workers must not carry out any work during furlough leave.
  3. Employees with caring responsibilities (e.g. those looking after their children).
  4. Apprentices, who can continue to train whilst on furlough leave. Apprentices must receive the applicable national minimum wage during any training period.
  5. Domestic employees (such as nannies) who are employed by individuals, provided that such employees are paid through PAYE and were on their employer’s payroll on or before 28 February 2020.
  • Multiple furlough periods. Employees can be placed on furlough leave more than once provided that, in each case, the period of furlough leave lasts for at least 3 weeks. Employers should therefore be able to rotate their furloughed employees, provided that each furlough period lasts for 3 weeks and the employer complies with the written notice requirement (see below).
  • Written notice to employees. Employers must notify its employees of their furloughed status in writing and keep that written record for at least five years. Please do let us know if you require any assistance with preparing these notifications.

Although the latest update is welcome news for employers, there are still a number of unanswered questions (some of which are set out below) which will, no doubt, cause further uncertainty and frustration. We have provided our initial thoughts to these difficult questions (in italics), pending further guidance from the government, although we should emphasise that they are our educated guesses only – the actual position on each remains unclear.

1.   Annual Leave

  • Will annual leave continue to accrue during the furlough period? We suspect so, given that the employment contract will remain in force during the furlough period.
  • Are employees allowed to take annual leave during furlough leave without breaking the furlough leave continuity? Our current view is that employees should be able to take annual leave during furlough. However, in the event that annual leave is deemed to break the continuity of furlough leave, cautious employers may wish to await further clarification from the Government and/or ensure that employees do not take annual leave in the first 3 weeks of furlough leave.
  • What rate of pay should furloughed employees receive during any period of annual leave? The furloughed employee’s salary during annual leave may need to be calculated differently to include any regular commission or overtime (i.e. their “normal” salary).

2.   Illness and furlough leave

  • What happens if a furloughed employee becomes ill and/or needs to self-isolate, in accordance with the government advice? It is likely that the employee will be marked as being on sick leave and that their entitlement to pay during this time would be to SSP or contractual sick pay. We are yet to find out whether this could break the continuity in that employee’s furlough leave.

3.  TUPE transfers

  • What happens if furloughed employees transfer to another undertaking after 28 February 2020 under the TUPE Regulations? Although the transferring employee may not technically have been on the incoming employer’s payroll on 28 February 2020, we suspect it is likely that these employees will be deemed to have been on the incoming employer’s payroll on 28 February, as long as they were employed by the outgoing employer on that date. However, if that is the case, it will be interesting to see which employer will be permitted to claim under the Scheme and in respect of which periods.

Furlough Leave and Immigration Status: Tier 2 Visa Holders

There has also been useful guidance from the Home Office regarding furloughing employees who are sponsored Tier 2 visa holders. Usually the Home Office imposes strict minimum salary levels for Tier 2 visa holders. This minimum salary threshold figure depends on:

  • occupation type;
  • level of experience; and/or
  • the visa holder’s age.

The Home Office have recently relaxed the minimum salary requirement. The new guidance allows employers to temporarily reduce a visa holder’s salary, thus aligning UK immigration rules with the wider Scheme. Therefore, it is now permitted, under the immigration rules, for employers to reduce the pay of sponsored Tier 2 employees to 80% of their salary or £2,500 per month, whichever is the lower. Any reductions must be part of a company-wide policy to avoid redundancies, ensuring all employees (including visa holders) are treated the same. Please note a visa holder’s pay must return to the previous level once the furloughing arrangements have ended, as the strict minimum visa salary thresholds will be re-introduced.

We are actively working with clients to assist their workforce planning during this difficult time (including preparing communications with ‘Furloughed workers’). If you require any assistance with that or any other employment issue, then please do not hesitate to contact Jonathan Bruck.

 

This article is provided for general informational purposes only.  Although every effort has been made to ensure that information in this article is accurate, it does not constitute legal advice and should not be relied on as such. In case you require any legal advice, please do not hesitate to contact us.

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Key Contacts

Jonathan Bruck
Head of Employment
+44 20 7539 7305
Stephen Hall
Senior Associate, Head of Immigration
+44 20 7539 7310
Karin Kiho
Solicitor, Employment
+44 20 7539 7304
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