What is a Furlough and What are Employees Rights During One?
What is a Furlough?
An employee furlough is a mandatory suspension from work without pay. It can be as brief or as long as the employer wants. In this case that means anyone asked to stop working during the coronavirus pandemic rather than be made redundant.
Furloughs can take place in both public and private institutions. An organization will furlough employees as a cost-saving measure when it doesn’t want to lay off staff but lacks the resources to continue paying them.
A private business might furlough its employees during a short-term or cyclical downturn. Seasonal businesses, for example, may furlough their employees during their slow months. Or a shop owner may do so in between orders, choosing to furlough employees he can’t afford while trying to drum up new business.
Please note the ‘No Work Rule’
If you use ‘Furlough’ employees are absolutely banned from doing any work on behalf of the company whatsoever.
This is a zero-tolerance rule. A furloughed employee can’t so much as take a phone call or answer e-mails. Even five minutes breaks the No Work Rule.
If a salaried employee does any work while on furlough the employer must pay them the equivalent of their salary for the entire day. If an hourly employee works while on furlough the employer must pay them for the time worked.
As a result, you must ensure that ‘furloughed employees’ have their access to work accounts and devices revoked. This is to prevent well-meaning employees from breaking the law and triggering a payment obligation.
Furloughs vs. Layoffs
There are key differences between a furlough and a layoff:
- Furloughed employees have an expectation that they will return to work. Typically, an employer will give furloughed employees either a specific date or a specific condition for resuming duties.
- Furloughed employees typically retain their benefits. Most notably, employees usually retain access to any health and life insurance during the furlough.
- A furlough is relatively seamless. Laying off employees requires significant process, as does hiring new staff. This can be time consuming and expensive. By contrast, a furloughed employee can come and go fairly easily.
- An employer typically will use a furlough to retain staff that they can’t afford but don’t want to lay off.
Employee Rights During a Furlough
First and foremost, furloughed employees have the right to seek new employment however, we cannot see this being an issue with the current pandemic. Apart from the supermarkets we cannot see that anyone would be recruiting. The government have also brought out guidelines to say that they will assist with wages and it is through the mechanism of Furlough that we understand that this will be done.
Many employees can consider taking temporary jobs during a furlough. However, if your contract of employment prevents this and they are receiving wages we would suggest that they are in breach of contract. Neither can we see how the government would be prepared to pay them a wage and let them work as well.
Government Pay During a Furlough
Employers will be able to contact HMRC for 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,” The Chancellor said. This grant will be provided through the HMRC.
The government announced that they will pay 80% of wages of furloughed employees, up to a maximum of £2,500 a month. The scheme which is called “coronavirus job retention scheme”, will also be backdated to March 1 and open initially for “at least” three months.
Any employer in the country, small or large, charitable or non profit, will be eligible for the scheme, and there is ‘no limit’ on the amount of money payable through the scheme.
When asked if the 80% wage guarantee will cover zero-hour contracts provided that employees are on a PAYE scheme and have a set of regular earnings, as for any other contract of employment the Chancellor said that it covers everybody who is on the PAYE system through a company. The government will be publishing guidelines in relation to this.
What To Do Next
If you decide to ‘furlough’ staff then you will have to send each one a letter explaining what it means and the period for which they will be asked to stay at home. You will also have to explain that they must ensure that they do not work at all, if they are to qualify for government assistance.