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Furlough, Restructures & Redundancy
As the lockdown continues, the Government has extended access to its coronavirus job retention scheme and employers are settling in to a new way of working. Business life may have drastically changed, but employment law still applies.
You should check the Government website for the latest guidance in conjunction with this article, as the guidelines on the coronavirus (COVID-19) are changing daily. The guidance and the Treasury direction are inconsistent in places. You should speak to your solicitor for specific advice for your business.
Coronavirus job retention scheme update
The HMRC online portal opened on 20 April to allow employers to claim the grant covering some employment costs while staff are not working due to coronavirus. HMRC has updated its guidance and published calculation guidance, and the Treasury has issued a direction to HMRC on the scheme. Important developments include:
- scheme extended by one month to apply from 1 March to the end of June 2020;
- employees are eligible for the scheme if they were on the employer’s payroll on or before 19 March 2020 (previously 28 February) and the employer made a real time information (RTI) submission to HMRC for that employee on or before 19 March;
- you need each employee’s written agreement to go on furlough leave and you need to keep a record of this for five years – note that the Treasury direction differs from earlier guidance on this;
- employees who are shielding or who have caring responsibilities because of coronavirus can be furloughed;
- salaried directors on furlough leave are only allowed to carry out limited statutory duties and cannot generate revenue; and
- employees can take holiday during furlough leave. It is uncertain whether employers must top up furlough leave pay to their normal rates of holiday pay.
Redundancy consultation during lockdown
Any release from lockdown will be gradual and a severe global recession is predicted, so making redundancies is becoming a harsh reality for many employers.
Even though it may be clear that there is currently no work or reduced work for your employees, you must still follow a fair process. Otherwise, you risk claims for unfair dismissal from employees with more than two years’ service or those who argue that their selection for redundancy was discriminatory.
A fair process includes individual consultation with employees, including those on furlough leave. This may have to be by telephone or video call to respect social distancing.
Employers making 20 or more staff redundant within 90 days, must also collectively consult. We can advise you on how to comply with this obligation or if you can use the special circumstances exception. You must still hold elections for employee representatives if you do not recognise a trade union.
One final warning; although there is nothing in the guidance preventing employers from making furloughed employees redundant, a redundancy dismissal has to be fair. In deciding fairness, an employment tribunal is likely to consider the suitability of using furlough leave instead of redundancy. We can advise you on ensuring any redundancies are fair.
Is home working not working?
Many businesses moved their staff to working from home, and changes had to be made quickly. For working parents, working from home is complicated by the closure of schools and nurseries for all but children of key workers. Home working may be the new normal for some time, so now is a good time to take stock.
Employers may need to agree flexible arrangements to support staff. Agreeing expectations and specific arrangements in writing with individual employees should help, along with a home working policy.
Some employees may struggle with motivation and feeling isolated. Managers should catch up regularly with their team, possibly through virtual ‘coffee breaks’.
It is worth remembering that employers are still responsible for employees’ health and safety when working from home. Acas has recently published practical guidance on how to fulfill these responsibilities remotely. We can advise you on this and any particular issues such as making adjustments for disabled employees.
We can also advise on what to do if, home working is not working for specific employees, for example:
- difficulty in getting hold of the employee during working hours;
- concerns that the employee’s productivity has dropped; or
- if the employee appears unable to cope with workload and looking after young children.
Data protection risks
One of the risks of home working is relaxation of your data protection measures as employees use their own devices and printed confidential information might find its way into kerb-side recycling.
The Information Commissioner’s Office (ICO) regulatory approach during the coronavirus public health emergency will take into account pressures on organisations due to coronavirus. However, employers still need to ensure data protection is integral to home working arrangements. The ICO guidance on working from home offers a number of tips. We can draft policies to protect personal data for home working.
Changes to the CJRS with effect from 1 July 2020
From 1 July 2020, furloughed employees can return to work on a part-time basis. Employers must pay in full for days worked and can claim under the CJRS for days not worked, subject to the relevant caps. The main aspects of the scheme which changed on 1 July are as follows:
- Only employees who started furlough on or before 10 June 2020 are eligible for the new scheme, unless they were on a long period of statutory family leave, or a military reservist on a period of mobilisation, on 10 June.
- There is no limit or restrictions on the working arrangements that can be agreed with furloughed employees. Employees do not need to be furloughed for a minimum of three weeks so rotations on and off furlough can be made on a more frequent basis.
- The new working arrangement must be agreed between employer and employee before the claim period starts and should be confirmed in writing by the employer).
- Claim periods need to be a minimum of a week and can no longer overlap months.
- Employers need to report both hours worked and the usual hours an employee would be expected to work in a claim period. This means that an employer making a claim in advance of the payroll date needs to be certain of the hours that anyone who is flexibly furloughed will work between the date on which the claim is made and the end of the claim period.
- The number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim. This could be relevant where the employer operated rotating furlough arrangements before 1 July 2020. There are specific rules for calculating the maximum number of employees who can be furloughed where there are employees newly furloughed following statutory family leave or a period of mobilisation as a military reservist, or who are inherited by an employer through a TUPE transfer after 30 June 2020.
- The calculations required to claim are more complicated. It is necessary to ascertain each employee’s normal working hours for the claim period, the number of hours they actually worked, and the sum that the employer can claim from the CJRS in respect of the non-working period. For further information on calculating furlough pay from 1 July.
Changes from 1 August 2020
From 1 August 2020, employers will be required to pay the following contributions towards furloughed employees’ 80% (subject to cap) furlough pay:
- August 2020: Employers will be required to pay the employer NICs and employer pension contributions on the furlough pay.
- September 2020: Employers will also be required to pay 10% of employees’ furlough pay, capped at £312.50. The government will pay 70% of employees’ furlough pay, capped at £2,187.50.
- October 2020: Employers will be required to pay 20% of employees’ furlough pay, capped at £625. The government will pay 60% of employees’ furlough pay, capped at £1,875.
As furloughed employees can return to work on a part-time basis from 1 July 2020, the new caps will be proportional to the hours not worked.
Do employers have to agree fresh furlough agreements with employees if their furlough period continued after the end of June 2020?
Yes. If the employer wishes the furloughed employee to begin to work part-time after 1 July 2020. As employees were prohibited from working for their employer while on furlough in the period 1 March to 30 June 2020, a properly drafted furlough agreement for furlough commenced during that period will prohibit employees from carrying out any work for the employer during furlough. In any event, the agreement must be confirmed in writing in order to claim in respect of flexible furlough from 1 July 2020.
This means that, where the employer wishes a currently furloughed employee to begin to work part-time after 1 July 2020, it will be necessary for the furlough agreement to be amended by a side letter, or for a fresh furlough agreement to be entered into, which permits this and deals with the circumstances in which the employer can require the employee to work.
Where an employer wishes to re-furlough an employee who is currently working but was previously furloughed for at least three weeks before 30 June 2020, a new furlough agreement will need to be entered into, unless the previous agreement specifically provided for rotating furlough arrangements (in which case a side letter will be required if the intention is to take advantage of flexible furlough).
Where an employer wishes to continue to fully furlough an employee beyond 1 July 2020 without any change to the terms of their furlough, the original agreement may suffice. Arguably, paragraph 13 of the third Treasury direction envisages this, providing that the agreement merely needs to be made “before the beginning of the period to which the CJRS claim relates”. However, the employer should check carefully whether the original agreement anticipates furlough continuing beyond 30 June and extends to the relevant claim period (as required by paragraph 10.1(e) of the third Treasury direction), and whether there are any other terms or conditions that need to be updated by either a side letter or a new furlough agreement.
Get in touch
For support on minimising the risk of claims and ensuring your business can still operate effectively during these challenging times, please contact Zoe on 0203 8587965 or email email@example.com. Mulberry’s has offices in Brighton and London and offers advice and support to business, charities and workers throughout East Sussex, including Gatwick, Crawley, Eastbourne and Tunbridge Wells.
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