On 20th of March 2020 the Chancellor set out a package of temporary, timely and targeted measures to support public services, people and businesses through this period of disruption caused by COVID-19. In it, he announced that affected employees could now be designated as “furloughed workers”, meaning that if an employer cannot cover staff costs due to Covid-19 the employer can access the Coronavirus Job Retention Scheme. This Scheme enables an employer to retain employees on payroll, rather than having to lay them off.
In order to qualify for this scheme, an employee should not undertake work while furloughed. This will then allow the employer the right to claim a grant of up to 80% of an employee’s wage for all employment costs, up to a cap of £2,500 per month. It is unclear at this stage as to whether this figure is gross or net.
Employment contracts will not contain a clause relating to furloughed employees. From an employment law position there are 2 options for employers in view of the absence of a contractual term:
- Introduce a new express term within contracts to classify employees as furloughed workers. This clause should cover the following:
- The employee will remain on payroll but will not be required to work;
- Pay will be made at the rate determined by statute (currently 80%), up to £2,500.00 (which is the current rate)
- Whether or not the employer makes up the difference between this payment and the employee’s salary is at the employer’s discretion.
- In the absence of a contractual term, cite custom and practice, i.e. because there was no clause to deal with furloughed workers a term can be argued/introduced by the employer to cover this “new” status.
The rationale behind (1) is to remove any risk of any employee arguing constructive dismissal and/or unlawful deduction from wages.
If you wish to discuss the above article, or require further clarification, please contact our employment department for expert advice.