Coronavirus – Guidance on Job Retention Scheme (Furloughing)
What does the option of ‘furloughing’ employees during the COVID-19 pandemic actually mean for business?
The government now seems to be suggesting we are in this phase of self isolation for the long term and the chances of relief from the current measures being within 6 months seem quite remote.
Employers across the spectrum of business will have given consideration already to how best to structure their organisations through this indeterminate period in light of the government’s various proposals for mitigating the effect of the lockdown on business.
One such proposal which was further detailed on Friday is the government’s retention of jobs or “furloughing” scheme.
Potentially it is a lifeline to businesses, particularly labour intensive businesses, giving them the option to cut costs of the business to a minimum to balance the lack of trading income where its commercial activities have ceased or reduced.
Employers should pause before they put their entire workforce on furlough leave.
There are both practical and legal reasons not to dive in with your eyes closed.
The legal reasons are that putting workforce on furlough leave inevitably puts the employer in breach of contract. It is a fundamental term of any employee’s contract that they are offered work and the point of furlough leave is that the employee cannot work.
In addition if the employee on furlough leave earns more than £3,150 per month and the employer is not making up their pay this again is a fundamental breach of the employee’s contract.
When the employer is in fundamental breach of contract the employee has the option of terminating the contact of employment and subject to sufficient qualifying service claim constructive unfair dismissal.
Thirdly, an employer who is considering asking more than 20 people to go on furlough leave should be opening a period of at least 30 days’ consultation. Without such consultation the employer risks a protective award which is an effective penalty of between 30 and 45 days’ pay for each employee employed.
The practical risks of furloughing employees are more straightforward:
- If any stream of work is to continue there must be some employees retained by the business
- Although of course an employee who has been furloughed can be recalled to duty the minimum furlough leave is 3 weeks.
- It is human nature that where the intimacy of routine contact has gone an employee left with time on their hands may well look at other opportunities
These are all risks which the sensible employer can overcome by careful planning with their employment adviser.
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