BFA Update: Coronavirus Job Retention Scheme BFA Guidance for Employers

Rishi Sunak announced on 20th March 2020 that the Government will establish the ‘CoronavirusJob Retention scheme’. This means that:

• All employers can contact HMRC for a grant to cover 80% of a furloughed (i.e. laid off)
employee’s wages, up to a maximum of £2,500 per month;
• Employers must designate the employee to be furloughed. These people are not allowed to
carry out any further work for the employer, but they remain employed.
• The scheme is currently intended to last for 3 months, backdated to 1st March 2020.
• The grant is available to all businesses, no matter what the size.
To clarify ‘to furlough’ is not legal terminology. Whilst no specific details have been put forward yet (we are expecting to see something from Government shortly) the BFA solicitors view is that ‘laying off’ (as a specific legal concept) and ‘furlough leave’ should be considered to be the same. In both circumstances, you are saying to your employees that you have no work and that they are going to have to stay away from work. The only difference is:
• Laying off means that you can have a contractual right to send them home without pay or on reduced pay; or
• If you do not have a contractual right to do this, you are still laying them off/furloughing them, but you just need to pay them their normal full salaries.
As far as the BFA solicitor is concerned, there is no difference between the two scenarios on a practical level; the purpose of the scheme is to allow you to send workers home with pay in order to avoid making them redundant.

Indications are that you would not receive this grant income until at least late April, so it is not an urgent short-term fix. However, if your situation is desperate and your business could not wait you should call HMRC who will look at providing funds to you sooner.

Frequently Asked Questions
1. Is my business eligible to claim the 80% up to £2500 per month for my staff?
Yes – You will apply for a grant from HMRC. BFA will share details as soon as they are
published by HMRC. We also recommend you look out for communications from HMRC sent directly to your business especially messages going to staff managing your payroll.
2. I have already laid people off am I still be covered under the scheme?
You can backdate any payments to staff laid off/furloughed from 1st March 2020. However, the employee must genuinely have stopped working from that date – if the employee was still working for you, this would not count as furlough leave.
3. Does my business have to pay the “shortfall” between the 80% and the 100% that a person usually earns? Can I furlough my employees on 80% so that I have no liability?
The Government’s guidance on this states that it is up to the employer whether or not to pay the remaining 20% (or excess above £2,500.00) per month). However, this is not the correct legal position; when an employer sends their employees home without work, they are still obliged to pay them 100% of their wages (unless there is already something in the contract of employment to the contrary, as in the case of the NCA). Withholding 20% of an employee’s salary will amount to breach of contract and an unlawful deduction of wages unless the employee gives their consent to doing this.

The entire point of the scheme is to encourage employers not to dismiss employees and
furlough them instead. Employers are unlikely to do this if they have to pay the employee 100% to stay at home; they would generally rather have them performing work for them. As such, the intention behind the scheme is that it is reasonable to only pay employees this reduced wage whilst on furlough leave.

It is advisable to seek the employee’s consent to accepting 80% (maximum £2,500.00) of their wages each month, as this represents a temporary variation to their contract of employment. It is expected that the majority of employees will consent since furlough leave is a better alternative than unpaid leave, lay-off, or redundancy.

To seek an employee’s consent to being placed on furlough leave, employers will need to:
i.Decide which employees to designate as furloughed employees.
ii.Notify those employees of the intended temporary change.
iii.Consider whether you need to consult with employee representatives or the union. For
example, where the employer intends to vary the contracts of 20 or more employees, and it intends to dismiss employees who do not consent to the change in their terms, this would be classed as a redundancy. It is unclear, however, at this stage, whether the government expects employers to follow this process before placing employees on furlough leave. BFA Solicitors view is that you will not be intending to make employees redundant (as you will expect them to agree to the furlough leave), so that the consultation process will not apply.

iv.Agree the change with the furloughed employees.
v.Confirm the employees’ new furlough status in writing. Ideally, the employer should advise how long it expects furlough leave to continue, however, this may be difficult in the current climate.

You may wish to put employees on furlough leave for an initial period, subject to review.
vi.Submit information to HMRC about the employees that have been furloughed and their
earnings through the new online portal (further details to come).

vii.Ensure that the employees do not carry out any further work while they are furloughed.

As above, if you do not have a contractual right to lay off the employees or to make changes to an employment contract, you should not unilaterally change an employee’s contract or pay without their consent. However, faced with the other alternatives, which are likely to be unpaid leave or redundancy, the majority of affected employees are likely to agree to be placed on furlough leave. However, if the employees refuse, your next step would be to:

a.Consider placing them on furlough leave anyway. Technically, the employees could resign and claim a breach of contract (a claim that would be unlikely to succeed if you carried out this process reasonably and appropriately, if there is a good business reason for placing employees on furlough leave), or could seek to bring a claim in the future for the difference in salary that they will be receiving.

b.Shortening working hours or reducing salaries, to which you would again be advised to seek the employees’ agreement; or

c.Make redundancies.

4. Is there a difference between weekly and monthly paid staff?
No.

5. Some of the staff have contracts which include lay-off clauses but my management, office and field sales staff do not have this clause in their contracts. Can I still furlough them and how much do I have to pay them?

You can furlough all employees, regardless as to whether you have an existing contractual
right to do so.The difference here is that you already have a contractual right to lay off some workers, meaning you do not have to seek a variation to their contract of employment as outlined above in question 3.

6. Will part time workers have the £2,500 cap reduced?
The payment is at 80% of their wages, up to a maximum of £2,500.00 per month. This appliesto all employees equally, regardless of the number of hours they work.

7. I am part of the NCA, my factory staff are covered by a wage guarantee of 75%. Do I have to pay 75% or 80% to my staff?

If you have a contractual right to pay 75% of wages, you are only required to pay 75% of their wages. This new scheme does not place any additional obligations upon you, it merely offers employers another option if they are thinking about making employees redundant. This equally applies if you have already agreed with your employees to send them home on some other reduced wage; you have already entered into a contract with them so you do not need to alter your agreement to match the Government’s new scheme.
8. Section 6 of the NCA states we can send employees home without pay. Why do we have to pay in line with the guaranteed 75%? Does this not say we can actually send home and not pay?

NCA 6.1.8 No employees are liable to be paid for periods for which they are sent home
The BFA Solicitors view of this is that if you are choosing to lay off your employees, you pay them 75%. If you sent the employee homes for any other reason, you are not obliged to pay them anything.
9. Who can be furloughed? Do I have a free choice who I can select for furlough or is there a strict criteria?
There is no set criteria. As with any aspect of work, you should not select staff on any
discriminatory criteria (i.e. their age, sex, race, disability) but based on your business need.
10. Can I change who is furloughed from week to week or month to month? Recalling them as it suits the business or the reverse laying them off again. The example here is that you might keep some office staff in but if one of them gets Covid-19 then you need someone to come back in to replace them.

Here there is an assumption that the furlough period can possibly be reactivated, i.e. put them on furlough now, bring them back in to the business, but then furlough again, although we recommend there would have to be a good business reason for this – this will be something that will hopefully be explained when further detail is announced by government.

11. If you have no work for the employees and, regardless of the grant scheme, cannot afford to pay them the wages what should I do?
You could:
•Negotiate laying employees off on unpaid leave or further reduced pay; or
•Consider making redundancies. If you cannot afford to make redundancies, you can approach the National Insolvency Service to ask for their assistance in paying redundancy payments etc. if it would otherwise mean that your business would become insolvent in paying them.

12. Does this apply also when an employee is partially laid off? E.g. only required to be furloughed for one day per week.

No – the policy only applies to those employees who are fully furloughed, i.e. who are not
working but kept on the payroll. In this case the employee would be on reduced hours not
furloughed.

13. Do employees accrue their employee benefits during furlough?
Yes. Your staff accure holiday at their usual rate and you will need to make provision to pay their PAYE, NI (notwithstanding the governments temporary suspension of these until the end of the current financial year). For all other benefits we are awaiting direction from government, including pension contributions.

14. I have employees who have holiday booked in the coming months what do I do?
We are awaiting government guidelines with regards to holiday pay and whether an employee can be taken off furlough during their previously booked holiday or during the NCA factory closure periods. Clearly some provision will need to be made to ensure that staff do not have significant holidays accrued at the end of this current situation, which would in turn prevent a business from re-starting its operation.

15. Will employees qualify for additional state benefit support?
Employees will remain entitled to the same support as they currently receive. The furlough scheme will pay the equivalent of up to £30,000.00 per year, so we do not believe that there would be additional benefits available to employees earning that amount of money (other than existing child benefits etc.).

16. Once an employee is furloughed can we ask them to do anything or do they become a worker again, for example – even if it’s just a phone call to ask where something is filed?
As above, the policy only applies to those employees who are fully furloughed and not given any work. However, you will still be able to speak with/socialise (social distancing permitting) those employees, so I do not believe asking them a question would be a breach of this scheme.

The purpose of the furlough scheme is to help businesses, not hinder them, so there will be a degree of leniency and common sense applied to the scheme in order to allow you to continue to run effectively.

17. When staff are called back into work are their wages immediately the responsibility of the employer?
Wages are always the responsibility of the employer; the scheme allows the employer to claim back 80% (up to £2,500.00) from HMRC. The employer is therefore responsible for paying wages whilst the employee is furloughed (albeit they can claim monies back from HMRC), and then still be responsible for paying wages when the furlough leave ends (with then no ability to claim monies back under the furlough scheme).

18. Can you rotate staff? This week group A work, next week group B, then C, then A, then B and so on, and still be within the law of the Coronavirus Job Retention scheme? Are they furloughed for the week they aren’t working?

As above, we would assume that the furlough period can possibly be reactivated, i.e. put them on furlough now, bring them back in to the business, but then furlough again, although we would suggest that there would have to be a good business reason for this – again, this will be something that will hopefully be explained when further detail is announced.

19. If I need to keep some staff working to support staff else-where – such as those still working in stores or warehouses – can I reduce their hours, still pay them at their full-time rate and claim the 80% on the reduced part of their salary?

You can vary your employee’s hours of working – you would again ideally seek their consent to this change, as it represents a change to their contract. You can then reduce their salary.

However, this is not the furlough scheme – that requires you to send employees home without work. In this scenario, you could not claim back the 80%.

20. If someone is “feeling ill”? members should send them home, and pay them SSP or treat that person as laid off?
If someone is ill, they are sick. If they are sick, they are entitled to receive sick pay only.
If you choose to send an employee home when they are not sick, you would have to pay them their normal full pay.

21. If someone is off with Covid-19 and therefore is being paid SSP, when they inform me that they have recovered do I pay them as a furloughed member of staff?
If the employee is fit to work and you do not want them to work, you would to pay them their normal full pay. You could then place them on furlough leave if you wanted to try to reduce the payments due to them.

22. If someone is self-isolating due to illness or childcare issues should they be on sick-pay or if they would usually be laid-off with everyone else should they be paid as the rest of the staff.

If an employee is looking after their children, you do not have to pay them – time off for the purposes of child care is unpaid.

If an employee is self-isolating, they are considered to be sick and would be entitled to sick pay.

If the employee is ready and able to work, you would either have to provide them with their normal pay, or you could seek to place them on furlough leave.

In terms of childcare issues only, you will need to assess each case in your business,
considering the employee and whether the business can manage without their services for a period.

23. If someone is already off and is being paid SSP, for reasons other than Covid-19, and they inform me that they are better what should I pay them?
If the employee is fit to work and you do not want them to work, you would have to pay them their normal full pay. You could then place them on furlough leave if you wanted to.
24. If someone who has been furloughed gets Covid-19 oris suspected of it should you move them onto sick pay or keep them as if they are laid off?

If you place the employee on furlough leave, you may be able to place them on to SSP if they tell you that they are now ill – we will have to wait for the details of the scheme. However, practically speaking, the employee is not going to tell you if they are unwell anyway, so I think the chances of this applying are quite remote.

25. Can an employee insist on becoming a furloughed worker?
No – an employee can request to go on furlough leave, but has no right to be placed on furlough leave.

Potentially redundant employees do not have a right to require their employer to place them on furlough leave as an alternative to redundancy either.

26. Can an MD/CEO/Owner lay themselves off along with their staff?

Any employee can be placed on furlough leave, as long as they are not carrying out any
work. It may be the case that the CEO/MD will still be required to carry out some work, so they may not be able to satisfy this critieria.

27. Does it apply to all types of employees, regardless of length of service?
Yes.
28. Can I ask an employee to still work “on the side”?
No – furlough leave only applies to those employees who are not working but kept on the
payroll.
29. My member of staff has a second job, can we both put that person on furlough?
As we understand yes you can.
30. Can a member of staff who has been furloughed take on another job?
Yes, that person could work for someone else. However, to remain in furlough paid by you they would need to be available at any time should you chose to recall them to work and remove them from furlough.

31. How should members treat the working rights of the individual at this time – should they write, consult and inform individuals or treat their staff collectively?
As above, employers will need to:

i.Decide which employees to designate as furloughed employees.
ii.Notify those employees of the intended temporary change.
iii.Consider whether you need to consult with employee representatives or the union. For
example, where the employer intends to vary the contracts of 20 or more employees, and it intends to dismiss employees who do not consent to the change in their terms, this would be classed as a redundancy. It is unclear, however, at this stage, whether the government expects employers to follow this process before placing employees on furlough leave. My view is that you will not be intending to make employees redundant (as you will expect them to agree to the furlough leave), so that the consultation process will not apply.

iv.Agree the change with the furloughed employees.

v.Confirm the employees’ new furlough status in writing. Ideally, the employer should advise how long it expects furlough leave to continue, however, this may be difficult in the current climate.

You may wish to put employees on furlough leave for an initial period, subject to review.
vi.Submit information to HMRC about the employees that have been furloughed and their
earnings through the new online portal (further details to come).

vii.Ensure that the employees do not carry out any further work while they are furloughed.

32. Do other employee benefits still accrue during the furloughed period?
It is not clear whether the £2,500.00 includes the value of benefits or not. I would suggest that  the employee will still receive benefits such as death in service and healthcare, but that things like pension and car allowance would have to be included within the maximum £2,500.00. We will have to wait for further details from government.

33. Can a factory put everyone on furlough mid-week – ie weekly paid staff placed on furlough today would get 100% for yesterday and 80% from today or do they have to pay 100% this week?

Furlough leave would start from whenever the employee was sent home without work. Any days spent working by the employee would not be considered to be furlough leave. You would pay the employee 100% of their wage in respect of the work they have carried out this week, and 80% of their wage from the date on which they were sent home without work.

34. Online operations remain a slightly grey area. It is clear that physical stores that aren’t
considered ‘essential’ should shut, but not so clear about online distribution centres. Can we still run operations to allow our digital businesses to continue trading?
Online retail is still permitted to operate as normal in the current climate. Parts of those physical shops which are open to the public should close.

Further guidance is here:
https://www.gov.uk/government/publications/further-businesses-and-premises-to-close

35. Is the 80% contribution 80% of what the employer pays the employee in a given week or 80% of their usual wage. If the employee usually earns £400 in a week, and this week because we were on short time before the furlough they are only getting £350 but next week once in furlough they will get how much? Which option:
a. 100% of a usual week £400 of which the government will re-pay the employer £320
b. 80% of a usual week £320 of which the government will re-pay the employer £320
c. Based on short time week -£280 of which the government will re-pay all or only £224 to the
employee
In the absence of any clear directives, I would say that it is a weeks’ worth of their usual pay.

For employees who work irregular hours, this might be based on their past 12 weeks’ worth of earnings (although please note the changes to other legislation on 1st April regarding holiday pay, to say that average earnings should be assessed over the last 12-month period).

PLEASE NOTE: The above information has been provided in consultation with Ben
Stanton, Franklins Solicitors representing the BFA. They are intended as a guide to BFA
members only. You do not have permission to share this document with anyone without
the express permission of a Director of the British Footwear Association.