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COVID-19 pandemic and Employment Law update

The pandemic has had a significant impact on the work force, businesses and the economy. One of the biggest overheads for commercial organisations is their employees. Therefore, many employers have taken action to reduce staff costs.

Stay at Home and Pay

Employees who are temporarily asked to stay at home because there is no work are called furloughed workers.

To help businesses during this covid-19 lockdown the government has offered financial support to employers who have had to furlough their staff. This is called the ‘Coronavirus Job Retention Scheme’ (the government scheme). Not all details of how the government scheme will work have been published yet. This page is valid as at 16.09.20.

It is hoped that when furlough leave ends employers will be in a position where they can ask their staff to return to work.

Furlough Agreement

The government scheme for financial support is to help pay for employees that agree to be furloughed. If there is no agreement in the employment contract or subsequently the employee refuses to agree to be laid off then they cannot be furloughed. Instead the employer must keep the employee gainfully employed with work or make them redundant where there is no work.

The Government Scheme

In recognition of the extreme challenges that businesses face during this crisis, the Government has committed to providing assistance to businesses by way of “a grant to cover part of the wages of employees who are not working but are furloughed”.

Changes to the Coronavirus Job Retention Scheme from 1 September mean that employers will need to fund 10% of furloughed employees’ usual wages for the hours they do not work and continue to pay their National Insurance and pension contributions.

Who can be furloughed under the scheme?

Employees can be on any type of employment contract, including:

  • full-time, part-time,
  • agency,
  • flexible or zero-hour contracts.
  • Foreign nationals.

For full details of people classed as employees eligible under the furlough scheme click on the following link: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme#employees-you-can-claim-for

What you will need to make a claim

First, as stated above, employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process.

The following will apply under the scheme:

  • From 1 September, the government will pay 70% of wages up to a maximum cap of £2,187.50 for the hours the employee is on furlough.
  • Employers will top up employees’ wages to ensure they receive 80% (up to £2,500). The caps are proportional to the hours not worked. You can read more information about the changes.
  • The employer will make deductions required under the scheme and PAYE.
  • As far as practicable, payments should be made on normal pay day.
  • Employees are not required to undertake any work for a period of time (at least the first 3 weeks minimum).
  • Employees are not laid off / made redundant during the furlough period.
  • mployees remain on the payroll.
  • Continuity of employment will be preserved.
  • Employment rights continue including:
    • Statutory Sick Pay
    • annual leave
    • maternity and other parental rights
    • rights against unfair dismissal
    • redundancy payments
  • Furloughed employees continue to accrue leave as per their employment contract. However, the employer and employee can agree to vary holiday entitlement as part of the furlough agreement. Note most workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.
  • Employment rights continue.
  • Employment contracts should where necessary be temporarily amended by a furlough agreement.
  • Employees must remain available for work and the employer can ask them to return to work as soon as the situation changes.
  • The government scheme does not include commissions or bonuses and uses the gross pay figures.
  • Staff on sick pay or self-isolating cannot be furloughed.
  • Staff who are able to work from home are not "furloughed workers".

Furlough leave may end on the following events:

  1. The government scheme ending or
  2. the employer no longer being able to claim under the government scheme or
  3. the resumption of work by the employee.

The Claim

  • Employers should make their claim using the amounts in the payroll - either shortly before or during running payroll.
  • HMRC will check the claim, and if eligible, pay it to the employer by BACS to a UK bank account.
  • The employer must pay the employee all the grant received.

For further information contact Ash Sanger or Esther Watton on 0845 217 1377 or use our on-line enquiry form, Ash Sanger is a Director and a Solicitor of England and Wales.


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