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Government Furlough scheme helping firms to ride the COVID-19 storm

Government Furlough scheme helping firms to ride the COVID-19 storm

In the first of three blogs looking at employment issues surrounding the coronavirus pandemic John Clarke, Wesleyan Bank's Head of Sales, and James Leo, Partner and Head of Employment at The Wilkes Partnership Solicitors, consider how furloughing employees can help a business weather the storm.

'Furlough' was a term hardly known when Chancellor Rishi Sunak introduced it as part of the emergency measures he announced to guide businesses through the coronavirus outbreak. The program - known as the Coronavirus Job Retention Scheme - is now live. It is designed to help firms protect jobs and ease the strain placed on cashflow as a result of the enforced lockdown.

With a 1survey from JP Morgan revealing that the average SME has a cash buffer of 27 days, businesses will soon find themselves in difficulty without the ability to pivot, access government support and other forms of forbearance from banks and other suppliers.

The Coronavirus Job Retention scheme, is one of a number of packages, being offered by the Chancellor. They are designed to support firms by enabling them to retain staff without redundancies so they are in a more stable position to quickly 'bounce back' once the lockdown ends.

Eligible businesses can 'furlough' staff and claim a grant from the government of 80% to cover the employee's salary - up to a cap of £2,500 a month or £576.92 a week. An online calculator has been launched by the government to help understand what you may be able to claim.

Companies can also use their discretion to provide a 'top up' to cover the full amount of an employee's salary. National Insurance and pension contributions must be paid on behalf of furloughed employees and then claimed back.

To qualify, an employee must be furloughed for a minimum period of three weeks and they cannot do any work for their employer during that period. They can, however, access training resources and it is considered good practice for the employer to remain in contact from a health and well-being perspective.

During the furlough period the individual can take holiday and perform voluntary work, utilising volunteer days if these exist. Furlough does not impact on the individual's continuous service or other accrued benefits and rights. Holiday pay continues to accrue at the contractual rates.

To ease cashflow, the government has announced that once an application is approved it will take six working days to process payment. When the dedicated Coronavirus Job Retention Scheme online portal went live on 20th April, the Chancellor said that more than 140,000 businesses, with around one million employees, had applied for the scheme.

As well as the scheme's financial aspects, it's important to consider furlough's legal implications. It is a new concept under employment law which means there are key aspects to consider, such as how you select employees and agree who is furloughed to considering what implications there may be on their contractual terms and conditions.

You should also carefully consider the impact on those workers not furloughed, such as an increase in their roles and responsibilities along with the emotional impact on both groups.

Employers should also be mindful of employees who remain employed but may not be in attendance at work during the consultation regarding furlough leave, such as those on maternity or long-term sickness.

The status of those employees does not change. They will receive those benefits for as long as their maternity or sickness leave continues. These workers cannot be furloughed but can be furloughed once the period of maternity or sickness comes to an end.

For atypical employees working variable hours each week, additional considerations will need to be given. Careful analysis of the past working patterns will need to be considered to determine the level of pay to be made to such workers whilst they are furloughed.

James Leo, Partner & Head of Employment Law at The Wilkes Partnership Solicitors, comments: "There are many aspects to the scheme including others introduced since it was announced. For example, the scheme was initially due to end on 31st May but has now been extended to 30th June.

"Speaking to a lawyer will ensure that you, and your furloughed employees, are fully compliant with the scheme and do not fall foul of the regulations."

A lawyer may also be able to advise on little known aspects of the scheme such as the fact that employees can take leave while furloughed, although holiday pay will need to be paid allowing the 80% government grant to be used towards discharging holiday payment obligations.

The Wilkes Partnership has launched a COVID-19 resource centre to provide commentary on employment issues that are particularly relevant for businesses in these uncertain times.

It is also offering a no-cost, no-obligation initial consultation to help you understand any issues facing you or your firm so you can map out the best route forward.

In the next blog, we will look at the implications on employees working hours, duties and pay. If you do have any employment law related questions, or a topic you would like to hear about, please contact James Leo -

*NB All information correct at the time of publication.

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