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Furlough - Legal Considerations

Gary Green
Gary Green
April 13, 2020

In today's post, we'll run through some of the legal considerations around the furlough process. Although the government is keen for businesses to take up the scheme, it's essential you remain legally compliant.

Before you sign up for the Coronavirus Job Retention Scheme, make sure you have checked the legal considerations. The furlough scheme overlaps with issues of:

  • Tax law
  • Employment law
  • Redundancy protections
  • Equal opportunity and discrimination compliance
  • Minimum/living wage requirements
  • Statutory pension contributions

You may find our article More Detail On Furlough Payments useful. And if you’d like more information about the financial, political and tax changes so far, check out our Coronavirus Tips. And be sure to visit our Coronavirus Update page.

Employees Working On Furlough

HMRC has strictly prohibited employees from doing any work while on furlough. This includes:

  • Making money for you
  • Providing services to you

They have made it clear that this will be checked and enforced strictly so that business owners don't abuse the system. From the government's business support website:

Government will retain the right to retrospectively audit all aspects of the scheme with scope to claw back fraudulent or erroneous claims.

Furlough & Redundancy

The furlough scheme has been designed as an alternative to redundancy. Rather than laying off staff, employers are encouraged to furlough staff, until they have enough work to justify bringing them back.

If staff refuse furlough, they can then (potentially) be made redundant. All the usual redundancy rules and protections would still apply. This can be quite a contentious area, so we would recommend working with an employment law specialist (if you don't have an HR department).

One interesting aspect of the furlough laws concerns staff who were made redundant after 28th February. You can actually bring these staff back, and then immediately furlough them.

Also, make sure that you don't pay any redundancy benefits to staff while they are on furlough. Furlough and redundancy are two completely different things. Staff get a proportion of their wages. As such, they aren't entitled to any redundancy pay or benefits.

Can We Furlough Some Staff And Not Others?

Some of our clients have asked us for guidance about which staff to put on furlough. Obviously that is a decision for the individual business. But there are some legal/compliance issues to bear in mind.

It is perfectly fine to furlough a proportion or subset of your staff. Have a think about how much work you have for them during the coronavirus slowdown.

Maybe an entire department can be furloughed. Or maybe you can furlough half of the members of each department.

In theory, you could rotate staff. An initial group could go on furlough for three weeks. Then, when they came back, you could furlough another group. Just make sure you follow a fair and transparent process. Otherwise you could find yourself facing discrimination claims if some employees feel hard done by.

At the moment the rules around furlough and its alternatives are changing daily. We'll have more information as soon as it becomes available. Be sure to check our blog for updates.

If you'd like to discuss your options during the coronavirus crisis, please get in touch. We are staying on top of all the announcements from the government and can help you navigate this challenging time.

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