Two Jabs – Protect you from the Virus and the Job Centre?

As the rapid rollout of the UK’s COVID-19 vaccine provides hope of returning to normality, preparations are being made for staff to return to the workplace. Unsurprisingly the vaccine has divided opinion, with a survey by HR Locker suggesting that one quarter of UK employers are intending to introduce a ‘No Jab, No Job’ policy of making vaccination of staff a compulsory requirement.

Is that permissible I hear you ask?

Can I compel staff to have the Covid-19 Vaccine?

In short, this is fraught with a myriad of issues.

There is currently no legislation permitting an employer to require staff to undergo mandatory medical treatment, including vaccinations, and to do so could amount to a breach of the employee’s human right to respect for their private life.

In addition, any disciplinary action imposed against an employee for refusing to be vaccinated could give rise to discrimination claims (see below).

There will of course be some sectors where you can see a greater justification for requiring staff to be vaccinated, such as healthcare or care home settings, where non-vaccinated employees could present a threat to patients, residents, other staff and themselves. As Boris Johnson recently pointed out, healthcare professionals are already required to be vaccinated against hepatitis B, so requiring a COVID-19 vaccination for those “entrusted with the care of a patient” is a possibility, although the Government is yet to give formal guidance on this issue.

However, in most sectors, a blanket policy of requiring staff to be vaccinated is unlikely to be justified.

If I want to protect the wellbeing of my staff, why is that potentially discriminatory?

It firstly depends upon whether the employee’s refusal to be vaccinated relates to a protected characteristic. This could arise on several grounds:

  • religion/belief, as some religions do not condone vaccinations and there is evidence that pig gelatine can be found in certain vaccines;
  • age, the vaccine is being rolled out on a sliding age scale such that some members of staff will not yet be eligible;
  • maternity/sex, as current guidance is that pregnant women should not have the vaccine; and
  • disability, as the vaccine may not be recommended for individuals with certain medical conditions or allergies.

Secondly, it depends upon whether those with the protection afforded above are treated less favourably or penalised for not being able to comply with a vaccination requirement. That might be refusing to allow the employee to return to the workplace, or even disciplining them for a refusal to have the vaccine.

In respect of some types of discrimination, you can seek to justify a discriminatory policy and whilst in some (limited) cases there might be a justification argument for insisting on the vaccine, this will be a very high threshold to surmount, particularly given the existence of less intrusive measures, such as regular testing, PPE and social distancing.

Can I make vaccination a requirement of hiring new employees?

Again, this is fraught with risk.

There are actually restrictions in place that are designed to prevent an employer from asking applicants about their medical history until such time as an offer of employment has been made, and there are also privacy and data protection obligations that will apply in respect of any such information.

When being considered for a vacant role, applicants have the same protection from discrimination as employed staff, so the above concerns will arise. If an applicant is not offered a role because of their refusal to have the vaccine, and their reason relates to one of the protected characteristics mentioned above, then this is likely to amount to discrimination.

What measures can an employer take?

Aside from some very limited exceptions, a compulsory vaccination requirement is not something we would endorse. Instead, we believe employers will need to careful consider a range of measures that can still be an effective way to ensure a safe working environment, whilst balancing individual circumstances and sensitivities:

  • Encourage employees to have the vaccine

You can encourage your employees to have the vaccine. Under the Health and Safety at Work Act 1974, employers are obliged to take steps to reduce workplace risks. Consider the extent to which you encourage employees to be vaccinated, as it is a personal choice for everyone.

  • Introduce other COVID safe measures

These could include asking staff to wear masks (subject to exemptions), implement social distancing and/or installing plastic screens as appropriate, setting up hand sanitiser stations, arranging for regular testing of staff, and deep cleaning the office.

  • Flexible working

Allow employees to work from home where feasible or consider temporary changes to minimise the risk as far as possible. For instance, employees may request to change their working hours to avoid commuting on public transport during rush hour.

  • Vaccine policy

Consider implementing a vaccine policy to handle potential workplace disputes which may arise regarding vaccination, for example, how to manage a vaccinated employee refusing to work alongside a non-vaccinated employee or requiring staff to not ask others about their vaccination status.

There is talk of a 3rd vaccination to be rolled out later in the year, so this is a situation that is not going away anytime soon. Taking some of the measures above will hopefully enable you to minimise any disputes on this issue and enable the business to get back to the normality that we have all been craving.

Click here for a link to the Governments guidance.

The Coronavirus Act 2020- The Cat and mouse for Retailers and Rent Payments

The Coronavirus Act 2020 came into force on 26 March 2020 to provide protection to many aspects of society. One such group are retail tenants on the High Street . One of the key features of the Coronavirus Act 2020 (“the Act”) legislation, in relation to landlords and tenants are a moratorium on wind ups, bailiffs and forfeiture. As a recap, forfeiture is when a landlord takes back possession of the premises. Provided there is a forfeiture provision in the lease, a landlord does not need a court order and can simply change the locks.

The Coronavirus Act 2020 provides a moratorium on forfeiture of commercial leases for non-payment of rent. Rent is defined to include any amount payable under the lease. Thus, this applies to all payments required to be made by a tenant including service charge, insurance payments, utilities etc.

The forfeiture moratorium applies as from 26 March 2020 and, after a series of extensions, has now been extended until 25 March 2022, or such later date as may be specified. This means that, whilst the moratorium is in place, a landlord will not be able to evict a tenant for non-payment of rent. Many commentators have shown surprise at the length of this extension and no doubt landlords are dismayed.

A landlord also has lost other recovery methods such as sending in the bailiffs to seize goods to the value of the debt. The Commercial Rent Arrears Recovery (CRAR) can only be used where tenants owe at least 544 days’ principal rent.

A landlord continues to not have the option of threatening Insolvency. There will be an additional three month extension (from 30 June 2021 until 30 September 2021) on the blanket prohibition on statutory demands and the restriction on winding up petitions based on a company’s inability to pay its debts (unless the creditor has reasonable grounds for believing that either COVID-19 has not had a financial effect on the company or that the circumstances forming the basis of the winding up petition would have occurred even if COVID-19 had not had a financial effect on the company).  Arguing that COVID-19 has not had a financial impact on your tenants finances is not an attractive or straightforward argument for landlords.

The inability to forfeit, send bailiffs in, or commence the insolvency process portrays a picture of tenants being in the driving seat and landlords being in an extremely weak and vulnerable position. However, landlords do have one weapon in their armoury.

A less known fact is that there is not protecton in place from stopping a landlord simply suing the tenant for rental arrears.

Recent Westfield Case

The courts have been prepared to follow this principle as reinforced by a case brought by Westfield against a tenant earlier in the year.

Many Retailers will be concerned after the High Court ordered a tenant to pay Westfield £160,000 in unpaid rent and service charges that accrued during the pandemic. The retailer had not paid any rent since April 2020.  Westfield sought payment for rent amounting to £166,884 and interest at the contractual rate.

The High Court granted Summary Judgment in its claim against the retail tenant without the need for a full trial; signalling in no uncertain terms the Court’s approach and that it is prepared to enforce the terms of leases. The Code of Practice in place for landlords and tenants to settle the position regarding rental payments was deemed to be merely guidance.

Helen Dickinson, CEO at the BRC, said: “This case highlights the weakness of the Code of Practice in that it doesn’t change the legal liabilities of the tenant with regards to rent. Thousands of retailers were legally forced to close by Government restrictions during the pandemic, and thus had little or no income with which to pay rents.  While the rent enforcement moratorium has been welcome, it has left the County Court Judgment loophole open that landlords can exploit. The Government must tackle the issue of rent arrears in a way that is equitable to all parties, and doesn’t ignore the loss of trade to shops who have been closed for most of the last 12 months. Unless a more imaginative approach is found, many otherwise viable businesses will be forced into administration, closing shops, costing jobs, and jeopardising future tax revenue for the Chancellor.”

What next after the Moratorium?

The government has made clear, and indeed the recent case referred to above that, tenants cannot view this “break” as an indefinite silver bullet.

The extension to the moratorium on commercial evictions is to allow time for negotiations to take place but the government has also confirmed that where parties cannot agree a mutually beneficial outcome in respect of COVID-19 arrears, new legislation will step in and compel the parties to a binding arbitration process. There is little further information about this and whether arbitrators can provide for payment plans/variations to leases.

Landlords and tenants will be watching carefully what proposals are set out, in the meantime, there will inevitably be further cases where landlords issue court proceedings for rental arrears.

This article has also been published in the British Retail Consortium’s Magazine. The Retailer, on pages 28-29. Click here for the full copy of the Summer 2021 edition.

Stranded in the UK?

Stranded in the UK and the consequences for tax residency and domicile.

Widespread restrictions on travel and the closing of some borders as a result of the current pandemic have left many individuals stranded in the UK unable to return home. Although we have entered into a new tax year, the lockdown currently shows no signs of easing and this may pose problems for individuals keen to be considered non-resident for UK tax purposes and for those concerned about becoming deemed domiciled.

Non-resident individuals:
An individual’s residence status is determined by the Statutory Residence Test (SRT). Broadly speaking, this test looks at the days spent in the UK and the connections (or ties) that an individual has in any given tax year. Therefore, an individual stranded in the UK may become tax-resident by virtue of being unable to leave the UK and exceeding their day count.

Why does this matter?
Amongst other issues, tax-resident individuals are subject to UK tax on their worldwide income and gains (unless the remittance basis, if available, is claimed). Non-UK tax residents are only subject to tax on their UK source income and gains related to UK residential property. Therefore, inadvertently becoming tax resident may result in a UK tax liability and a filing requirement in the UK.

How have HMRC recognised this issue?
Some provisions in the SRT allow for an individual to disregard certain days they have spent in the UK. The number of days which can be disregarded under ‘exceptional circumstances’ is limited to 60 per tax year.

In light of Covid-19, HMRC has updated its guidance and confirmed that the following should be considered ‘exceptional’:

  1. Quarantine or advice by a health professional or public health guidance to self-isolate in the UK as a result of the virus
  2. Receipt of official Government advice not to travel from the UK as a result of the virus
  3. Inability to leave the UK as a result of the closure of international borders, or
  4. A request is made by the individual’s employer for his temporary return to the UK as a result of the virus.

If travel restrictions continue past June 2020 (the 60 day ‘marker’ for this tax year) any subsequent days will count towards the day count, which may lead to UK tax residency being activated. If travel restrictions and the lockdown period continue, 60 days may not be enough, though no guidance on this has been issued by HMRC yet.

Domicile concerns:
How does Covid-19 affect an individual’s domicile?
Domicile of choice:
Being stranded in the UK due to Covid-19 is unlikely to affect an individual’s domicile of choice in the short-term, unless their non-intention to permanently or indefinitely remain in the UK changes.

Deemed domicile:
An individual will be deemed domiciled in the UK if they have been UK resident for 15 out of the previous 20 tax years. For individuals drawing near the 15 years’ residence mark, being unable to leave the UK may make them tax resident due to the additional days spent in the UK. However, as outlined above, up to 60 days may be ignored if the individual cannot leave the UK due to the outbreak.

Why does this matter?
If an individual becomes deemed domiciled, then on their death, their worldwide estate becomes subject to UK inheritance tax. If an individual avoids becoming deemed domiciled, then only his or her assets in the UK come within the scope of UK inheritance tax on their death. This would be of particular concern, for example, to individuals who have assets in jurisdictions with lower rates of inheritance tax or no inheritance tax regime at all.

Those concerned they may be in this position should contact us as soon as possible in order to put in place measures to help mitigate against this, such as a bespoke Will specifically dealing with the issue of domicile. We can also assist with any other cross-border inheritance tax planning concerns.

What the new measurements introduced by the Government mean for businesses in financial difficulty

On Friday 20th March, the Government announced new measures to support businesses finding themselves in financial difficulty as a result of the impact of the Covid-19 pandemic. Below, Joanne Perry, Partner in the Employment team, summarises the announcement and what it means for you and your business.

Please bear in mind that the Government announcement is lacking in some important detail, we endeavour to provide this to you in the coming days.

There are, therefore, a number of questions that remain unanswered.

The Government’s website for support for employers states:

  • Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employee’s salary for those employees that would otherwise have been laid off during this crisis.
  • To access the scheme, employers need to designate affected employees as ‘furloughed workers’ and notify their employees of this change. The guidance states that “changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation”.
  • Employers must submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal.
  • HMRC will reimburse 80% of furloughed workers’ wage costs, up to a cap of £2,500 per month.

The Government’s website providing support to employees states:

  • If an employer intends to access the Coronavirus Job Retention Scheme, they will discuss with you becoming classified as a furloughed worker. This would mean that you are kept on your employer’s payroll, rather than being laid off.
  • To qualify for this scheme, you should not undertake work for them while you are furloughed. This will allow your employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month.
  • You will remain employed while furloughed. Your employer could choose to fund the differences between this payment and your salary, but does not have to.
  • The Government intend for the Job Retention Scheme to last at least 3 months from 1 March 2020 but will extend if necessary.

Joanne highlights key areas which are worthy of further discussion:

In order to benefit from this scheme, employers would have to notify the employees of the change to them being furloughed workers. Since there will be no contractual right to do this – as it seems to be a completely new concept – employers would, in effect, need the employees’ agreement to the change. On the basis that the alternative is redundancy, then I would assume that most employees would accept the change.“One particular challenge is that the guidance is using terminology unfamiliar in an employment law context – despite saying that “changing the status of employees remains subject to existing employment law”. The guidance also repeatedly refers to employees who would have “otherwise been laid off”. Laying off, in an employment law context, has a very specific legal meaning – which is to provide employees with no work (and no pay) for a period while retaining them as employees. This seems to be exactly what they are now referring to as “furloughed workers”. The Government presumably mean “laid off” in the vernacular sense, which is to be made redundant (i.e. have their employment brought to an end).

So, once the employer has agreed with an affected employee that they will be reclassified as a “furloughed employee”, then the employer can reclaim 80% of the employees’ wage costs up to £,2,500 a month. However, what we are not clear about is:

  • What classifies as “wage costs”. The employee guidance talks about “all employment costs”. This might include the cost of benefits, pension, employer’s NI etc.
  • Whether the cap of £2,500 refers to the 80% value or the 100% value – likely the 80% value.
  • What happens when employers have already reduced employees’ salaries – can they claim the full 80% or only 80% of the reduced salary?
  • What happens to employees who have already been made redundant? Can they be reinstated in order to benefit from this scheme?
  • Whether there are any minimum service requirements. What happens if an employer has a new employee joining – can they immediately be furloughed?
  • How long the wait will be for reimbursement – if there is a significant wait, it doesn’t help with the immediate cash flow issue.
  • Whether furloughed employees continue to accrue holiday, what happens when they are on sick leave, and are they still entitled to pension contributions?

Employers need to think very carefully about whether to use this and for whom. One particular issue that jumps to mind is how non-furloughed employees will feel about still working – and probably picking up more of the workload to cover for their furloughed colleagues – and potentially receiving the same pay (80%) as those who are not working.

Employers will also need to consider what their approach will be to topping up the salary costs (or not) – particularly for those employees earning over £30K, for whom the cap will not fully cover their 80% salary.

Some of these questions may be answered in the next few days, but some of them are likely to remain unclear. I aim to update you as soon as the Government provide further guidance.”

As you will appreciate, whilst we have outlined options and some of the legal implications, this note does not constitute legal advice as each situation will be different and commercial considerations will no doubt dictate what you as a business ultimately decide to do.

Sherrards is here to support you should you need specific assistance.

Covid-19: The impact on employers and the options available to them

This is a truly exceptional and unprecedented time for all organisations, and you will already be thinking about the measures that you may need to implement in order to safeguard the future of your business. Taking steps now, even as a contingency, could be crucial in getting through this challenging period.

We have outlined below some of the options that exist in a situation of this nature:

GOVERNMENT SUPPORT – announcements are being made daily about various financial measures introduced by the Government, whether it be an opportunity to recover Statutory Sick Pay or grants and loans to help businesses during this critical period (Government link here). Utilise these to the fullest extent and communicate any impact on your business, with your staff.

LAY OFF – not to be confused with redundancies but lay off refers to a situation where an employer provides employees with no work (and no pay) for a period while retaining them as employees. They are effectively on unpaid leave for a temporary period. This is a measure often used when the downturn in work is expected to be short-term. Ideally the right to lay off is set out in the contract of employment and if it isn’t, generally speaking you would need the consent of the employees concerned. There are significant legal implications if you impose this measure without consent. Note also that after 4 weeks, an employee has the right to seek a redundancy payment, with the effect of bringing their employment to an end.

SHORT TIME WORKING – is where you ask an employee to reduce their contractual hours, again for a temporary period of time, with a corresponding reduction in pay. For example, asking somebody to work 3 days a week, instead of 5, and reducing their salary accordingly. The same principle as above applies here in respect of having the contractual right to do so and needing consent in the absence of that.

TEMPORARY SALARY REDUCTIONS – it is open for you to ask employees to consider a temporary reduction of pay to help the business navigate through the next few months. This would clearly need the consent of the employees concerned and would be open to discretion as to the amount of the reduction, and for how long. For example, the top earners could take a pay reduction of 20% and the lower earners, 10%. You also have the option to offer to make up the shortfall at a later point.

COLLECTIVE REDUNDANCIES – if you are proposing to make 20 or more employees in the same establishment redundant, within a 90-day period, it will trigger collective consultation obligations which has additional legal implications. In particular, there is a minimum period of consultation that ordinarily must be observed and a financial penalty if this is not met. Likewise, there will be consultation obligations if you are proposing to change terms of employment. This is a complicated and very technical area and one where legal advice should definitely be sought.

REDUNDANCIES – it is obviously open to a business in these times to consider making employees redundant. The difficulty with a situation like this is that it could be a hasty and premature step if this turns out to be a short-term crisis. The problem is that these truly are unchartered territories for businesses in the UK and indeed, around the world. From a legal perspective, employees with less than 2 years’ service have no entitlement to a statutory redundancy payment and provided their dismissals take effect at least a week before they accrue 2 years’ service and are due to redundancy, they will have no right to claim unfair dismissal. For employees with over 2 years’ service, they have a right to claim unfair dismissal which means that you will generally need to consult and comply with the legal requirements of carrying out a fair redundancy.

SICK PAY – there is currently ambiguity about whether employees who are self-isolating are entitled to paid sick leave. If an employee is unwell, then the situation is relatively straightforward – your normal sick pay rules should apply. If somebody is self-isolating on the basis that they have chosen to do so, but are fit and able to work, then it is arguable that they are not entitled to sick pay. The Government has however indicated that employees who are isolating as a result of adhering to their advice, or advice from a GP / NHS 111, will be eligible for Statutory Sick Pay. For some businesses, Statutory Sick Pay can be recovered for up to 14 days where covid19 related. Further details are pending. This may also be a time to review your occupational sick pay scheme and how that might apply in the context of this situation.

HOLIDAY – as a means by which to mitigate the financial impact this situation will have on your employees, there is the option to ask employees to consider utilising some of their holiday entitlement during periods when they might otherwise be laid off without pay. You would need to consider what accrued entitlement exists and again ideally obtain the agreement of the employees concerned.

OFFERS OF EMPLOYMENT – in addition to a recruitment freeze, you may also want to consider whether to withdraw offers of employment or alternatively defer the start date. This is important in the context of redundancy, as a business is under a duty to consider whether it has any suitable alternative employment. If offers have been made, but not accepted, these can be withdrawn with minimal implications. If offers have been made and accepted, they can still be rescinded albeit with the potential for a damages claim, arguably limited to the period of notice that would have applied once their employment had commenced.

In our experience, a key issue in respect of the above is regularly communicating with your employees and being open about the reason for the measures you are introducing.

As you will appreciate, whilst we have outlined options and some of the legal implications, this note does not constitute legal advice as each situation will be different and commercial considerations will no doubt dictate what you as a business ultimately decide to do.

Sherrards is here to support you should you need specific assistance.

The practicalities of furloughing employees

Furloughed employees and how to make a claim through the Coronavirus Job Retention Scheme

The Government has now released further details in respect of the Job Retention Scheme and the practicalities of making a claim. They have confirmed that:

The scheme is expected to be up and running by the end of April;

  • Employers can use a portal to claim for 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrollment employer pension contributions on that wage;
  • The scheme is open to all UK employers that had created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account;
  • Employers can use this scheme anytime during the three months starting from 1 March 2020 however the minimum length of time that an employee may be furloughed is 3 weeks.

What can you claim?

Previous guidance advised employers that they could claim for “wage costs” through the scheme however it was unclear exactly what this covered. The Government has now confirmed that, in addition to the grant to cover the lower of 80% of an employee’s regular wage or £2,500 per month, employers can also claim for the associated Employer National Insurance contributions and minimum automatic enrollment employer pension contributions on that subsidised wage. The Government have also clarified that any fees, commission and bonuses should not be included in calculating an employee’s regular wage.

The practicalities of ‘furloughing’ employees:

In order to make a claim, employers will need the following information: ePAYE reference number, the number of employees being furloughed, the claim period (start and end date), amount claimed (per the minimum length of furloughing of 3 weeks), bank account number and sort code, contact name and phone number;

Employers need to calculate the amount they are claiming themselves and HMRC have said that they will retain the right to retrospectively audit all aspects of any claims made;

Employers can only submit one claim every 3 weeks, which is the minimum length an employee may be furloughed for. Claims can be backdated until the 1 March if applicable;

Once HMRC have accepted an employer’s ‘claim, they will pay the grant via BACS payment;

Employers should make claims in accordance with actual payroll amounts at the point at which payroll is run or in advance of an imminent payroll;

Employers must pay the employee all the grant they receive, no fees can be charged or deducted from the money that is granted;

Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic pension enrolment contributions on qualifying earnings;

The Government has also confirmed that furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below National Living Wage (NLW)/National Minimum Wage (NMW).

Points to note:

It would appear that it is likely that employers will be claiming for payments which have already been made to their employees (subject to the usual deductions for tax and employee National Insurance contributions). Accordingly, it looks as though employers will be claiming for the net payment made to employees. This means that what employees will actually receive in their bank account will be less than the lower of 80% of their earnings or the cap of £2,500;

We presume that the Government has chosen a three-week period for making claims under the scheme in order to reduce the risk of fraud, however administratively this could become quite burdensome for employers;

The Government have said that they will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrollment employer pension contributions, before the scheme becomes live.

Who can you claim for?

  • Furloughed employees must have been on an employer’s PAYE payroll on or before 28 February 2020. Employees hired after 28 February 2020 cannot be furloughed;
  • The scheme covers full-time employees, part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts;
  • The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.

For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%.

For employees whose pay varies, if the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, employers can claim for the higher of either the same month’s earning from the previous year or the average monthly earnings from the 2019-20 tax year. If the employee has been employed for less than a year, employers can claim for an average of an employee’s monthly earnings since they started work. If the employee only started in February 2020, employers should use a pro-rata of their earnings so far to claim.

The Government guidance also states the following:

  • If your employee is on unpaid leave – Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February 2020.
  • If your employee is on Statutory Sick Pay – Employees on sick leave or self-isolating should get Statutory Sick Pay but can be furloughed after this. Employees who are shielding in line with public health guidance can be placed on furlough.
  • If your employee has more than one job – Employee’s with more than one employer can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.
  • If your employee does volunteer work or training – A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of an employer’s business. However, if workers are required to complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
  • If your employee is on maternity leave, contractual adoption pay, paternity pay or shared parental pay – If an employee is eligible for Statutory Maternity Pay or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance. If you offer enhanced contractual pay to women on Maternity Leave, this is included as wage costs that an employer can claim through the scheme. The same principles apply where an employee qualifies for contractual adoption, paternity or shared parental pay.

Topping up the employee’s earnings

It is open to an employer to top up an employee’s salary beyond the grant but they are not obliged to under the scheme. It is worth noting that if employers decide to do this, the following will not be funded through the scheme:

Employer National Insurance Contributions and automatic enrollment contribution on any additional top-up salary; or

Any voluntary automatic enrollment pension contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).

When the scheme ends

When the government ends the scheme, employers will have to decide, depending on their circumstances, whether employees can return to their duties. If not, it may be necessary to consider redundancies;

Once the scheme has been closed by the government, HMRC have confirmed that they will continue to process remaining claims before terminating the scheme.

Other Points to Note

To be eligible for the subsidy, when on furlough, an employee cannot undertake any work for or on behalf of an employer’s business. This includes providing services or generating revenue.

Employers should discuss with their staff and make any changes to their employment contract by agreement. To be eligible for the subsidy employers should write to their employees confirming that they have been furloughed and keep a record of this communication.

When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.

Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.

In our experience, a key issue in respect of the above is regularly communicating with your employees and being open about the reason for the measures you are introducing.

As you will appreciate, whilst we have outlined options and some of the legal implications, this note does not constitute legal advice as each situation will be different and commercial considerations will no doubt dictate what you as a business ultimately decide to do.

Sherrards is here to support you should you need specific assistance.

Furlough and annual leave

As of 4 April, the Government issued some further guidance regarding the Job Retention Scheme and whilst it has provided welcome clarification on a number of matters, it has still not addressed the issue of how annual leave will be treated in respect of those employees on furlough leave. As we approach Easter, where holiday is regularly taken (including 2 bank holidays), the need for confirmation is becoming more pressing.

We consider the main queries being raised below.

Does annual leave entitlement continue to accrue during furlough leave?

Furlough leave is an entirely new concept to UK employment law. However, the prevailing view appears to be that it is highly likely that annual leave will continue to accrue during any period of furlough leave. This makes a lot of sense, since the Government guidance is that an employee on furlough leave remains employed and the contract of employment remains in force.

Can an employee actually be on annual leave during a period of furlough?

Currently it is unclear from Government guidance whether an employee can be on both annual leave and furlough leave simultaneously. If furlough leave was viewed in the same way as statutory maternity leave, for example, then the answer would be no! However, whilst the Government have clarified certain other matters relating to the correlation between furlough leave and other statutory leave, they have not explicitly indicated that annual leave cannot be taken during a period of furlough.

If employees can be both furloughed and on annual leave at the same time, the next question for employers will be, what rate of pay will apply during this period of leave? Is it 80% of an employee’s earnings (subject to the cap applicable under the furlough scheme) or is the employer required to top this up to 100%? Further, can the employer still claim 80% under the retention scheme for any period of annual leave taken during furlough leave, or does it have to account for the full amount?

The answer is that we just don’t know, but we do expect the Government to confirm this shortly.

If an employee can be on annual leave during a period of furlough, can an employer force an employee to take annual leave during this period?

Technically, it is open to an employer to give notice to an employee requiring them to take statutory holiday on specified dates under the Working Time Regulations 1998. However, an employer should be aware that any such notice must be at least twice the length of the period of leave that the employee is being ordered to take i.e. if an employer would like their employee to take 2 weeks annual leave, they would need to give them at least 4 weeks’ notice.

Despite the above, there is also the ethical issue associated with forcing an employee to take annual leave during a period of furlough. Furloughed employees are prohibited from working anyway, and given the current lockdown restrictions, few employees will be enamoured about being forced to take annual leave from their entitlement and this may cause unrest.

What happens if the employee asks to take annual leave during a period of furlough leave?

It is difficult to imagine why a furloughed employee would want to take annual leave during the furlough given they are not working anyway and cannot travel. However, it is possible that some employees will seek to use annual leave as a basis to increase their income for the period of annual leave, on the assumption that they would be entitled to full pay for this period.

Interestingly, Acas guidance published on 2 April 2020 suggests that furloughed employees can still request and take holiday in the usual way but does not state whether they should be paid their normal remuneration or the furlough rate.

Recent legislative developments

The Government have clearly recognised the practical impact that annual leave accrual will have on a business once we come through this crisis. If an employee continues to accrue their annual leave entitlement during any period of furlough leave, and annual leave is not being taken during a period of furlough (or by employees who are still working for their employer),  the likelihood is that employers will be inundated with holiday requests from employees who are all seeking to take their unused holiday entitlement before the end of the holiday year. In these circumstances, it is easy to see how this could cause serious concerns for an employer, who is trying to kick-start its operations post the COVID-19 pandemic.

The Government has attempted to deal with some of these concerns already by passing emergency legislation, which relaxes the current restriction on carrying over annual leave into the next leave year, with immediate effect.

The Working Time (Coronavirus) Amendment Regulations 2020 permit the carry-over of up to four weeks untaken statutory leave where it was not reasonably practicable to take it in the leave year “as a result of the effects of the coronavirus (including on the worker, the employer or the wider economy or society)”. Such leave may now be carried over into the next two leave years.

This legislative change should provide reassurance to employers that they will not be inundated with holiday requests once any period of furlough leave comes to an end. It should also allow employers to feel slightly more relaxed about employees continuing to accrue holiday entitlement during furlough leave, as employees will now be able to spread this entitlement over the next two leave years.

However, some uncertainty remains and further clarity from the Government is currently awaited in respect of whether employees can be both furloughed and on leave at the same time and if so, what rate of pay will apply.

Furloughing Employees: Latest Updates

Until a few weeks ago, the concept of “furloughing” staff was a foreign one for UK employers. Now, however, it’s the hot topic on everyone’s lips. As you are probably aware, the furlough provisions are part of a range of measures introduced by the Government to help businesses cope with the impact of the COVID-19 pandemic, and allow employers to temporarily suspend staff and reclaim some of their pay from HMRC.

Unfortunately, employers and lawyers alike are having to deal with an ever-changing playing field, as they attempt to digest and interpret various iterations of guidance from the Government and HMRC – some of which even appears to directly contradict itself.

We are now in mid-April and the Guidance on the furlough scheme has had its fifth update. We also now have a Treasury Direction which sets out the legal basis of the scheme. Many of us are not used to interpreting legislation in this format – however, this is likely to be the only legislative provision we have.

There are a couple of key points arising from the Directive and latest Guidance:

  • The furlough scheme (known as the Coronavirus Job Retention Scheme, or CJRS) has been extended to the end of June. The scheme was initially due to run until the end of May (with the possibility of an extension) but it is likely that the early extension has come about because of concerns that, if the scheme ended on 31 May as indicated, employers who are proposing to make more than 100 redundancies after the protection of the scheme had been removed would need to start a 45 day collective consultation period no later than 18 April. This extension buys everybody a little bit more time before such decisions have to be made.
  • The CJRS scheme has also been extended so that employees who were on an employer’s payroll on 19 March 2020 (previously 28 February) can be considered for the furlough scheme. This might, however, not be quite the good news that it appears to be as the Guidance also talks about the fact that the employer must have notified HMRC of their payroll on an “RTI” (real time information system) on or before 19 March. For employers who run a monthly payroll towards the end of the month, employees who were not in the February payroll would likely not be on the RTI report until after the 19 March cut off point.
  • HMRC have announced that the portal to lodge claims for reimbursement will be opened on Monday, 20 April 2020. They have produced a step-by-step guide for claiming on the portal, including all the information employers will need to have to hand, (www.gov.uk/government/publications/coronavirus-job-retention-scheme-step-by-step-guide-for-employers), as well as a guide on how to work out 80% of an employee’s wages (www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme).
  • Some confusion has arisen following the publication of the Directive, which states that, in order to be furloughed, the employer and employee must “have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work in relation to their employment”. This seems to be at odds with the previous Guidance which stated that the employer merely needed to write to the employee “notifying them” that they had been furloughed. The concept of “agreement” is therefore a new one. This confusion has been further compounded by the most recent iteration of the Government’s Guidance, which post-dates the publication of the Direction, which states: “employers must confirm in writing to their employee confirming that they have been furloughed… There needs to be a written record, but the employee does not have to provide a written response.” Employers who have relied on implied consent may, therefore, need to consider whether they now seek express agreement in light of the Direction. We will consider this further in a separate Q&A article, and set out the employer’s options in this scenario.
  • The vexed question of annual leave while on furlough has also been addressed in the Employees’ Guidance (but not in either the Employers’ Guidance or the Directive). The Guidance confirms (unsurprisingly) that furloughed employees will continue to accrue annual leave. It also states that holiday can be taken while on furlough, although it goes on to say that the employer should pay the employee their usual holiday pay in accordance with the Working Time Regulations. This means that employers are obliged to “top up” the 80%/£2,500 furlough pay in order that the employee receives their proper holiday pay. The Guidance also confirms that employers are able to restrict when leave can be taken (or, presumably, by extension that they can insist on leave being taken). Interestingly, the section of the Guidance concludes by saying that, “During this unprecedented time, we are keeping the policy on holiday pay during furlough under review,” meaning that the position could change yet again (and more uncertainty may arise from employers/employees relying on guidance which is subsequently changed).

How the furlough scheme is changing

What is clear from the Government’s latest furlough announcement is that from August 2020 they will be asking employers to start to share the burden of paying furloughed employees on a staggered basis.

What this means in practice is:

  • Up until the end of the July 2020: The Government will continue to pay 80% of wages up to a cap of £2,500, as well as employer National Insurance and pension contributions.
  • From August 2020: The Government will pay 80% of wages up to a cap of £2,500. Employers will be required to pay employer National Insurance and pension contributions.
  • From September 2020: The Government will pay 70% of wages up to a cap of £2,187.50. Employers will pay employer National Insurance and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500.
  • From October 2020: The Government will pay 60% of wages up to a cap of £1,875. Employers will pay employer National Insurance and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.

What is “flexible furloughing”

From 1 July 2020, businesses will be given the flexibility to bring furloughed employees back into the workplace on a part time basis.

Up until now, employees had to be furloughed for a minimum of 3 consecutive weeks. However, from 1 July, employers will only need to report and claim for a minimum period of one week. This is different to the previous position under the scheme, as whilst the minimum claim period is now 1 week, the employee does not appear to have to be furloughed for that entire week.

The aim is to help bring people back into the workplace on a flexible basis, with businesses able to decide the hours and shift patterns their employees will work on their return. Broadly, it appears that from 1 July, employers will be able to claim a pro rata’d amount of salary, based on the proportion of the employee’s normal working hours which are spent on furlough during that period.

Of course, employers will also be responsible for paying their employees’ wages while they are in work and not on furlough leave and so this strategy ultimately depends on whether the business has enough work for its employees to do, in order to justify bringing them back into the workplace.

Important dates and points to note:

  • The job retention scheme will close to new entrants from 30 June. From this point onwards, employers will only be able to furlough employees that they have furloughed for a full 3 week period prior to 30 June.
  • What this means in practice is that the final date by which an employer can furlough an employee for the first time will be 10 June, in order for the current 3 week furlough period to be completed by 30 June.
  • Employers will have until 31 July to make any claims in respect of the period to 30 June.
  • Further guidance is said to be expected from the Government on the 12 June 2020.

The Job Retention Scheme extended until December 2020.

The Government’s u-turn in respect of a national lockdown may have come as unwelcome news but for some it has come with the welcome side effect that the Government’s Coronavirus Job Retention Scheme (aka the Furlough scheme) has been extended until December.

The Government’s Job retention scheme (Furlough) was due to end on 31 October 2020 and to be replaced with the new (less generous) Job Support Scheme.

However, the Furlough scheme has now been extended until December 2020, to mirror the fact that we are now due to be in a national lockdown until at least 2 December 2020.

The Job Support Scheme, which was scheduled to come in to force on Sunday 1st November, has been postponed until the Furlough scheme ends.

What does this mean in practice?

The Furlough scheme has slowly become less generous for employers since it was first introduced in March 2020, with companies having to contribute 10% towards employee wages in September and 20% in October, however the Government has confirmed that the extension of the Furlough scheme, will revert back to the levels of contribution as they stood in August 2020.

This means that the Government will pay 80% of employees’ wages for hours not worked, up to a maximum of £2,500 per month and employers will only have to contribute pension and National Insurance.

This means that the extended Furlough scheme is more generous for employers than it was in October. Businesses will also still have the flexibility to bring furloughed employees back to work on a part-time basis or Furlough them full-time.

The Job Support Scheme, which was due to replace Furlough, has been postponed until the extended Furlough scheme ends.

Key points:

  • For hours not worked by the employee, the Government will pay 80% of wages up to a cap of £2,500 per month.
  • The grant must be paid to the employee in full.
  • Employers will pay employer NICs and pension contributions and should continue to pay the employee for hours worked in the normal way.
  • As with the current Furlough scheme, employers are still able to choose to top up employee wages above the scheme grant at their own expense if they wish.

We understand that further details, including how to claim this extended support through an updated claims service, will be provided by the Government shortly.