Employers advised to keep on right side of furlough rules or risk missing out on payments

Sarah Hall, partner in the specialist employment team at Hay & Kilner Law Firm
Sarah Hall, partner in the specialist employment team at Hay & Kilner Law Firm

A North East employment law expert is advising regional businesses owners to keep on the right side of the rules around furloughing their staff – or risk making themselves ineligible for the payments it offers.

Sarah Hall, partner in the specialist employment team at Hay & Kilner Law Firm, was commenting on the emerging detail of the government’s coronavirus job retention scheme, which was introduced almost four weeks ago to help firms meet their staffing costs while they are not able or allowed to operate as normal.

The HMRC portal through which claims can be registered for grants from the scheme is due to open on 20 April, with the first payment expected to be made to businesses by the end of the month.

The scheme allows for furloughed staff to be called back into their workplace if there are urgent tasks for them to complete and to then be ‘re-furloughed’ afterwards.

But with any furlough period having to last a minimum of three consecutive weeks to qualify for the government grant, any employers who call people back in before that period is up will not be eligible to receive payments and will be as liable for meeting their staffing costs as they usually are.

Sarah Hall says: “The government’s coronavirus job retention scheme has been a lifeline for many businesses which would otherwise have had to make substantial permanent redundancies or even close down altogether, but as with any initiative of this type, there are clear rules to follow.

“The start of the new financial year that we’ve just gone past might, for example, create an urgent need for accounts department staff to carry out related tasks, but if they’ve been furloughed and then undertake any work before their three weeks are up, their employer won’t be able to make a grant claim for the 80% of their pay.

“It is also essential that directors with statutory obligations take full advice as to what they can and can’t do if furloughed.

“It won’t matter whether the employer broke the rules knowingly or not, they will still be liable for their employee’s pay for all the time they were off work.

“This could clearly have a very detrimental impact on company finances as it aims to recover lost ground in the coming months, so it’s essential that employers stay on the right side of the rules.”

Further guidance on the coronavirus job retention scheme was published by the government over the weekend, covering areas including which types of payment can be covered, but there has yet to be any clarity on how annual leave is to be treated.

Sarah Hall continues: “To be eligible for a grant under the government scheme, employers must send appropriate ‘furlough’ letters to their employees and must keep a record of this communication for five years.  It’s also vital that employees agree in advance any related salary reduction or the business could subsequently face wages or contract claims, and there are also additional steps that must be taken if directors or salaried LLP members are to be furloughed.

“Employers can helpfully now include any regular payments they are obliged to make to their employees in their claims, including past overtime, fees and compulsory commission payments as well as wages. However, discretionary bonus and tips, commission payments and non-cash payments are excluded.

“The rules also allow employees to be furloughed multiple times which is great news for employers, and it is hoped that a ‘furlough rota’ is now permissible as long as each period of furloughed leave is for the minimum three-week period.

“Surprisingly, employees are also permitted to work for another employer after being placed on furlough leave if their employer allows them to do so, so they could in theory receive 80% of their pay from their usual employer and 100% of their pay from a new one.

“The full grant system is still not up and running, and there will no doubt be more information to come in what remains a complex environment, so it is essential that employers stay on top of the developing rules.”