Residential property
15 Apr 2020 News

Updated Guidance on Furlough Leave

Representatives from HMRC told a Parliamentary Select Committee yesterday 8 April 2020 that the online portal will be open from 20 April 2020 and HMRC will be in a position to make payments by 30 April 2020, its aim being to process all payments within 4-6 working days of receiving a claim.  The portal is to be open 24/7 and will operate a queuing system, given the anticipated high levels of demand.


The HMRC general guidance on the furlough scheme was updated on 4th April 2020 and can be read here.  The highlights are as follows:

  • There was previously speculation around whether or not a need for redundancies was a pre-condition of eligibility for furlough support.  The updated wording has clarified that it is not.
  • The guidance has U-turned on what should be included and excluded from pay calculations.  The previous version of the guidance stated that fees, commission and bonuses should not be included in the calculation. However, the guidance as updated on 4 April 2020 provides that the employer can claim for "any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.”  There is already a great deal of discussion around what is and is not “regular” and so if you are in any doubt, please give us a call.
  • We knew that those made redundant after the end of February 2020 could be furloughed if they were re-instated.  That provision has been reframed in terms which suggest you can re-instate not only those made redundant but also those who left your employment for any reason.  This could result in individuals who resigned for new employment and who now wish to be reinstated with their old employer asking to be reinstated and furloughed - something you can but do not have to do.
  • If you have employees on fixed-term contracts which expire mid-furlough, you can claim support beyond the expiry date if you agree to extend or renew that contract.
  • Employees can be furloughed “multiple times”, which confirms employers may rotate those on furlough (provided they do so for not less than three consecutive weeks at a time).
  • The list of employees eligible to be furloughed has been expanded to include foreign nationals, apprentices, those working under fixed term contracts, employees shielding in line with public health guidance, employees with carer responsibilities (i.e. those looking after children), office holders including directors, salaried members of LLPs and agency workers (including those employed by umbrella companies); provided they are paid through PAYE.  Administrators can also access the scheme if there is a reasonable likelihood of rehiring workers.  

Training is encouraged but if any training is undertaken by furloughed employees at the request of an employer, they must receive at least the National Minimum Wage.

Handling Holidays
The interplay between furlough leave and holiday has regrettably not been addressed in the latest guidance.  In our experience, practice between employers in this regard therefore continues to vary. 

In our view the safest approach is to proceed on the basis that holidays will continue to accrue during furlough leave.  Further clarification from the Government is however needed - a minority take the view that holiday doesn’t accrue because when furloughed an employee is not working and in any event has no need for a period of rest.

When they can be taken
Opinion still varies on whether annual leave can be taken at the same time as furlough leave.
Under the Working Time Regulations an employer can require an employee to take statutory holiday on specified dates on giving the required notice (as set out in the WTR). Until such time as those Regulations are amended or changed, it appears employers can still insist on leave being taken during furlough (and indeed whilst employees are not on furlough but are in lockdown).  However, we remain of the view that you should exercise caution if doing so, for a number of reasons:

(1) Employees may seek to argue that it’s “not reasonably practicable” for them to take leave and accordingly insist on it being carried forward for two years (following the legislation change reported in our last update here); and/or that one of the purposes of the WTR (ensuring the health and safety of staff by affording them adequate time off) cannot be met during periods of annual leave spent in lockdown.  The updated Acas guidance (a source often used by employees because it is free) available here for example suggests that the new carry-over rule could apply where a worker has been put on furlough leave and is unable to take leave due to COVID-19.

(2) Annual leave may interrupt furlough leave.  That could be particularly problematic if it breaks the minimum three week furlough period.

(3) It is not yet clear if HMRC will reimburse employers for time employees who are furloughed spend on annual leave.

Assuming annual leave and furlough leave can happen simultaneously, in our view employees who take annual leave during a period of furlough will most likely be entitled to 100% of their normal salary.  That’s because the Working Time Regulations provides that holiday pay for workers with a fixed wage or salary is calculated with reference to the basic pay payable for normal working hours – and the normal working hours of those on furlough have (arguably) not changed.  For those with variable working hours, we would recommend that you take advice.

Hints and Tips 

  • You can pay people on furlough differently (some at 80% and others topped up) provided you have non-discriminatory reasons for doing so. You should ensure the communications are handled sensitively though as there is an outside chance of breach of trust and confidence claims from those on reduced salaries. 
  • As a workaround to the unclear annual leave situation, some employers are rotating furlough with annual leave - 4 weeks furlough followed by 1 week leave, and repeat, for example.
  • Collective consultation regulations may kick in if you’re considering redundancies, as we reported in our last update here.  Separate pensions consultation regulations may kick in too if changes are being made to pension schemes.

A mixed approach (some on furlough, others not) is legally permissible provided the arrangements are non-discriminatory, but may give rise to management or employee relations issues depending on the differences in terms between furloughed and non-furloughed staff, as well as risk of a breach of trust and confidence claims.  If you’re considering a mixed approach, we recommend that you take advice.

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