Furlough

Furlough leave was temporarily introduced by the UK Government in response to the unprecedented situation presented by the COVID-19 pandemic. Furlough generally means a temporary leave of absence from work, but this does not mean that the fundamentals of employment law have changed, simply that the furlough scheme adds to them. Furlough leave provides employers with options when reviewing the impact of the COVID-19 pandemic on their business as an alternative to implementing redundancies or layoffs without pay. The furlough scheme and flexible furlough scheme provide employers with an option to keep employees on the payroll without working or working reduced hours.

The guidance is clear that employees’ redundancy rights, and other employment rights, will not be affected by being furloughed. So, any employee who is made redundant whilst on furlough will be entitled to a statutory redundancy payment if they have two years’ continuous employment, as well as any contractual redundancy entitlement. Statutory redundancy payments are likely to be calculated based on an employee’s pre-furlough salary. The calculation of any contractual redundancy entitlement will depend on the contractual terms governing that payment (and subject to any valid contractual variation made before the employee was furloughed).

The Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme (“CJRS”) was first introduced in March 2020 and has undergone multiple changes from its introduction. A timeline of key CJRS events is outlined below.

CJRS claim process and record retention

Guidance around the scheme has changed over the course of the pandemic. One of the rules outlined was that claims must be made on a monthly basis and HMRC have communicated the following deadlines for the future.

It is critical that payroll and accounting professionals ensure that they retain evidence for claims submitted, along with a copy of the legislation and HMRC guidance which was valid at the time of the claim. HMRC have the right to come into a business and audit all claims that have been submitted, therefore employers must:

• keep a copy of all records for six years, including:
  • the amount claimed and claim period for each employee;
  • the claim reference number for your records;
  • your calculations in case HMRC need more information about your claim;
  • for employees you flexibly furloughed, usual hours worked including any calculations that were required;
  • for employees you flexibly furloughed, actual hours worked;
• tell your employees that you have made a claim and that they do not need to take any more action.

Employers can make corrections to their claims within the deadlines noted above if they have either overclaimed or underclaimed the CJRS grant. If there have been overclaims, then any subsequent claim can be adjusted to reflect the overpayment, or employers should contact HMRC to obtain a payment reference number and make payment within 30 days.

HMRC audit and review of CJRS claims

HMRC have clearly stated that they will be auditing and reviewing CJRS claims, and where necessary criminally pursuing any employer or individual that has made fraudulent claims. News of the first person to be arrested over alleged fraud of furlough scheme hit the news on 9 July 2020 and by the 3 June 2020 HMRC received 1,900 reports of potential fraud, rising to almost 8,000 reports of potential furlough fraud by August 2020.

Other support schemes for employers

Both the Chancellor’s Summer Statement in 2020 and the Spring Budget in 2021 were very much focused on the plan for jobs.

Specifically, the Chancellor announced that the plan for people’s jobs and incomes, will:

• protect people’s jobs;
• offer more generous support to those who are without employment;
• strengthen the safety net for those who work for themselves; and
• help people who stay in their homes.

To help achieve this, several schemes were introduced aiming at helping employers. These included:

• Kickstart Scheme;
• traineeships;
• apprenticeships;
• modifications to the Statutory Sick Pay claim process;
• creation of the Job Retention Bonus (though this did not come into operation given the extension to the CJRS);
• Recovery Loan Scheme; and
• Business rate relief.

Conclusion

The global COVID-19 pandemic has challenged even the most robust organisations and smart leaders. It is doubtful that any business anticipated months of lockdown without months to prepare – ‘unprecedented’ is an understatement.

For Payroll and HR teams, management of people has been completely upended, including getting to grips with furlough arrangements, reduced hours, remote working and balancing of jobs with other duties. Without in-depth legislative knowledge, many organisations struggled to process employees’ pay correctly and put themselves at risk of breaching employment laws.

Now as we emerge from the pandemic, it will be important that after this global timeout, we do not waste the chance to turn demanding experiences into significant learning and change.

Louise Gray is Head of Transitions and Operations at EY Absolute and is based in Belfast.

Tel: 028 9044 1798 | Louise.Gray@uk.ey.com Website: www.ey.com