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Employment Protection Scheme: what is its legal effect?

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It seems that every week since the end of March has been marked by a further update to the government’s guidance regarding the Coronavirus Job Retention Scheme (CJRS). The scheme was announced on 20 March 2020 and the first guidance as to how it would operate published on 26 March 2020. As the media has covered extensively in recent weeks, the furlough scheme is changing to enable workers to go back to work on a part-time basis if full-time work is not quite achievable, from 1 July 2020. 

On the face of it the flexible furlough scheme appears to provide businesses with the opportunity to bring back furloughed staff in line with the amount of trade and therefore work that is available. In other words, if things are only picking up slowly then staff can come back for as little as a few hours per week; they can also remain fully furloughed if that is what the business requires. 

How flexible will it really be?

 Unfortunately, the scheme does not provide as much flexibility as it seems.  

  • The changes apply to any employee who has already been furloughed for at least three consecutive weeks at any time during the period between 1 March and 30 June 2020.   
  • You can bring furloughed employees back to work for any amount of time and any work pattern and claim the furlough grant for hours not worked by those individuals.  This means you must work out those employees’ usual working hours and furloughed hours before you can calculate the amount of your furlough grant to claim in respect of them.  You continue to be liable to pay the employees in full for the hours they work.
  • The total number of employees you can claim for in any claim period cannot exceed the maximum number of employees you claimed for in any claim period up to 30 June 2020.  So, if the maximum number of employees you have ever claimed for in a single claim period up to 30 June is 50 employees, you cannot claim for more than 50 employees in any single claim period after 1 July.  However, this may differ if you have employees returning from family-related leave.
  • Employees may be furloughed flexibly for any period until 1 July, any employee placed on furlough must have been furloughed for a minimum period of three consecutive weeks.  However, subject to certain exceptions, the period that you claim for must be for a minimum of seven calendar days. 
  • As before, employees cannot undertake any work for you during the period that they are furloughed.
  • The new furlough arrangement must be documented (in writing) in a new/amended furlough agreement. 
  • Employees can enter a new flexible furlough arrangement more than once (i.e. the arrangement may be changed, or they can return to work and then be furloughed again).
  • You can furlough an employee returning from statutory parental leave (i.e. maternity, shared parental, adoption, paternity, or parental bereavement leave) after 10 June 2020 even if you are furloughing them for the first time.  This is subject to certain conditions, including that the employee was on your payroll on or before 19 March 2020.  Such individuals would not count towards the maximum number of employees you can make a claim for in a single claim period in accordance with point 3 above.  They would be in addition to that maximum number.
  • The first time you will be able to make claims for days in July will be 1 July.  31 July is the last day you can submit claims for periods ending on/before 30 June 2020.

Planning is crucial

The Treasury Directions are the delegated legislation which form the legal basis of the CJRS. The Treasury Directions themselves constitute the legal basis of the CJRS. However, that does not mean that the guidance is of no legal effect. It is likely to have some effect in the way that the Treasury Directions are interpreted.

Ordinarily, guidance issued by government departments as to the operation of legislation which falls under their purview is given little notice by the courts. The courts are clear that their role is to apply legislation, not the executive’s interpretation of that legislation.

It is easy to miss something and be left out of pocket which of course would impact on cashflow which could have a negative impact on your business in these already difficult times. If you are looking at implementing flexible furlough, there is no doubt that it will require quite a bit of planning from each business as well as working out a way to keep records of hours that are actually worked. 

Keep up to date on changes that are coming

The money granted by the government is gradually reducing – from August employers will be required to start paying national insurance and pension contributions for all furloughed staff; in September the grant amount is reduced to 70% salary and in October this falls to 60%.

Another important change to note is that the level of furlough grant that can be claimed will be reduced each month from 1 August 2020 (when employers will become liable to pay employer National Insurance Contributions and pension contributions in respect of furloughed employees). 

Further adjustments to the furlough grant will apply in September and October and the scheme will close on 31 October 2020.

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