The concept of furloughing is unfamiliar to many, so how does it work?

Charles Urqhart

As the entire population of the UK is trying to process the fact that they should not leave their homes (aside for one of four approved reasons), similarly employers up and down the land are trying to understand how the government’s new job retention scheme is going to help them through the current world health crisis.

Earlier this month the chancellor announced the scheme, which will support all UK employers by reimbursing 80% of the wage cost (up to a cap of £2,500 per month, per employee) of PAYE employees who would otherwise be ”laid off” during the crisis.

The reimbursement can be backdated to 1 March 2020 and will be payable up to at least 31 May 2020. The government’s reference to “laid off” is being construed as meaning those who would either be made redundant or who would not be given either work or pay by virtue of statutory lay off (together described as “furloughed workers”).

Given that the scheme is very new, the precise mechanics remain to be confirmed. In practical terms, unless employers have a contractual right to place their employees on statutory lay off (not unheard of in the construction industry), they will need to get their staff to formerly agree to being furloughed through a consultation process. Collective redundancy obligations may also be triggered depending on the number of employees being furloughed at any one site.

Clearly, given that individuals are now largely required to remain at home, any such consultation to change employees’ contractual terms would have to occur by telephone and by email, which creates its own logistical hurdles.

Michael Gove stated that only construction workers doing jobs “critical to the economy” should attend work. Given the risks of non-compliance, and not to mention the practical difficulties of enforcing social distancing on-site while balancing health and safety obligations, Persimmon, Taylor Wimpey and Barratt among many others, have significantly reduced or even completely stopped construction works as a result. There is therefore a significant possibility that many construction employees will need to be furloughed over the coming weeks.

Charles Urquhart is a partner at Clyde & Co


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