Sunak’s Friday evening pledge to fund 80% of wages for employees sent home during the COVID-19 crisis, up to a ceiling of £2,500 per week, was unprecedented. More detailed guidance is due to be released this week. The Chancellor has also come under pressure to produce a similar rescue package for self-employed and gig economy workers.
Rustom Tata, Chairman of law firm DMH Stallard, said: ‘The concept of a “furloughed worker” is new in the UK.
‘The initial announcement on the gov.uk website makes explicit that the process of designation will, in many cases be a change of status which will need to be achieved consistent with existing employment legislation. While it will be for the employer alone to make the designation, there will be situations where workers will be keen to agree, particularly where they will otherwise receive little or no pay. However, in many cases, the designation might be made or offered as an alternative to immediate compulsory redundancy.’
Tata, who heads his firm’s employment group, said employers whose businesses have essentially stopped trading may not face too much difficulty applying the designation. ‘If work picks up subsequently and the employee returns to full pay, all well and good, but what if they don't and are dismissed? In those cases, the employer's approach in making the designation may well fall to be scrutinised in the context of an unfair dismissal or unlawful discrimination claim.
‘However, many businesses are anticipating a highly uncertain level of activity. They will need to go through the usual process of assessing the likely level of resource needed. The “all or nothing” nature of the scheme (the gov.uk advice to workers is that they are not to work at all while furloughed) means many employers will want to err on the side of caution.
‘The initial outline states that the scheme is designed for those workers whom the employer cannot afford to pay. It is not clear how rigorously this will be assessed. What if, in good faith, the employer retains the worker, but assessment under the Scheme does not trigger payment?’
Employers will want to know precisely what is to be covered in the 80% of wage costs, for example, will it include employer NICs?
Moreover, it is optional for employers to make additional payment on top of the 80% contribution, but what are the implications? Tata said: ‘The exercise of this discretion by the employer is potentially subject to challenge by the worker, although they would be well advised to wait until they return to full pay.’
