Posted: 07 May 2020 10 min. read

COVID-19 Update for High Growth Companies – Employment Law Overview

Deloitte Private High Growth held a COVID-19 webinar for founders and CXOs of fast growing tech-enabled UK businesses. As the first in a series of virtual forums for our high growth community, we will continue to host these monthly on a variety of topics.

One of the key areas of interest in this webcast was the Job Retention Scheme (JRS). While ‘furlough’ is a word that many of us hadn’t ever uttered prior to this crisis, it now feels synonymous with JRS, and requires careful consideration.

What is it?

The primary objective of the JRS is to avoid, as far as possible, job destruction during this crisis.

Inherently, it is not a cash-flow measure, rather it’s about giving grants to businesses in order to fund the salaries of the employees who have been furloughed. That grant itself is calculated based on 80% of a person’s wages, with a cap on that grant of £2,500 per person per month. On top of that maximum grant, the government will also add an amount to cover employer’s national insurance. The grant is paid out through the normal payroll process to employees, plus an amount intended to cover auto enrolment employer pension contribution. Therefore, the maximum grant amount is actually going to be higher than £2,500, it’ll be nearer to £2,800, taking into account both of those additional payments for employer’s national insurance and pension.

Exploring the ins and outs of JRS

Let’s assume for a second, moving into this new world of furloughing, that this scheme is right for you. If you are designating someone as furloughed, you must make sure that you have a good written record of it. Not just for audit purposes, but also so that the employees know what’s going on. This can be electronic or written, and you’re getting consent that way as well.

As we know, a furlough must be a minimum of three weeks. If it’s less than that, the grant won’t be available. What if there are interruptions to that three week period? An emergency, for example? Say your premises are flooded and you need people to come in for a day and sort it out, is there a risk that this breaks furlough? Almost certainly yes: the JRS guidance suggests that employees who are not furloughed should deal with emergencies. The furlough period must be uninterrupted with no work being done whatsoever. Online training is fine, voluntary or paid work for another organisation but not yours is fine. You can roster people in and out, provided that the time they’re back on furlough lasts for three weeks. The employee doesn't have to come back into work for three weeks, but they must stay away for chunks of three weeks at a time.

In choosing who you might furlough, bear in mind that the government guidance says the ordinary principles of equality and discrimination will still apply. My advice is to ask for expressions of interest and volunteers.

Job Retention Scheme vs redundancies

JRS is a new and additional tool. It doesn’t stifle the other initiatives which are still there, and indeed we’re seeing a number of organisations employing a variety of measures to save jobs and the business, such as asking some parts of the workforce to accept a pay cut and other parts asked to accept a furlough arrangement. You don’t have to decide and commit now either. If your business requires it, you can furlough staff later on. If necessary, businesses can also still undertake a redundancy process. The existence of the Job Retention Scheme does remove slightly the financial urgency for headcount reductions, so if you do decide to make redundancies, their necessity could be questioned further down the line.

There is no general hardship test in order to take advantage of JRS. Nobody is having to demonstrate that they’re close to the cliff edge, so to speak, in order to justify the right to furlough. If you can show that employees are not doing work for you and they’re at home, you can furlough them. But that has caused some businesses to stop and think about whether they feel it’s right or not to be using this scheme.

Continuity of employment and holiday

Continuity of employment continues during furlough and holiday continues to accrue as well. Holiday can be taken during furlough too but anyone taking holiday is paid at full rate so employers will need to top up anything paid via the JRS. So, to avoid a large amount of accrued, untaken holiday after furlough, you may have a preference for holiday to be taken during furlough. While this is no easy decision for a leader, or for staff on furlough, this may be a viable solution to protect both jobs down the line and future of the business. Furthermore, it’s worth bearing in mind that there’s been a relaxation of the normal rules that apply to the carrying over of statutory holiday in response to the crisis. Your employees will be able to carry over into the next year or two more of their statutory minimum holiday entitlement, which is broadly four weeks plus bank holidays, in a way they wouldn't otherwise have done. We have seen a couple of businesses seeking to buy back holiday, if you’re dealing with holiday in addition to the statutory minimum.

In relation to applying for a grant under the JRS, make sure you retain records of who has been furloughed and when, so that you are able to deal with not only the calculations, but also any questions in the event that you are audited down the line. Particularly for workforces where there’s any significant element of variable pay, the detail around how you calculate 80% of someone’s pay is complicated. Have a look back beyond 12 months and ensure the payroll teams have access to data ready to be able to support people in completing grant calculations and claims.

The UK Deloitte Private High Growth team is running monthly webinars with experts from across the business to offer practical considerations for Founders and CXOs. You can register for our next webcast here.

Finally, Deloitte has pulled together a useful framework on resilient leadership and provides practical and specific steps that can help blunt the crisis’s impact—and enable organizations to emerge stronger, you can access the guide in full here.

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Key contact

Andrew Lilley

Andrew Lilley

Partner

Andrew is an Employment Law partner for Deloitte Legal. Deloitte Legal combines market leading lawyers, consultants and technology experts to provide clients with new solutions to legal problems. Andrew began his legal career at Freshfields Bruckhaus Deringer and served as the Managing Partner of Travers Smith before joining Deloitte Legal. Andrew’s UK and international experience spans a wide range of sectors, advising employers on all aspects of employment law and employment relations. Andrew is a Solicitor of the Supreme Court of England and Wales and a member of The Law Society.