Lack of a lay-off clause in an employee’s contract means that you cannot use it as a lever to get agreement to furloughing an employee’s employment. But there are other levers…
Of course, if you do have a lay-off clause in the contract of employment you are in the strongest position to get employees to agree to furlough. In that case if they refuse then you can lay them off without pay (other than statutory guarantee pay: £30 per week for 5 weeks). Agreement is important because without their agreement you will not be able to claim their pay back from the Government. There are compelling reasons why an employee should accept a furloughed contract even if there is no lay-off clause.
The moral imperative
Under a furloughed contract the employer can claim 80% of an employee’s wages or salary (up to £2,500 per month). That helps to preserve the organisation’s survival and therefore the employee’s length of service, their job and those of their colleagues. If the employee is a Company Director there is a legal as well as a moral requirement to act in the interests of the Company.
They can survive
Aside from those with a crippling mortgage, some London based living costs, or financial problems, I submit that anyone can survive temporarily on 80% of their income (or £2,500 per month) because:
- Their net pay might not fall below 80% of their normal net pay
- They cannot visit pubs or restaurants
- They cannot take holidays that involve travel
- They cannot visit clothes shops, hairdressing salons, DIY outlets etc
- Home improvements may need to be on hold
The option may be redundancy
Unless you are prepared to furlough a key employee on full pay, your other option is to declare an employee redundant. That could be unattractive to the employee because:
- You can require them to work during their notice, which you cannot do under furlough.
- You do not need to make redundancy payments until the end of the notice period – therefore there is no immediate financial gain to the employee.
- There is a cap on statutory redundancy pay at £538 per week.
- Length of service, for statutory redundancy purposes, is also capped, at 20 years.
- The maximum amount of statutory redundancy pay is £16,140.
- If an employee wishes to leave during their notice period, you can with-hold the redundancy payment.
- If the organisation is unable to pay the redundancy amounts at the end of the notice period, the employee will have to make a claim on the National Insurance Fund.
Note: Acceptance of a furlough agreement must be voluntary. That does not preclude discussion of facts, but if an employee claims to have agreed under coercion then the agreement might be invalid.
*Please get in touch if you need any support with regards furloughed workers, we are advising employers on this process daily and have developed communication that can be sent to affected employees.
Malcolm Martin FCIPD
Author Human Resource Practice
Blogs are for general guidance and are not an authoritative statement of the law.