Furlough and temporary leave: what’s allowed and when

Annual leave is meant to help employees relax and unwind. Whether you receive paid annual leave is a matter of ne­go­ti­ation with your employer. It is not sur­pris­ing then that temporary leave and concept of furlough – or forced leave – can be confusing. What is more confusing is that the term was not part of UK em­ploy­ment law, but was used by Chan­cel­lor Rishi Sunak for the first time during the early 2020 Coronavir­us pandemic. Pre­vi­ously, lay-offs and temporary leave were the terms used. So, what exactly is the meaning of furlough? When are employers allowed to furlough their workers, and what rules do they need to adhere to? What is the dif­fer­ence between furlough, layoffs, and temporary leave? Find out all you need to know in this article.

Furlough is defined as a temporary leave of absence from work ordered by an employer in wake of the economic con­sequences of the Coronavir­us. The term is used commonly in the US, but is new in UK ter­min­o­logy. Workers can be put on furlough by a company without an employer requiring their consent or ap­plic­a­tion.

In other words, furlough is a type of leave or absence from work for economic reasons but stands in contrast to annual leave because it does not consider the wishes of an employee. Some employers will allow their staff to use their paid annual leave instead of being fur­loughed.

The term appeared for the first time in the UK during the early 2020 Coronavir­us pandemic as part of the gov­ern­ment’s em­ploy­ment retention scheme. The term is used commonly in the US to refer to temporary leave, but in the UK the term is used in con­junc­tion with leave as­so­ci­ated with the gov­ern­ment’s Coronavir­us Job Retention Scheme.

There is no legally uniform basis for when an employer is allowed to put staff on temporary leave. Generally, a company will consider previous ex­per­i­ences and current cir­cum­stances to make a decision. Temporary leave may be ordered for any of the following reasons:

• The business provides seasonal work.
• It is written into your contract of em­ploy­ment or the official labour agreement.
• The company is no longer operable because a key person or the owner dropped out. This can occur, for example, in a doctor’s surgery or law firm.
• The company is facing an un­ex­pec­ted economic crisis.

The main reasons for temporary leave are usually of economic nature. Employees are fur­loughed, for example, to save a company from in­solv­ency. However, companies do carry a certain economic risk which means that not every crisis qualifies for furlough, or temporary leave.

There are certain situ­ations nearly every company could face during which putting workers on temporary leave is allowed. These include:

• Closure of the business because of essential main­ten­ance or renov­a­tion
• Closure of the business ordered by the au­thor­it­ies

In addition to the reasons stated in the previous section, these three examples fulfil the criteria for temporary leave where no other mean­ing­ful jobs are available for a worker.

Fur­lough­ing, on the other hand, is currently used as a term in the UK when a worker is put on leave due to con­sequences of the Coronavir­us (COVID-19). This may change in the future, however, and fur­lough­ing may become part of normal UK em­ploy­ment law. As of early 2020, however, if a company cannot give an employee work because of the gov­ern­ment ordered shutdown due to Coronavir­us risks, an employee can be fur­loughed. This applies to all types of worker contract (PAYE): full-time, part-time, and even zero-hours.

Yes, and in fact the term came into use in the UK because of it. You can check your company’s eli­gib­il­ity to furlough its employees at HMRC through the Coronavir­us Job Retention Scheme.. The coronavir­us crisis and its economic impacts are an ac­cept­able reason for fur­lough­ing for most employers. For example, many gast­ro­nom­ic busi­nesses had to shut down following an order by the au­thor­it­ies – an urgent economic reason. Entry re­stric­tions to working spaces can be another viable reason, although employers should carefully assess whether it makes more sense to introduce working from home instead.

In the UK, employers can furlough their workers for a wide variety of reasons due to effects of the Coronavir­us on the economy. These include a slowdown in business contracts or profits. However, in these cases, employers must still meet certain salary reg­u­la­tions, as of April 2020. 80% of your employee’s wages can be claimed, up to a maximum of £2,500 per employee per calendar month. Companies may also opt to reduce the working hours of their employees instead of fur­lough­ing them.

The idea behind fur­lough­ing is to save a business’ jobs during a period of economic hardship. This means that furloughs are temporary, and employees are expected to return to work once the business recovers. There are no legally defined maximum time limits for a furlough in the UK, however, and you can be fur­loughed more than once. Furlough lasts a minimum of three weeks. Busi­nesses that operate sea­son­ally often furlough workers and make their workforce aware that such times are coming. When an un­ex­pec­ted reason forces a company to lay off staff it will usually be up to the employer to determine how long workers should remain on temporary leave.

As mentioned before, furlough and temporary leave are not the same thing in the UK, as of April 2020. Furlough spe­cific­ally refers to action taken as a result of the Coronavir­us, and therefore in direct con­nec­tion to the gov­ern­ment’s em­ploy­ment retention plans. Up to 80% of employee wages will be paid as long as this does not exceed £2,500 before tax pcm. It does not affect pension payments. In essence, the scheme means that employees will be paid although they are unable to fulfil their em­ploy­ment re­spons­ib­il­it­ies.

Fur­lough­ing shouldn’t be the first order of business. Furlough means that your employees are not allowed to work for you or generate revenue. It really should be a last resort. There are times when it makes more sense to find other solutions during periods of economic strain. Al­tern­at­ives to furlough and temporary leave include:

• Ap­plic­a­tion for short-time working during which a company may reduce working hours for a certain time. The employer will pay part of an employee’s wages based on the agreed hours during this time.
• Reduction of working hours. This could affect single employees or the entire company. Salaries are adapted ac­cord­ingly.
• Reduction in overtime
• Reduction in con­trac­ted staff or freel­an­cers or real­loc­a­tion of work
• Ad­apt­a­tion of shift models

Please note the legal dis­claim­er relating to this article.