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.

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What is furloughing?

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.

Definition: furlough

People who get furloughed are put on temporary leave from work but are expected to return to work after a set amount of time. In the UK, furlough schemes by the government pay up to 80% of an employee’s salary to a maximum of £2,500. The term is new in UK employment terminology (as of early 2020).

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.

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When can an employer put a worker on temporary leave?

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.

In detail: what are the conditions for furloughing and 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 othermeaningful jobsare 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.

Is the coronavirus crisis a reason for furlough?

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.

How long does a furlough last?

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.

Are furloughed workers paid?

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.

Note

If an employee’s pay varies because they are, for example, on a zero-hours contract, the pay will be calculated by looking at the pay from the same employer from the same month of the last year. If this information is not available, the average monthly earnings will be calculated, and this will be paid.

What are the alternatives to furloughing and temporary leave?

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.


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