What’s the difference between ‘furlough’ and ‘lay-off’?

On Friday the Government announced as part of its measures to assist businesses through the coronavirus crisis a Job Retention Scheme. Reference is made ‘furloughed’ workers and where this is happening, the government will fund 80% of salary costs (to a maximum of £2,500 monthly).

But what does ‘furlough’ mean and how is it different to laying staff off?

The first thing to note is that ‘furlough’ is not (yet) a concept laid out in UK employment law at all – there is no such thing from a legal point of view. There is however a concept of ‘lay-off’, which is where a business places employees on unpaid leave for a period, usually a few weeks, because of insufficient work.

In sectors where this is common, such as construction, there is frequently provision in the employment contract to do this where necessary, although as this is not something used frequently in most sectors, many employers naturally don’t have clauses for this.

When the government is referring to reimbursing businesses for 80% of salary, it is referring to circumstances where either the worker would have been made redundant completely, or would have been ‘laid off’ with no pay.

If you have a clause in your contract permitting you to lay staff off, on an unpaid or low-paid basis, you can exercise that clause, and will then be able to go on to the new HMRC portal and designate those workers as being ‘furloughed’, reclaiming 80% of their salary so that you can continue to pay your staff something while there is no work for them.

If you do not have the relevant clause in your contract, don’t worry, you’ll still be able to do this. You will need consent from the staff you are proposing to lay off, or put on ‘furlough’. As the alternative for most of them would be either redundancy or unpaid leave or short time working with very reduced hours and pay, consent should not be difficult to obtain. You will need to write to the employees setting out the arrangement as this is a change to their contract, so it will need to be suitably documented.

 

If you’d like more advice on ‘furlough’ and how to manage it, do get in touch.