With many businesses now laying-off staff as a result of business closures (pubs, restaurants, shops) and a significant reduction in business activity it is important that employers make sure that they follow correct procedures in laying-off staff. Until such time as more precise details are released in respect of the Government’s Job Retention Scheme it should not be assumed that 80% of the wages of those laid-off will be automatically underwritten by the Government. The law relating to lay-offs has not been changed and the legal position needs to be reflected in written communication in respect of any lay-offs. On a point of detail, the use of the word ‘furlough’ instead of ‘lay-off’ has been very common recently. This is presumably to differentiate between ‘lay-off’ in its US definition (which is dismissal) and ‘lay-off’ in its UK definition which is used to refer to a temporary unpaid suspension from work without pay. We believe it is important to use the terminology that is that used in the relevant Primary Legislation; see Chapter III of the Employment Rights Act (ERA) 1996.
The need for caution in considering the eligibility your business may have to access the Job Retention Scheme can be summed up by careful reading of the Government’s announcement of the Scheme, namely that it will apply to businesses that “cannot cover staff costs” due to Covid-19 and that “they may be able to access support”. This is not a cast-iron guarantee. For example, what evidence will the businesses be required to provide to demonstrate that they truly “cannot cover staff costs”? Whilst we anticipate that the Government will adhere to the spirit of its announcement, a degree of caution is advised.
Because of this, organisations cannot and must not guarantee that the 80% of staff costs will in actuality be covered by the Government. Letters confirming any lay-offs should reflect the fall-back position; that lay-offs will be without pay, but that the employer will apply for the Government grant for funding under its Job Retention Scheme. A template that can be used for such written confirmation of lay-offs that covers the eventualities that may occur is available as a free download from the resources section of this site.