Written 30 March 2020
Furlough Letters
An employee furlough refers to a temporary leave or modification of normal working hours for a specific amount of time. It’s a leave of absence given to an employee with the promise that they will still have their job once the leave is over.
Employee furloughs are becoming common practice in both public and private-sector organisations. There are numerous reasons why employers implement a furlough employee policy, such as plant shutdowns, seasonal work, company reorganizations and reduced demand due to COVID-19.
Don’t rush into implementing an employee furlough policy without talking to your lawyer or HR specialist first.
If you decide that putting employees on furlough is the best option for you and your employees, then staff need to be notified of the change in their designation, from employees or workers to “furloughed workers”. In order to add clarity to a difficult and emerging situation, our view is that this should be in writing. Your furlough notice letter should contain the following:
- Address - This is a formal letter, a furlough notice should clearly state the date, employee’s name, and their address.
- Purpose – State the purpose of the letter. Get straight to the point. Include the employee’s position, department, reason for the furlough, and information about any changes to employee benefits. It is advisable to tell the employee that this action does not reflect dissatisfaction in job performance.
- Detail - Explain what a furlough is, determine the length of the furlough, and communicate employee benefits during this period to employees.
- Future communication - Offer a way for the employee to keep in touch. End the letter on a positive note.
However, note that the Government website is clear that changing the status of staff remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
If there is a contractual right to lay staff off in the employment contract, this should present little difficulty: furloughed status will at least mean that the staff are paid. Where there is not a contractual right to lay off, designating staff as “furloughed” will in theory amount to a breach of contract. Given that the Government is paying 80% of wages up to £2,500 per month, it is unlikely that most staff will complain. However, we can foresee potential problems arising:
- For those who are paid more than £2,500 per month and where the employer does not propose to top up the wages.
- For those who will see a pay-cut where the employer does not pay the 20% reduction in wages.
- Due to the fact the normal lay-off rules will continue to apply, such that if staff are laid off for four consecutive weeks or for six weeks in any period of 13, they would be entitled to leave and claim a redundancy payment (although in practice the continuation of a proportion of pay will mean that only higher earners will actually satisfy the relevant conditions). On the information we have so far, the Scheme would not preclude claims for redundancy payments being made, although in many cases the risk of staff triggering these payments will be low.
We should stress that in the current economic climate, it would be unlikely that staff would claim a redundancy payment rather than ongoing pay, but it is possible depending on circumstances, particularly for higher paid staff who might be able to find other opportunities for work.
EXAMPLE TEXT [NOTE: RUN THIS PAST YOUR HR SPECIALIST]:
To go on Headed Paper
[Insert name]
[Insert address]
[Insert date]
Dear [Name of employee/worker]
As discussed with [name of HR/manager] on [date when furlough was discussed with employee/worker], we will place you ‘on furlough’.
This means that you will still be employed by us [although at a lower rate of pay]. You will not do any work for us during the furlough period. We can then use the Government's Coronavirus Job Retention Scheme, which covers 80% of your normal pay [for employees earning more than £2,500 per month, add ‘up to a maximum of £2,500 per month’].
[In this way, we hope to keep the business going and avoid redundancies if possible until matters get back to normal.]
If you agree to be placed on furlough, your contract of employment will be temporarily varied. You will need to sign to confirm your agreement to the variation in the section at the end of this letter headed “confirmation of agreement” and return a copy to us. We are sending two copies of this letter so that you can keep one for your records. Unless we agree otherwise and unless your contract of employment is terminated by you or by us before that date, the temporary variation will come to an end on the date when you return to normal work.
Your period of furlough will begin on [date]. It will last for at least three weeks and may last up to three months. After three weeks, we will keep the situation under review. The three months may need to be extended and, if so, we will discuss this with you. As soon as we think we can get you back to work as normal, we will give you notice and will expect you to return to work immediately unless agreed otherwise.
Please confirm your contact details in the section at the bottom of this letter so that we can keep in touch.
To summarise, this is how furlough will work:
- Based on your [monthly/weekly] [wage/salary], while on furlough we will pay you [amount per week]. This amounts to [80%/the maximum amount that can be claimed under the Job Retention Scheme/if you are topping up pay provide relevant details here] of your [wage/salary]. This amount is subject to deductions for tax and national insurance in the usual way.
- In addition to that [wage/salary], we will pay employer national insurance contributions and minimum automatic enrolment employer pension contributions on that [wage/salary].
- Your contract of employment will continue with [name of employer], but the terms of the Job Retention Scheme require that you do not do any work for us during the furlough period.
- While your statutory rights are unaffected by this variation to your contract of employment, your contractual entitlements to pay and other financial benefits during the furlough period are limited to [[those in points 1 and 2] [plus the following additional benefits, if any: please list]].
If you agree to this temporary variation, please sign and date below and return a signed copy of the letter to [HR/Manager] by [insert date].
If you have any questions about your entitlement to annual leave or any other of your rights or entitlements during the period of furlough, please direct those questions to [HR/Manager].
Yours sincerely
[name of employer]
Confirmation of agreement
We agree that the contract of employment between [name of employee/worker and name of employer] will be temporarily varied and that [name of employee/worker] will be placed on furlough on the terms set out in this letter.
Signed: _________________ Date: _______________ (Employee/Worker)
Signed: _________________ Date: _______________ (Employer)
Employee/worker contact details:
Tel: _________________
Email: _________________
Address: _________________
If you have any questions, please email us on info@raffingers.co.uk
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