As the furlough scheme starts to wind down and redundancies become more commonplace, employers in the UK may face a host of pay-related queries, grievances or claims from employees arising from the workplace upheaval caused by coronavirus. This article discusses some of the main issues concerning pay that employees could raise.
Pay reductions
Many employers reduced pay and hours in direct response to the decline in economic activity and demand during the period of lockdown. Some employees have no right to any particular number of working hours but could potentially raise grievances if theirs were cut while the hours of their colleagues were maintained.
Other staff will have a contractual right to a set amount of pay, even if there is no work to be done. Pay reductions for those staff would have required consent in the absence of the employer having an express contractual right to lay them off or put them on short-time working (such these clauses are very rare). Some employers may have unilaterally cut wages and relied on acquiescence (continuing to work) as a form of consent. Employees may now challenge this and argue that they did not genuinely consent to a wage reduction and should not be taken to have done so by carrying on working.
Furlough pay
Employees who were furloughed on reduced salary or wages should have given their consent to this. Disputes may arise if the arrangements have not been agreed or confirmed in writing.
Some employers have been topping up employees’ pay during furlough but will no longer be in a position to do so once the government subsidy begins to taper off from 1 August 2020. They will need to secure their employees’ agreement to the withdrawal of the top-up, unless this has already been given in the original furlough agreement. If employees do not agree, this could also cause disputes.
The amount that can be claimed through the furlough scheme has not always been clear. Employees who have been furloughed on the understanding or explicit agreement that their employer would pay them the maximum amount that could be claimed may now raise grievances or claims if they think their employer could have claimed more for them.
Impact of furlough on pay for family leave
From 25 April 2020 onwards, statutory maternity pay should be calculated based on the pay the employee would have received had they not been on furlough, and the same is also true for shared parental, adoption, paternity and parental bereavement leave. Employers can expect employees to raise queries about this.
Holiday pay
Employees are entitled to their usual full holiday pay rate for statutory minimum holiday (5.6 weeks) taken while on furlough, with employers required to fund any top-up to full holiday pay themselves. Although employers and employees are free to agree a different rate of pay for contractual holiday over and above the statutory minimum holiday entitlement, many employers make no distinction between different types of holiday and did not try to introduce one when furloughing employees. Depending on what the contract and furlough agreement say, there may be disagreement over what holiday has been taken and whether it has been paid correctly.
Redundancy pay
Employees who are made redundant will be entitled to a tax-free statutory redundancy payment provided they have at least two years’ service. Whether they are entitled to an enhanced redundancy payment will depend on whether there is a contractual entitlement to one. While statutory redundancy pay should be straightforward, employees could seek to argue that they have an implied contractual right to enhanced redundancy pay based on custom and practice.
Notice pay
Calculating notice pay for employees on furlough can be complicated, because of special statutory rights that may entitle employees to their usual pre-furlough pay during their notice period in some cases. (We explain the rules in our Restructuring the workplace post-Covid-19 FAQs.) If an employer makes a payment in lieu of notice under a clause in the employment contract, the calculation approach will depend on what the contract says and may also require pre-furlough normal pay.
Sick pay
Employees will have been entitled to statutory sick pay (SSP) if they were unable to work because they were sick with coronavirus or because they were following NHS advice to self-isolate or to shield due to extreme clinical vulnerability. Our table of pay entitlements explains the rules in more detail.
Whether any extra company sick pay is payable will depend on what the contract says, but generally this will generally be only where the employee is actually sick and unable to work as a result. Employees may, however, raise grievances about the lack of company sick pay or how any discretion has been exercised, especially if company sick pay has been extended to some employees but not others.
Vulnerable workers
Clinically vulnerable workers can remain on furlough for now, but once the Coronavirus Job Retention Scheme comes to an end there may be disputes about their return to work and the impact on their pay if they don’t come back. If the employee is disabled within the meaning of the Equality Act 2010, they will be entitled to reasonable adjustments. In our view, the duty of reasonable adjustment would not extend to keeping an employee on paid leave if they are unwilling to return, but there may be disputes about this.
Clinically extremely vulnerable workers have been advised to shield and are entitled to SSP (if they are not on furlough). The shielding advice and SSP entitlement will be lifted on 31 July 2020 in England but could be reintroduced in the event of a new outbreak.
Pay disputes if workplace is not Covid-secure
Employees have a right not to be subjected to a detriment if they leave work, or refuse to return to work, in circumstances where the employee has a reasonable belief that they are in ‘serious and imminent danger’. This may lead to disputes over pay if, for example, an employee leaves work during a shift because of a health and safety breach and refuses to return until they are satisfied that the breach has been remedied. We examine this issue in more detail in our FAQs on staffing decisions when reopening workplaces.
Quarantine
The UK government has recently exempted many countries from its quarantine rules, but if an employee returns to the UK after travelling from a non-exempt country they will be subject to a compulsory 14-day self-isolation period. If employees are unable to work remotely during this period, there may be disputes over how this period should be treated. SSP is not payable for compulsory quarantine and employees are generally not entitled to pay unless they take additional holiday to cover the period of self-isolation, but employees may raise queries about this.
Employers could also face grievances from staff if, for example, they are aggrieved about differential treatment between those who can work from home and those who cannot. Other employees may consider that a special policy should be adopted for those who booked holidays before lockdown or had particularly strong reasons for needing to visit family abroad.
Time off for dependants
Many employees with caring responsibilities are currently on furlough but, once they return to work, they may need time off work to deal with emergencies. Employees are entitled to a reasonable amount of time off work to assist or arrange care for dependants (e.g. if their child has the virus), or to deal with an unexpected breakdown in care arrangements (e.g. their child is quarantined or the school is closed).
This time off is unpaid unless the employer’s contract or policies provide otherwise. This is, however, a situation in which many employers will exercise discretion, which always has the potential to generate grievances and disputes. Also, if an employee is in a household with someone who has the virus they will be advised to self-isolate, which will trigger SSP entitlement.
Temporary workplace closure
As national lockdown restrictions begin to ease, employers can expect more local lockdowns: we’ve written about the employment law implications here. Local lockdowns could involve the closure of whole regions or just individual workplaces.
If employees cannot work remotely, then they could be re-furloughed if they have previously been furloughed under the scheme. Where staff do not qualify for furlough or the scheme has come to an end, they will be entitled to their usual pay unless there is an express contractual agreement for unpaid or reduced pay lay-off.