Covid-19, Insight

Furlough Scheme – Should There Be a National Minimum Wage Floor?

The Job Retention Scheme, otherwise known as the furlough scheme, initially introduced in March 2020, currently allows employers to claim up to 80% of worker’s wages if they have been put on furlough or flexible furlough.

This means that workers might get less than the National Minimum Wage (“NMW”) – something which is currently allowed, but which some are petitioning against.

Current Rules

Under the current rules, workers are not entitled to be paid an amount equivalent to the NMW for the hours that they are not working under the furlough scheme. Furloughed workers can be paid the lower of 80% of their wages or £2,500 even if, based on their usual working hours, this would be below the NMW. This is allowed, so long as they are not doing work-related training, in which case an employer must top up their furlough pay for any hours spent training if it amounts to less than the NMW. This has resulted in millions of low-paid workers on less than the NMW.

It is worth noting that, so long as permitted in a worker’s contract, furloughed workers can undertake other employment whilst on furlough and this will not affect the grant that the employer can claim under the scheme. In instances where the worker would otherwise be receiving less than the NMW, this may help low-paid workers. In reality, however, instances where this can happen will probably not be very common because the worker must have the employer’s consent to seek other employment and will have to be ready and available to work for the employer that placed them on furlough if they decide to end the furlough (and so any alternative employment has to be flexible).

Is this set to change?

On 2 February 2021, Labour MP Richard Burgon presented a petition to the House of Commons requesting that the Government introduce a wage floor in the furlough scheme to ensure that no worker is paid less than the NMW (which, for most, currently sits at £8.72/hour). The petition, which has more than 15,000 signatories, comes in response to the 2020 figures which show that over two million workers have been paid less than the NMW, which is nearly five times the 2019 figure.

The Government is yet to respond to this petition, however we will keep you updated on any developments.

This article is provided for general information only and is not intended to be nor should it be relied upon as legal advice in relation to any particular matter. If you require specific legal advice on any issue relating to furlough or employment law, we at Burlingtons Legal LLP will be able to assist. Please contact us on  +44 (0)20 7529 5420 or fill out the form below to arrange a consultation.

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