All businesses hope that they will never need to take advantage of the Furlough Scheme, recently unveiled by the government, but that doesn’t mean that they don’t need to be aware of exactly what it entails.
We know that many people, both employees and employers, aren’t entirely clear about what their options are. Therefore we’ve done our best to clarify everything for you below.
To read the guidance on the Government’s own website click here.
What is the Furlough Scheme?
The Furlough Scheme, or to give it its formal name, The Coronavirus Job Retention Scheme, is a temporary option the government has put in place to support employers who have been severely affected by the Coronavirus outbreak.
In simple terms if an employer reaches the stage where it would otherwise have to make redundant or dismiss all, or part, of its workforce, the Government will allow that employer to put part of its staff on leave whilst keeping them on the payroll. HMRC will then cover up to 80% of those staff member’s monthly wage costs, up to £2500 per month, per person.
Furloughed staff will remain on the payroll, so they are not being laid off or being made redundant.
The scheme is expected to run for three months but may be extended as necessary.
Why the name?
A furlough is a temporary leave of absence granted to an employee due to economic problems.
Though the term has a long history in the USA it only became an official term in the UK on 24 March 2020 in response to the Coronavirus outbreak.
How do I access the Scheme and when will it be operational?
Employers will make their claims via an online portal which is expected to become available before the end of April 2020.
The scheme will be backdated and will apply from 1 March and last until 31 May (though this may yet be extended).
Who can be furloughed?
- Do employees have to agree? What happens if they refuse?
- Does it apply to part-time employees or casual workers?
- What about those on zero hours contracts?
Those people who can be furloughed are those who are working for businesses that would otherwise have to make redundant or lay off part of their workforce.
The furloughed employees must have been on the employer’s PAYE payroll on 28 February 2020.
This can apply to full-time employees, part-time employees, agency employees and zero-hour contract workers (provided that they are employees albeit on flexible contracts).
Employees must also be consulted and agree in writing to being furloughed (unless there is a lay-off provision in their existing contract.)
Do I claim for employees individually or as a group?
Employers will be asked to claim for the entire group of employees furloughed under the scheme.
Some clarification is still needed but it is predicted that employers will be able to make more than one claim during the crisis and that claims will be submitted at least once every three weeks.
Can it be backdated?
The scheme is only backdated to 1 March to cover employees who have already been made redundant as a result of the coronavirus restrictions.
Employers are only eligible to claim the reimbursement once they have agreed the furlough with employees and they have stopped working.
If I have already made employees redundant, can I reinstate them and then furlough them?
Yes, employers who have already made a group of employees redundant because of the impact of the virus can reinstate those employees and then put them on furlough leave, though this is not mandatory.
This applies to employees made redundant after 28 February.
Is it a grant or a loan? Do I have to pay it back?
Money provided under the scheme is a grant which employers do not have to pay back.
The government is paying 80% of my furloughed staff’s wages, but does the employer have to cover the additional 20%?
What the government is doing is providing a grant equivalent to 80% of the gross pay of all employees furloughed, up to a maximum of £2500 each per month. The first thing to note is that the entirety of this grant has to be paid over to employees.
After that it is up to the employer whether they wish to make up all or part of the 20% not covered.
Can furloughed employees do any work for me?
In a word, No. Any furloughed employees cannot undertake any work for their employer whatsoever whilst they are furloughed. This includes any sort of reduced workload or working hours.
Please note that this is different to the Coronavirus support scheme for the self-employed, to whom different rules apply.
As an employer do I still have to cover pension and NI contributions?
Yes. Employers are still liable for employer NI contributions and employee pension contributions of all their furloughed employees. However the reimbursement from HMRC covers these contributions.
Are furloughed employees guaranteed a job to come back to?
When the Scheme eventually comes to an end it will be up to employers to decide if there is sufficient work for employees to return to.
If the answer is no then redundancies can be implemented using the normal procedures.
