Chancellor Rishi Sunak has announced that Government would pay furloughed workers to ease the burden on companies suffering from the impacts of COVID-19. For many people, employed by many companies throughout the UK, this announcement came as a huge relief, with employers also benefiting from being able to maintain their staff. Although a great help from the Chancellor, ‘furloughing’ is a relatively new concept and not something the government has done before. Thus, as a word that most people will not quite be familiar with, what does it actually mean and who does it apply to?
- What is furloughing? How does it work?
- Can I be put on furlough? Will I lose my job?
- Can I furlough my staff?
What Is Furloughing?
Furloughing is a process which is specifically designed to support businesses of all shapes and sizes, that have been adversely affected by the coronavirus in order to prevent mass unemployment. A furloughed employee remains on the payroll, despite no longer working. The Government’s ‘Coronavirus Job Retention Scheme’ will temporarily help employers pay the wages of people who can no longer work, to allow companies to retain employees.
Due to the detrimental economic impacts of coronavirus, it is likely that over the next few months, millions of workers will rely on furlough payments through the government scheme. The scheme is set to run at least until the end of May, with the Government indicating that this will be extended when necessary. Of course, many firms will choose not to furlough staff but have reduced working hours and pay accordingly; this does not make them eligible for the scheme and will have to be funded as usual.
How Does Furloughing Actually Work in Practice?
The Government’s ‘Coronavirus Job Retention Scheme’ provides an option for employers and employees to agree to changes in their contract to place workers on furlough. Employers must write to affected employees to let them know they have been furloughed for a minimum of three weeks. If you have been furloughed, you cannot do any work for your employer.
Businesses can claim 80% of their employees’ wages from the Government, up to £2,500 per person, per month pre-tax. For companies in which employees wages differ each month, salaries should be based on the previous year’s monthly earnings or an average from the 2019-20 tax year, whichever is higher. The company can choose to top this up. The government funding is based on an employees core salary and does not include any bonus or commission payments. It does cover minimum pension and National Insurance contributions.
Can I Be Furloughed?
As long as you have been on the company’s payroll since 28 February 2020, your employer can place you on furlough, with your agreement. It is the responsibility of your employer to claim through the Job Retention Scheme on your behalf, and you cannot apply yourself. If your company can’t give you work to do because of the coronavirus outbreak, they may choose to do so and are required to confirm this to you in writing. You can be furloughed whether you are on a full time, part-time, flexible or zero-hour contract.
If your company can still provide work, but you are shielding due to health concerns, you are still eligible for furlough and can discuss with your employer if they are planning to do so. Employees that have stopped working because they are ill are eligible for statutory sick pay but can be placed on furlough once recovered. If you are on maternity or paternity leave, you will continue to receive statutory pay from the Government but can be placed on furlough following the leave.
For workers with more than one employer, furlough can be received from any of them, up to a maximum of £2,500 a month per employer. Foreign nationals and apprentices can be furloughed in the same way as other employees.
Who is not Eligible to be Furloughed?
If you have been made redundant since 28 February, your former employer can choose to rehire you under the furlough scheme, but employees first hired after that date are not eligible. Those who are self-employed also cannot be furloughed. However, The Self-employment Income Support Scheme provides similar support conditions to self-employed individuals who have lost income due to COVID-19. You can claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month.
To check your eligibility for the scheme see: https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronavirus-job-retention-scheme
If I Am Furloughed, Will I Lose My Job?
While companies are not obliged to keep on employees after they have been furloughed, the scheme’s aim is to reduce redundancies. The Government has introduced the Job Retention Scheme to ensure that companies are not forced to fire people as a result of the financial implications of the coronavirus. The hope is that suffering businesses will remain afloat, and once restrictions are lifted, will be able to start paying full salaries again.
Although employees must agree to be furloughed, if your employer asks you to take leave and you refuse, you may risk termination of employment. In any case, this must be in line with standard redundancy protocols.
Can I Furlough My Staff and Employees?
The scheme is open to all UK employers so long as they had started a PAYE payroll scheme by 28 February 2020. Any organisation with employees can apply to HMRC to pay the wages of people who are furloughed. The government information states that employers must confirm in writing to their employee that they have been furloughed, and record this communication for five years. Individuals can also furlough employees, such a nanny or cleaner, but only if they are paid through PAYE. Employers should note that reimbursements for wages will not start until at least the end of April.
For more advice on furloughing employees see: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-businesses-through-the-coronavirus-job-retention-scheme