Furlough – What is it?

Prior to mid-March this year, very few people in the UK had ever really heard of furlough.  That all changed on Friday 20 March when the government announced the Coronavirus Job Retention Scheme.  This is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020 and was put in place to help avoid significant large-scale redundancies across the country from those businesses directly affected by Coronavirus.  Employees who are placed on temporary leave in order to benefit from this scheme are referred to as being “furloughed”. 

Through this scheme, UK employers can claim back 80% of furloughed employees usual monthly wage costs up to £2,500 a month, plus the associated Employer NI contributions and minimum automatic enrolment employer pension contributions on that wage.  This will be paid in the form of a grant and will be processed through an HMRC online portal (expected to be available by the end of April 2020) 

Some key points: 

-It is available to all companies regardless of size or type.

It is only in respect of employees who were on a PAYE payroll on 28 February 2020.

They can be on any type of contract including full time or part time employees, employees on agency contracts and employees on flexible or zero-hour contracts.

It must be for a minimum of three weeks. 

The employee cannot undertake any work on behalf of their company that involves providing services or generating revenue.  Their eligibility is not compromised by completing any volunteer work or training.

Employers must discuss the fact that employees are being furloughed with any impacted employees and employees have to agree to it unless they have a layoff/short term working clause already in their contracts.

Companies may choose to top up their employee’s pay but do not have to.

The normal pay rate does not include fees, commissions or bonuses.

If an employee is shielding (i.e. self-isolating for a prolonged period due to being in a particularly at-risk category) should be furloughed rather than put on statutory sick pay

Employees who are self-isolating or who are on sick leave should be paid statutory sick pay for this and can be placed on furlough after this point.

Self-employed individuals cannot be furloughed. A separate Self-Employed Income Support Scheme was revealed on 26 March that will support the majority of self-employed individuals.

For further information on these schemes, please see www.gov.uk.  

If you have any queries about your employees and want some help, please contact Kellie at Dunwoody HR Consulting. 

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