What is the Furlough Job Retention Scheme?
‘Furlough’ means leave of absence.
Due to the Covid-19 pandemic, The UK Government has stated employees of all businesses on the pay roll as of 28 February 2020 will be covered by the Coronavirus Job Retention Scheme.
This means that employees on the furlough scheme will be paid 80% of their salary (capped to £2500.00 per month) for a period of 3 months, after which they will go back to work. This is the Government’s effort to reduce laying off staff and redundancies.
Which businesses can furlough their staff?
- All businesses including charities and recruitment agencies can apply.
- The criteria for this would be that they would be subject to having a UK bank account and having created a PAYE payroll scheme for the employee prior to 28 February 2020.
- This means that many businesses that may otherwise may not have been able to keep their staff on should be able to.
Who is covered by the UK Coronavirus Furlough Scheme?
- Full time employees
- Part time employees
- Employees on agency contracts
- Employees on flexible or zero-hour contracts
The scheme will also cover employees who were made redundant since 28 February 2020 if they are re-hired by their employee.
What does it mean to be on Furlough in the UK?
If the employee is on furlough they cannot undertake work for or on behalf of their employer. The employee’s wages will be subject to usual income tax and other deductions. The employer will receive a grant from HMRC to cover 80% of the employee wage but will be liable to pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out. Fees, commission and bonuses are not included. As this is a grant the employer will not need to repay this back to the Government. The employer can choose to top up the employee’s wages to 100% but the extra 20% the employer pays is not refundable by the Government.
Employees on sickpay or self isolating cannot be furloughed. They will get Statutory Sick Pay but can be furloughed afterwards. Employees who are shielding (high risk people) can be furloughed.
How do I Furlough an Employee?
As a requirement of the grant employers must write to their employee confirming they have been furloughed and keep a copy of this correspondence.
If the employee is working or they are working on reduced hours they will not be eligible for the scheme.
Once employees who have been furloughed return to work they have the same rights they had previously including holidays, Statutory Sick Pay entitlement, maternity right, rights against unfair dismissal and any redundancy payments.
Furlough leave is at the discretion of the employer and employees must agree this with their employer.
Employers can only claim back the wages from the Government once every 3 weeks they will not be reimbursed weekly and claims can be backdated to 01 March 2020.
The purpose of the scheme of the Government is to support UK businesses by continuing to pay 80% of employee wages who would have otherwise been laid off during the Coronavirus crisis.
