Furlough Leave / Coronavirus Job Retention Scheme Explained
What is Furlough Leave?
As part of the UK Government’s response to Coronavirus, they have announced a range of measures to support business and their workers. One of these measures, as announced by the Chancellor on Friday 20 March, is the Coronavirus Job Retention Scheme. The Scheme has been introduced to protect employees who otherwise would have been laid off or made redundant as a result of the financial difficulties encountered by businesses due to the Coronavirus outbreak. It is a promise to repay employers who do not dismiss employees, but instead retain them.
The Scheme does not change any existing statutory rights such as the right not to be dismissed unfairly, the right to redundancy payments, protection against discrimination, maternity rights or rights to paid annual leave. It does not change common law rights either, however common law may evolve to address challenges raised by the pandemic.
- What is the Coronavirus Job Retention Scheme?
- Who can claim?
- How do employers claim the grant?
- What can employers apply for?
- Which category of workers can be furloughed?
- What if I was made redundant or stopped working after 28 February 2020?
- Employees hired after 19 March
- Employees on Statutory Sick Pay and Furlough
- Agreeing to furlough employees
- Minimum Length of furlough
- When your employees are on furlough
- Working somewhere else whilst on furlough
- How the Scheme will operate from June 2020 – October 2020
What is the Coronavirus Job Retention Scheme
The Scheme allows employers to furlough workers rather than lay them off or make redundancies. A ‘furloughed employee’ is stated in the guidance as an employee “on a leave of absence”. The Scheme, in most recent guidance, applies to any employees who are furloughed “by reason of circumstances as a result of Coronavirus or Coronavirus disease”. Therefore, employers whose operations have been affected by the current crisis will be able to retain employees on their payroll and then be able to apply for the grant, even if the employee wasn’t going to be made redundant.
The Scheme is open from 1 March 2020 for an initial 3 month period, however this has now been extended to the end of October 2020.
Who can claim?
Any UK employer with a UK payroll can apply, including businesses, charities, recruitment agencies (as long as the employees were agency workers and paid through PAYE) and public authorities.
You must have:
- Created and started a PAYE payroll scheme on or before 19 March 2020
- Enrolled for PAYE online
- A UK bank account
How do employers claim the grant?
HMRC have now launched their online portal through which employers must apply for the grant. Employers will need to be to be registered for PAYE online and able to provide the following information to HMRC:
- Your UK bank account number and sort code
- Your employer PAYE scheme reference number
- The number of employees being furloughed
- Each employee’s National Insurance number
- Each employee’s payroll or employee number (optional)
- The start date and end date of the claim
- The full amount you’re claiming for including employer National Insurance contributions and employer minimum pension contributions
- Your phone number
What can employers apply for?
HMRC will reimburse the employer:
- 80% of the furloughed workers wage costs, up to a cap of £2,500 per month;
- The associated Employer National Insurance contributions; and
- Pension contributions (up to the level of the minimum automatic enrolment employer pension contribution) on that subsidised furlough pay.
- Discretionary bonuses and tips are not included as part of the scheme.
It is at the employer’s discretion as to whether they then top up the additional 20% of pay. There is no legal obligation for them to do so.
What category of workers can be furloughed?
The Scheme applies to all workers who were on a PAYE payroll as of 19 March which were notified to HMRC on an RTI submission on or before 19 March 2020.
Workers can be on any type of contract; full-time, part time, agency contracts, zero hour contracts.
Company directors who are also employees can be furloughed (so long as they are on the company’s PAYE as at 19 March 2020). They can still perform their statutory duties, but not other work for the company. This also applies to salaried individuals who are directors of their own personal service company (PSC).
What if I was made redundant or stopped working after 28 February 2020?
Employees that were employed as of 28 February 2020 but were dismissed after that and prior to 19 March 2020, can also qualify for the scheme if the employer re-employs them and puts them on furlough even if you do not re-employ them until after 19 March
Employees hired after 19 March 2020
No, employees hired after 19 March 2020 are not eligible for the Scheme and to be eligible you must have been on the employer’s PAYE payroll as of 19 March 2020.
Employees on SSP and Furlough
Employees who are on long standing sickness absence or have symptoms and are self-isolating should get Statutory Sick Pay. However, employers who want to furlough employees for business reasons can furlough staff who are off sick. In these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee.
However, employees who are shielding (capable of undertaking role) in line with public health guidance can be placed on furlough.
Agreeing to furlough employees
HMRC Guidance provides that ‘Employers should discuss with their staff and make any changes to the employment contract by agreement’. In order to be eligible for the grant employers must confirm with their affected employee(s) that they have been furloughed and that they will be ceasing all work. A record of this communication must be kept for five years.
The guidance states:
“…the employer and the employee must reach an agreement and an auditable written record of this agreement must be retained. It does not necessarily follow that the employee will have provided written confirmation that such an agreement was reached in all cases."
Minimum length of furlough
All employees placed on furlough must be done so for a minimum of 3 consecutive weeks. Employees can be furloughed more than once but each separate instance must always be for a minimum period of 3 consecutive weeks.
The guidance so far has remained silent on how annual leave interacts with furlough and whether it interrupts the consecutive week requirements.
When employees are on furlough
Employees cannot carry out any work that makes money or provides services for your organisation or any organisation linked or associated with your organisation.
They can take part in volunteer work (i.e. as an NHS volunteer) or training. If staff are required to undertake training during furlough leave, they are entitled to be paid at least the applicable minimum wage rate for doing so, even if this exceeds the 80% which will be reimbursed by HMRC.
Working somewhere else whilst on furlough
Yes, as long as your contract of employment allows it, you can work for a different organisation i.e. a supermarket.
Your employers needs to communicate their position clearly. If there is a restriction in your contract of employment stopping you working elsewhere, you should ask your employer to consider carefully if they waive the right to enforce it during the pandemic.
How the Scheme will operate from June 2020 – August 2020
On Friday 29 May 2020 the Chancellor announced further updates to how the Scheme will run in the coming months. Below are the key points from the announcement:
- 10 June 2020: The last day that employers can place employees on furlough for the first time,
- From 1 July: ‘Flexible furlough’ to be introduced. This means that employees will be able to work part-time and be furloughed part-time. Individual firms will decide the hours and shift patterns their employees will work on their return, allowing flexibility across the board for employers to find the best approach for them. Employers will be responsible for paying their employees’ wages while in work.
- From 1 August: Employers will have to pay employee’s national insurance contributions and pension contributions. For the average claim, this represents 5% of the gross employment costs the employer would have incurred had the employee not been furloughed.
- From 1 September: The government will only reimburse 70% of an employee’s salary (capped at £2,190 as opposed to the original £2,500). Employers are required to top up to at least 80%.
- From 1 October: The government will only reimburse 60% of an employee’s salary (capped at £1,875) and employers remain obliged to top up to 80% or more.
- 31 October 2020: Furlough scheme closes.
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