- What does the term “furlough” mean?
To furlough means “to grant a leave of absence to” – in the case of COVID19 specifically, the Government has created a furlough grant scheme that businesses can use as a way of keeping their employees on payroll whilst they are unable to trade due to the virus lockdown. Furlough is used as an alternative to redundancy. The furlough scheme is officially known as the Job Retention Scheme (JRS)
2) Which businesses can use the furlough scheme?
Any entity with a UK payroll can apply, including businesses, charities, recruitment agencies and public authorities but the following must also be true:
- created and started a PAYE payroll scheme on or before 19 March 2020 (note this was originally 28th February 2020).
- enrolled for PAYE online – this can take up to 10 days
- a UK bank account
3) Which employees can I claim for?
- on PAYE payroll on 19 March 2020, including directors and office holders. Monthly paid workers, who started in late February, missed payroll cut-off that month and received their first pay at the end of March, are excluded. Bi-weekly paid and weekly paid employees, who started in March, are not excluded.
- any type of contract
- those shielding in line with public health guidance
- those with caring responsibilities
- those made redundant after 19 March 2020 can be re-hired and furloughed instead
- normal equality laws apply when deciding who should go on furlough.
4) Which employees cannot be claimed for?
- employees hired after 19 March 2020
- employees still working whether on reduced hours/pay or not
- employees on unpaid leave
- employees on sick leave or self-isolating should get Statutory Sick Pay but can be furloughed after this.
5) What about employees who work for more than one company?
- if employees currently have more than one employer, they can be put on furlough by one employer and continue to work for another, if it is permitted within their employment contract. If they are put on furlough by more than one employer, they’ll receive separate payments from each employer. The 80% of their normal wage up to a £2,500 monthly cap applies to each job.
6) Do I need agreement from my employees before designating them as furloughed workers?
- unless the contract states a right to furlough, you must gain agreement from your employee to designate them as a furloughed worker and to reduce their pay to 80% of normal salary.
- it is not anticipated that employees will withhold agreement when it is explained to them that the likely only other alternative is to make them redundant. Normal redundancy rules and protections will still apply for any employee refusing to be designated as furloughed.
7) What communications do I need to do?
- once agreed, the employer must write to employee confirming they have been furloughed to be eligible to claim.
8) What costs can I claim for?
- 80% of an eligible employee’s usual monthly earnings, up to a maximum of £2,500.
- employers’ National Insurance Contributions and minimum Automatic Enrolment Contributions (pension) on the claimed amount.
9) How long can I claim for?
- a minimum of 3 weeks and for up to 3 months – but this may be extended.
- you can place an employee on furlough more than once, and one period can follow straight after an existing furlough period, while the scheme is open.
10) What about employee deductions?
- employees will still pay Income Tax, National Insurance contributions and any other deductions from wages.
11) Can I pay my employees their full salary & bonuses whilst they are furloughed?
- yes, but you may only claim according to the rules set out in 10) above. Any salary costs above 80% and additional payments cannot be claimed under the Job Retention Scheme.
12) Is National Minimum Wage payable during furlough?
- pay when on furlough does not have to meet NMW/NLW because these rates are only payable for hours worked.
13) How exactly do I make a claim?
An online portal (available 20th April 2020) will be used to claim.
To claim, you will need:
- your employer PAYE reference number
- the number of employees being furloughed
- National Insurance Numbers for the employees you want to furlough
- Names of the employees you want to furlough
- Payroll/works number for the employees you want to furlough
- your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
- your bank account number and sort code
- your contact name
- your phone number
14) Can employees do any work for me during furlough?
- once employees are on furlough, they will not be able to work for you, but can undertake online training or volunteer subject to public health guidance, as long as they are not making money for or providing services to you.
Madison HR provides HR consultancy to small and medium businesses. If you have detailed questions about the furlough scheme or would like to discuss your company’s specific circumstances, we would be delighted to help you.