What does ‘furlough’ mean?
‘Furlough’ is a temporary leave of absence. The purpose of the furlough scheme is to incentivise employers to retain employees on paid temporary leave rather than making them redundant. Through HMRC, the government will subsidise the earnings of furloughed employees (up to 80% of pay, capped at £2,500 per month).
When does the scheme start and how long does it last?
The scheme will be backdated to 1 March 2020 and will be in place for at least three months, with extensions if necessary.
Can my business apply for the furlough scheme?
All businesses registered and operating PAYE and with a UK bank account as of 28 February 2020 can apply. This includes businesses, charities, recruitment agencies and public authorities.
Which employees can I place on the furlough scheme?
Employees must have been on PAYE as of 28 February 2020. They can be full-time, part-time, agency staff, or on flexible or zero-hours contracts. Those made redundant after 28 February 2020 are eligible to be furloughed if re-hired.
Can employees still continue to work for the business whilst they are on furlough leave?
No, employees can do no work during the furlough period that generates revenue for the company. They can, however, carry out training or voluntary work.
Can employees on SSP be furloughed?
Employees who are on sick leave or self-isolating should be paid Statutory Sick Pay (SSP). Employers can place these staff on furlough after the sick pay period if there is no work for them to do and they would otherwise be laid off or made redundant.
Should employees who are ‘shielding’ be placed on SSP or furlough?
Employees who are extremely vulnerable and have been advised by the NHS to ‘shield’ for 12 weeks in line with public health guidance should be placed on furlough.
Can employees on maternity leave be furloughed?
Employees eligible for statutory maternity pay are entitled to the usual 39 weeks’ SMP. The same principles apply for paternity, adoption and shared parental pay rights.
If the employer offers enhanced contractual rights, these are included as wages costs which can be claimed through the furlough scheme.
What happens to agency staff?
Under the scheme, you may furlough agency staff who are paid through the company’s PAYE payroll, but not otherwise. Where they are employed by an agency and paid through the agency’s PAYE payroll, they may be furloughed by the agency.
Can I bring employees back from furlough if work increases?
You can bring employees in and out of furlough although the minimum furlough period is three weeks. You may also rotate furloughed staff on a three weekly (or more) basis, however, where staff are physically at work be aware that this may increase the spread of infection.
Will furloughed employees be gaining continuous service (for the purposes of statutory rights such as unfair dismissal and redundancy payments) whilst on furlough?
Yes, the rules relating to ‘temporary cessations of work’ will not apply because the contract of employment will remain in place throughout the furlough period.
What should I pay my employees on furlough leave?
The maximum amount to be paid is 80% of wages (not fees, commission or bonuses) or £2,500 per month (gross) whichever is the lower. If their wages vary then you can apply the same month’s earnings from the previous year or the average of the past year (whichever is the higher). HMRC will pay that amount plus employers’ NI and employers’ minimum automatic enrolment pension contributions. There is no minimum wage when an employee is furloughed.
Should I top up the 80% to 100% pay for my employees?
Employers are not obliged to top up the additional 20%. However, usual employment law applies, so any changes to the contract must be agreed and is subject to the Equality Act 2010.
How do I claim back the wages from the government?
There will be a HMRC portal to submit the claim. This is expected to be up and running by the end of April. Employers need to calculate the amount. HMRC will make BACS payments.
The payments need to be included in the company accounts as revenue.