Furlough Leave & Government Assistance

Furlough Leave and the Government Assistance

UPDATE: 1st June 2020

Originally announced as 1st August, the date at which employees are allowed to re-enter the workplace has been brought forward. From 1st July, businesses will be able to bring employees back to work on a part time basis. This applies to employees that have previously been furloughed for any amount of time and any shift pattern, while still being able to claim CJRS grant for their normal hours not worked.  Further guidance on flexible furloughing to follow on 12th June.

  • For June and July the government will continue to pay 80% of wages up to a maximum of £2,500 as well as employer NI and pension contributions.
  • In August, the government will still pay 80% of wages up to a maximum of £2,500, but employers must pay the employer NI and pension contributions.
  • In September, the government will pay 70% of wages up to a maximum of £2,187.50 and employers will cover 10% up to a maximum of £312.50, plus employer NI and pension contributions.
  • In October, the government will pay 60% of wages up to a maximum of £1,875 and employers will pay 20% up to a maximum of £625, plus employer NI and pension contributions.

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Under the Coronavirus Job Retention Scheme, the Government has put into place emergency measures to avoid workers being laid off or face redundancies as a result of the ongoing health crisis. By making their employees furloughed and placing them on furlough leave, employers will be able to access support to help cover the wages of those who have had to stop work.

What is furlough leave?

Furlough leave is when an employee has had to stop working but remains on the payroll. Employees on furlough leave must NOT continue to work, even at home.

Designating an employee, a furloughed worker

Unless there is a lay off clause in a employee’s employment contract, their consent will be required to put them on furlough leave, and an Agreement in writing should be made. If the employee refuses furlough leave, they may be at risk of redundancy. As always, a fair process for redundancy selection must be adhered to by the employer.

Who is eligible to claim?

All employers who cannot cover the cost of wages, due to the Coronavirus, for a furloughed worker that was on the payroll on 19th March 2020, can claim 80% of their salary, up to £2,500 per month. You can be on any type of contract, including a zero-hour contract or a temporary contract.

It is not yet known whether there may be room for disputes with the HMRC over the eligibility of certain employers. For example, whether a company can afford to cover the cost of their staff’s wages; or those with healthy profit margins and cash flows.

Topping up a furloughed workers wage

While the Government have pledged to cover 80% of a worker’s wages, an employer may cover the other 20%, but this is entirely optional. It is advisable for an employer to be consistent with all employees.

How will payments work?

The scheme will pay a grant to employers through a new online system which is currently being purpose built. Employees will then be paid as normal, through payroll. As the system will take time to build, employers can look to the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime.

Furlough can be backdated from 1 March 2020. It is proposed to last for at least 3 months and may be extended, if necessary.

Frequently asked questions

How long does an employee need to be furloughed to make a claim?

An employee must be furloughed for a minimum of 3 weeks before any payments can be claimed.

Can National Insurance and employer pension contributions be claimed?

Yes, National Insurance contributions and minimum automatic enrolment employer pension contributions can be claimed on top of the actual wage cost.

How are payments calculated?

For full and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.

For employee’s whose salary varies,  if they have been employed for a full 12 months prior to the claim you can claim for the higher of either:

  • the same month’s earning from the previous year; or
  • the average monthly earnings from the 2019-2020 tax year

If the employee has been employed for less than 12 months you can claim for an average of their monthly earnings since they started work.

Can an employee undertake training whilst on furlough leave?

Yes, although an employee must NOT do any work for the company while they are on furlough leave, they can undertake training courses.  

Can an employee with more than 1 job be furloughed?

Yes, an employee who works for 2 different companies (and therefore has separate employment contracts) can be put on furlough leave by one company but continue to work for another.

Can an employee who is self-isolating be furloughed?

Yes, self-isolating employees can be furloughed, but this must be for the minimum 3 weeks.

What should I do if an employee is sick whilst on furlough leave?

If an employee is sick during the furlough period pay, they should switch to contractual sick pay or Statutory Sick Pay.

Can I claim if I am paid through both PAYE and dividend?

Provided you are on furlough and not working, any wages paid via PAYE can be claimed for. You cannot claim for any dividends.

Information, guidelines, and rules are changing rapidly, and you should seek independent confirmation before acting. The official Government web page is here, but we will keep you posted with any significant changes.

As always, if you would like to discuss anything please feel free to get in touch.