Q&A: Furlough leave and job retention scheme

Interior of an empty modern office where staff have been placed on furlough

In response to the difficulties facing employers as a result of the COVID-19 outbreak, the Government announced it was introducing the Coronavirus Job Protection Scheme which would allow employers to furlough staff. But what is furloughing and how is it different to making staff redundant? We answer your frequently asked questions

What does furlough mean?

If you furlough staff, you are essentially putting them on a temporary leave of absence (instead of making them redundant). Furloughed staff remain on the payroll, in a similar way to employees on gardening leave, but with the intention that they will return to their normal work when the situation improves.

Furloughing staff would normally be in response to extreme economic circumstances.

I've heard there's a furlough scheme. What is it?

The Government launched the Coronavirus Job Protection Scheme. The scheme allows eligible employers to claim a percentage of furloughed workers wages up to £2,500 per month (plus the associated employer national insurance contributions and employer automatic enrolment pension contributions). Unlike some of the other government support packages this is a grant, not a loan. This means the money you claim does not have to be repaid.

The original aim of the scheme was to prevent mass unemployment as a result of the COVID-19 pandemic. However, the guidance makes it clear that any employer that cannot maintain their current workforce because of the coronavirus pandemic can furlough staff and access the scheme.

The Government announced the scheme is changing. What are the changes?

Firstly, there will be a phased withdrawal of support. Employers will be expected to contribute to some of the costs from 1 August 2020 as follows:

Date

Employer contribution

Government contribution

From 1 August

Employers' NI and statutory pension contributions

80% of wages

From 1 September

10% of wages plus employers' NI and statutory pension contributions

70% of wages

From 1 October

20% of wages plus employers' NI and statutory pension contributions

60% of wages

The second change allows employers to return furloughed workers on a part-time basis from 1 July. Employers can pay staff normal wages for the hours worked and can claim from the furlough scheme at the furlough rate for those hours they are not working (subject to the same caps).

As this new scheme takes effect on 1 July, employees needed to be furloughed by 10 June 2020 (in order to complete the minimum three week furlough period before 1 July). If your employees were not furloughed by that date, you cannot claim under the revised scheme.

The scheme will finish on 31 October.

How is the furlough scheme different to the Job Retention Scheme?

The Job Retention Scheme can be viewed as the third and final stage of the furlough scheme. The furlough scheme set out to protect jobs whilst businesses were in lockdown or were recovering from lockdown. The Job Retention Scheme is an incentive scheme to encourage employers to bring employees that have been furloughed back to work and to keep them employed while the economy recovers from the lockdown.

Employers will be paid £1,000 for each employee earning over the lower earnings limit (£520 per month) that returns from furlough and who remains continuously employed until 31 January 2021.

What is the point of furloughing staff if I still have to pay them?

The Coronavirus Job Protection Scheme allows you to retain staff that you might otherwise consider for redundancy. It allows you to claim for a percentage of furloughed workers wages meaning you can keep them on without having to cover the cost. It also means employees keep their job until the economic picture improves.

Do I have to pay national insurance and pension contributions while workers are furloughed?

Yes. As your workers are still in your employ while furloughed, they remain entitled to the same terms and conditons as before - including company benefits. The only difference is they are not allowed to undertake work for you and they receive 80% of their normal pay.

Your national insurance and statutory pensions contributions will be based on the furlough pay (ie 80% of normal salary up to the cap of £2,500). You can claim this back as part of the furlough scheme until 1 August. If you are topping salaries up (over the £2,500 cap) or paying more than the minimum auto-enrolment pension contributions (3%), you will be responsible for paying the difference in salary, national insurance and pension contributions.

The scheme will be changing over time with a phased withdrawal of support. From 1 August, employers will become liable for the National Insurance and statutory pension contributions. From 1 September they will also have to cover 10% of furloughed workers wages and 20% of furloughed workers wages from 1 October.

Which employers are eligible for the Coronavirus Job Protection Scheme?

Any employer that was running a PAYE scheme on or before 19 March 2020 with a UK bank account can apply of the scheme (regardless of size). The scheme is open to businesses, charities, recruitment agencies (where the workers are paid through PAYE) and public bodies. Companies that have entered administration will also be able to access the scheme via their company administrator.

Which employees can be put on furlough?

Any employee that was on payroll on 19 March 2020 and included in an RTI PAYE submission to HMRC on or before this date can be put on furlough. This includes full-time, part-time, agency contract workers (providing they are not working at all) and zero-hour contract workers. Employers must have furloughed workers by 10 June.

Employees hired after the 19 March cannot be furloughed unless they were on your payroll on or before 28 February and have been re-employed.

Employees who are on sick leave (for example, due to coronavirus) can also be put on furlough once their period of sick leave has ended. Employees who are 'shielding' on government advice can also be placed on furlough.

Employees must be consulted on your plans to furlough staff and must agree to be furloughed. You must agree this in writing (which can include in electronic form) to qualify for the Coronavirus Job Protection Scheme. You may have to consult collectively and include a union in your consultation process. Where employees do not agree to be furloughed, you can dismiss the employee as redundant.

It may be helpful to follow a similar process to redundancy when deciding which employees are put on furlough. Bear in mind that equality and discrimination laws still apply.

The scheme changes on 1 July 2020. If your employees were not furloughed by 10 June 2020 (in order to complete the minimum three week furlough period before 1 July), you cannot claim under the revised scheme.

Can an employee put themselves on furlough?

No.

I have heard I can re-employ an employee that I made redundant and put them on furlough. Is that true?

Yes. You can give employees who were on your payroll (and included in an RTI submission on or before 28 February) that were made redundant between 28 February and 19 March the option of being rehired and put on furlough.

Can I put an employee that resigned on furlough?

Yes. You can give employees who were on your payroll (andincluded in an RTI submission on or before 28 February) that resigned after 28 February the option of being rehired and put on furlough (although you are under no obligation to do so). You can also allow someone who has resigned but not yet left, the option to rescind their resignation.

How long can I put employees on furlough for?

The Coronavirus Job Protection Scheme is open between 1 March 2020 and 31 October 2020. The scheme will remain in its current form until 31 July 2020.

From 1 August 2020, the scheme will become more flexible. Employers will be able to return staff on a part-time basis while still accessing the support scheme. This will run until 31 October 2020. From 1 August, there will be a phased withdrawal of support and employers will be asked to contribute towards the national insurance contributions, statutory pension contributions and wages of their furloughed staff.

The minimum period of furlough is three weeks. Employees can move in and out of furlough as business circumstances change. They can also be furloughed multiple times providing each period lasts a minimum of three weeks and furlough periods can be contiguous.

At the end of the furlough period, employees can be made redundant if trading conditions have not improved.

Do I need to alter my furloughed employees' contracts?

Employees must be consulted and agree to be placed on furlough in writing. The agreement can be made 'electronically' if necessary. You can also make any necessary changes to the employment contract by agreement. For example, if the current contract does include provisions for layoff you will need to agree that the employee will be furloughed due to lack of work.

What must I include in a furlough letter?

Understandably, as furloughing staff is a new concept here in the UK, businesses are unsure what they must include when furloughing staff. To save time, and ensure your template complies with employment law, the safest option is to use a pre-prepared template. Acas has created a Furlough agreement letter.

Do workers continue to accrue holiday?

Yes. As they are still employed by you while on furlough, they will continue to accrue holiday as usual. Special provisions have been introduced during the coronavirus outbreak which will allow workers to roll over up to four weeks' unused holiday over the next two years (usually only one week's leave may be rolled over from one year to the next).

Can I ask workers to use their holiday?

Yes. Equally, employees who have already booked annual leave can take the leave as planned. If they take holiday, they must not be disadvantaged as a result of the coronavirus. They must receive their normal holiday pay rate (rather than the 80% pay they receive while on furlough) for any statutory holiday they take (up to 5.6 weeks' per year). However, you will not be able to claim any money to top up the payment for any holiday taken from the furlough scheme. You will have to make up the difference.

You can also restrict holiday if there is a geniune business need. A temporary measure has been introduced allowing workers to roll over up to four weeks' unused holiday over the next two years.

What happens if an employee goes on maternity leave while furloughed?

Workers taking parental leave (maternity, paternity, adoption, shared parental leave or parental bereavement leave) on or after 25 April 2020 must not be disadvantaged simply because they are on furlough. Employees who go on maternity, paternity or any other parental leave on or after 25 April must have their pay calculated on their usual earnings (not 80% they receive under the furlough scheme).

How much can I claim from the Coronavirus Job Protection Scheme?

The scheme allows you to claim up to 80% of each furloughed workers' wage, capped at £2,500 per employee (plus employers' national insurance contributions and employers' pension contributions under auto enrolment). This must be paid in its entirety to the employee.

You cannot claim for the cost of non-monetary benefits including benefits in kind. You must continue to provide those to employees unless you come to an agreement with your employees. There will be a phased withdrawal of support from August 2020 and employers will be expected to contribute to some of the costs as follows:

Date

Employer contribution

Government contribution

June & July

0%

80% of wages, plus employers' NI and statutory pension contributions

From 1 August

Employers' NI and statutory pension contributions

80% of wages

From 1 September

10% of wages plus employers' NI and statutory pension contributions

70% of wages

From 1 October

20% of wages plus employers' NI and statutory pension contributions

60% of wages

How do I claim the Coronavirus Job Protection Scheme?

You make a claim for your furloughed workers' wages online. Before you make your claim, you will need:

  • to check if you and your employees are eligible for the scheme
  • to work out how much you can claim
  • certain information PAYE information

Once you have submitted your claim, you will be taken to a confirmation screen containing your claim reference number. You should print this screen or take a note of the reference number as you will not receive an email confirmation. You should also retain your calculations.

How do I work out how much I can claim under the furlough scheme?

HMRC have produced guidance and an online calculator you should use to check how much you can claim before you submit the claim.

When will I receive my payment?

HMRC will verify your claim and you will receive payment within six working days. Do not contact HMRC before this time as they will not be able to assist you with your claim.

You cannot delay payments to your workers. You must continue to pay staff according to their normal payroll timetable. This may cause some cashflow issues while your claim is processed. You can backdate your claim to the date the workers were furloughed.

Payments may be withheld or may need to be repaid if your claim is based on dishonest or inaccurate information or if it is found to be fraudulent.

Are furloughed workers allowed to work for the company while they are furloughed?

Under phase one of the scheme, furloughed workers must not do any work that provides a service to you or generates income for your business while they are furloughed. If they do, you may have to repay any grant you have received for them.

There is an exception for company directors who have been furloughed. Directors and owner-managers are allowed to carry out statutory duties relating to these roles as long as they are not generating business income or providing services to or on behalf of the company. They must not spend any longer working than is reasonable for the task.

You may ask workers to use the time they are furoughed to complete work-related training providing it does not generate income for the business or provide a service to the business. The Government is actively encouraging workers to undertake training while on furlough. The Department for Education has created the Skills Toolkit, a range of free, digital and numeracy courses from the likes of the Open University and Google.

Workers undertaking training must be paid at least the national minimum wage for any time they spend completing training - even if this is more than you are receiving in subsidy for them whilst on furlough.

From 1 July 2020, furloughed workers can start to return to work on a part-time basis. You must pay staff 100% of wages for any hours they work, but can claim the furlough scheme for any hours they are not working.

Can my furloughed workers work elsewhere while they are furloughed?

Yes, providing this is allowed for in your employment contract. You may want to agree an amendment to existing contracts with your workers as part of your furlough consultation negotiations. You might prohibit work for competitors but allow other work. For example, to work in key industries and roles such as care work, food production and delivery.

Can my furloughed workers do voluntary work?

Yes, so long as the work does not provide a service to you or generate income for your business.

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