With nearly half of UK businesses expected to furlough most of their staff due to COVID-19, it’s essential that employers who haven’t done it yet understand how the process works.
The British Chamber of Commerce expects nearly 50% of firms to furlough most of their staff next week as they struggle to cope with the economic impact of the coronavirus crisis.
With many business owners keen to keep those that have helped drive their business forward so far, it’s no surprise that many UK firms are furloughing staff during the outbreak.
For business owners that have never done it before, it’s important to understand what furloughing staff means.
What is furlough?
Putting workers on furlough means that a business has been forced to temporarily send them home as there isn’t enough work for them to do. Usually, this is due to economic conditions affecting the business.
If a business owner wants to furlough workers during coronavirus, there is financial support available.
The Government has provided businesses with the ‘Coronavirus Job Retention Scheme,’ which is open to employers who use PAYE payroll and have a UK bank account.
The scheme has been open since February 28, 2020, and will be available for at least 3 months.
UK businesses with employees; including businesses, charities, recruitment agencies and governmental organisations are eligible for the scheme.
Employers can put employees, casual workers and those on agency and zero-hour contracts on furlough, including staff who are on sick leave or are self-isolating.
However, there are some staff that can’t be furloughed, such as employees who were on unpaid leave before Feb, 28 or those employed after this date.
If staff are operating on reduced hours or on reduced pay, they won’t be eligible for the scheme either.
Selecting staff to furlough
Employers must tell staff they are being furloughed, or they won’t be eligible for the scheme.
While staff are on furlough, employers must keep them on their payroll and ensure the furlough lasts for a minimum of 3 weeks. If a member of staff was made redundant on the day the scheme was introduced (Feb,28) or after, the employer has the choice to re-hire them and put them on furlough.
Selecting employees for furlough must be done in a way that prevents any accusations of discrimination, as equality and discrimination laws apply to this process.
Furlough agreements should be made in writing and include the date when the furlough starts, how much the employee will be paid over the furlough period and how the employee should keep in contact with the business, as well as when the furlough period will be reviewed. This should all be kept on record.
There are terms that employers must adhere to if they want to use government assistance to furlough staff, these terms are explained below:
Terms and staff rights
Employers cannot make furloughed staff do to any work for or on behalf of the business. Furloughed employees are not allowed to provide any services for the business, nor do anything that will generate revenue for the business.
Furloughed staff have the same rights as they did before, this includes a right to Statutory Sick Pay, (SSP), maternity and paternity rights, a right to redundancy pay and the right to pursue an unfair dismissal claim.
If not already covered by a clause in an employee’s contract, it’s essential for employers to reach an agreement with selected employees about being furloughed.
If an agreement cannot be reached and there are over 20 staff affected by this issue, employers should speak to elected representatives in the business and consult on the issue if changes need to be made to contract terms.
How it works
The facts about the ‘Coronavirus Job Retention Scheme’ as stipulated on the Government website says employers will be paid to cover 80% of furloughed employee wages up to £2,500 per month “plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.”
Employers should also note that “fees, commission and bonuses should not be included,” in this grant.
The employer has the option to top up this amount to 100%, but they don’t have to. If the employer takes the decision not to top up wages, they should tell furloughed staff why they haven’t.
If an employer wants to furlough a member of staff that has two jobs, they can be furloughed by one employer while continuing to work for the other. If they are furloughed by both employers, they will still be entitled to financial support from both jobs.
For employers wanting to claim the 80% salary assistance, claims can be backdated to March 1, 2020.
It’s the employer’s responsibility to claim for the scheme. To do it correctly they’ll need:
- A ePAYE reference number
- The number of staff on furlough
- the start and end date
- the amount claimed
- their bank account number and sort code
- their contact name
- their phone number
Employers must calculate the amount they are claiming. It’s also worth remembering that “HMRC will retain the right to retrospectively audit all aspects of your claim.” Employers also are obliged to pay furloughed staff all the grant amount they’re given by the Government, which is paid out every 3 weeks as per the shortest furlough period.
The Government website says that employers “must make their claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.”
Employers will also have to pay “Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.”
When the Government ends this scheme, employers must make the decision, depending on economic conditions, whether furloughed staff can return to work or if they will have to be made redundant.
Things to remember
Employers must remember that this scheme is temporary and the online service to make claims won’t be available until late April 2020. If a business has gone into administration, the appointed administrator will be able to access the scheme.
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