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COVID-19 Advice for business – Furlough leave - news article image

COVID-19 Advice for business – Furlough leave

30 Mar 2020

4 minute read

On the 26th March 2020, the Government released much needed further guidance on the Coronavirus Job Retention Scheme (Furlough Leave). This temporary scheme is designed to support employers whose operations have been severely affected by coronavirus (COVID-19). 

It is being introduced to help employers avoid redundancies due to COVID-19. Employers will be able to use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Fees, commission and bonuses must not be included. HMRC are urgently trying to design this portal to manage claims via this scheme and they hope it will be up and running in April. It is not clear whether or not the Government will introduce specific legislation on this scheme and as a result, this scheme is subject to change. In the meantime, employers can start to furlough employees but there are some key points you need to make sure you are aware of before going ahead to limit the risk to you as an employer.

 Shaw Gibbs can provide you with a Furlough Agreement template tailored to your business along with a meeting script to use with employees (who do not have a lay off short term working clause in their contracts) and we can advise you on who is eligible and how the scheme will work.

 Below are some points for employers to consider:

  •  You cannot force employees to be furloughed unless they have a Lay Off or Short Term working clause in their employment contracts. If they do not have this clause, you need to consult with them, get their consent to becoming a Furloughed Worker and they will need to sign a Furlough Agreement. Regardless, employers must write to their employees to let them know they are being furloughed. Important - changing the status of employees to Furloughed Workers remains subject to existing employment law, and depending on the employment contract, may be subject to negotiation. 
  •  At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.
  •  For full time and part time salaried employees, the employee’s actual salary before tax, as of 28th February should be used to calculate the 80%. Fees, commission and bonuses should not be included • The scheme is open to all UK employers who had created and started a PAYE payroll scheme on 28th February 2020 and have a UK bank account
  • UK organisations with employees can apply including businesses, charities, recruitment agencies (agency workers paid through PAYE) and public authorities
  • The scheme is open to UK employers for at least 3 months starting from 1st March 2020 and it is expected to run until 31st May. It may be extended
  • When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way. 
  • To be eligible for the subsidy, when on furlough, an employee cannot undertake work (of any kind, no matter how small) for or on behalf of the organisation. However, they can take part in volunteer work or training, as long as it does not provide services to or generate revenue, or on behalf of your organisation.
  •  Employees hired after 28th February 2020 cannot be furloughed or claimed for in accordance with this scheme 
  •  If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed. 
  • Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this 
  • For employees whose pay varies, the employer can claim for the higher of either the same month’s earning from the previous year, or the average monthly earnings in the 2019-20 tax year
  •  Furlough leave must be taken in blocks of 3 weeks
  • Some employers may consider giving people pay rises to benefit from this scheme. The Government have said they will take measures to avoid fraud like this and HMRC are likely to be wise to this.
COVID-19 Advice for business – Furlough leave - news article image


Kerry Whitfield

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