Good question, this term has not previously been used much in the UK, ‘Furloughed workers’ are common in the United States, and the term ‘furlough’ relates to the temporary leave of an employee/employees due to the special needs of a company or employer, attributable to the economic conditions at a specific employer, or in the economy as a whole.
Following the Chancellors announcement of the Coronavirus Job Retention Scheme which referred to salary assistance for furloughed employees, the detail was expected on Monday 23rd March 2020, we find ourselves still waiting on the full details as there still unanswered questions since the headline, but here’s what we do know...
- Salary assistance is for “all employers with PAYE scheme”
Although BEIS states eligibility is for “all businesses”, on the 26th March wording changed slightly in the description of who will be able to access the scheme to “all employers with a PAYE scheme”; HMRC also have confimed over the phone that domestic employers with a PAYE scheme will be eligible, therefore we are feeling more confident that you can make use of the Coronavirus Job Retention Scheme.
- It is for employees unable to work due to the crisis who would otherwise be made redundant.
- It is for a period of three months (March, April and May).
This may be reviewed and extended.
- They must be designated as ‘furloughed’ (granted a leave of absence) and notified of this in writing.
Any furlough agreements should be in writing. It’s a good idea to include:
- the date furlough starts
- when it will be reviewed
- how to keep in contact during a furlough
We have a template agreement for our clients that is available on request.
- For these purposes, it means temporary non-pay status due to lack of work or lack of funds.
- They remain an employee with normal employment rights and accrue holiday pay etc.
- If employees have already been made redundant (laid off) you can change their status and backdate to 1st March 2020.
- The employee cannot do any work for you during their furlough period.
- Claims for this grant will be made via a new online HMRC portal.
The claims portal is not currently opertational, first payouts are expected at the end of April. An employer will need have the necessary cashflow to pay any furlough payments due to an employee in the meantime.
- It will cover 80% of the gross wage bill up to a maximum of £2,500 per month per employee.
Furlough payments are still subject to normal deductions as normal as far as we are aware, we await further guidance.
- The employer does not have to cover the remaining 20% but is encouraged to think carefully before making any decision not to.
- We are waiting to hear from HMRC if this grant is to also cover Employer NI costs.
- The Pensions Regulator won’t be allowing employers to suspend pension contributions at this stage.
This may change.