Employers guide to furlough and the Job Retention Scheme

Peninsula Team

April 03 2020

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The UK government recently launched an initiative to help pay your staff during the COVID-19 crisis.

The initiative, known as the Coronavirus Job Retention Scheme, could help you avoid laying off or dismissing employees.

What is the Job Retention Scheme and furlough?

The new scheme will pay for most of an employee’s wages while they’re on furlough. But what exactly is a ‘furloughed employee’?

Under normal circumstances, an employee on furlough takes a period of temporary leave without pay. They stay on your books, and you can bring them back in when you need them.

Under the proposed Job Retention Scheme, if you need to furlough employees due to the COVID-19 crisis, the “no pay” element will be overridden and the government may pay 80% of your employees’ wages up to £2,500 per employee per month.

Which employees can I furlough?

You can furlough any employee as long as they’re on PAYE and were on your payroll on February 28th, 2020.

It’s up to you to decide who goes on furlough. However, employees cannot be made to work while they’re furloughed, even if they’re on short-time working.

When you need to select employees for furlough, it may be best to ask for volunteers across the workforce. If any high-risk employees who had previously been risk assessed as fine to be in work put themselves forward, they may be best to choose first. 

Also, there’s no restriction on the number of employees who can be furloughed.

How do I apply for the government grant to cover furloughed employee wages?

Initial guidance sets out that organisations need to designate which of their workforce will be furloughed. You must then submit this information, along with each employee’s earnings, to the HMRC through an online portal. You will then receive a grant to cover 80% of their wages.

The government is expected to launch the online portal and provide more information on the scheme soon.

When will I get the government grant under the Job Retention Scheme?

Chancellor Rishi Sunak has stated he hopes the first grants will be paid by the end of April 2020. These can also be backdated to March 1st, 2020. The scheme is intended to run for three months but may be extended.

Will zero hours employees have their wages covered through the government grant?

Yes, provided they’re PAYE. The government’s aim is for the scheme to have as broad a scope as possible.

What’s the shortest amount of time I can furlough someone for?

To claim the government grant, furlough must be for at least three weeks.

Can I force employees to furlough?

You will need to get employees’ agreement before you furlough them if you don’t have a contractual right to do so. It isn’t likely that your employees will say no if the potential alternative is unpaid lay-off or redundancy.

Can I furlough someone more than once?

Yes. This means you can rotate employees around periods of work and furlough. Each period of furlough must be at least three weeks long. While on a period of furlough, employees must not do any work for you.

Can I furlough people on sick leave

No. You must wait until they’re fit to return and then make a decision on whether there is work for them or whether you will agree furlough with them.

Do I have to pay wages to employees first before claiming back?

Yes. The grant will act as a reimbursement of wages paid.

Can I offer someone a couple of hours of work a week during furlough?

No. The employee must do no work for you while on furlough. 

Can directors be furloughed?

Provided they’re PAYE and they were on the payroll on February 28th, 2020, directors can be furloughed. The same rules apply on not doing any work during the furlough period, except for complying with statutory duties.

Can the 80% wage fall under National Minimum Wage?

Yes. National Minimum/Living Wage is a rate payable for hours worked. During furlough, no hours are worked and so the minimum rates do not apply.

Can I still make someone redundant on furlough?

Yes. However, you must still follow the normal rules on fairness and procedure.

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