To furlough or not to furlough? That is the question for businesses up and down the UK. But, what does it really mean for employers AND employees?
Here we break down the common questions employees, accountants and employers have been talking to us about.
The recent launch of the Government’s ‘Coronavirus job retention scheme’ enables companies to continue employing staff with 80% of staff pay covered (up to £2,500 a month) by the Government.
Why the £2,500 ceiling?
£2,500 is the monthly equivalent to the average UK worker’s annual wage of £30,000.
The idea is that staff who would otherwise be made redundant or laid off, can be retained, allowing businesses to retain their talented workforces.
But, there are some strict caveats if a company wants to ‘furlough’ all or part of their employees.
The UK’s Chancellor, Rishi Sunak, announced several measures to help safeguard the wages of millions of hardworking employees who would otherwise have been laid off, and try and relieve cashflow and prevent bankruptcies.
Sunak’s scheme, applicable to all businesses with PAYE employees, will be up and running by the end of April and backdated to the 1st of March 2020. The self-employed are not covered by this scheme.
To access the scheme, businesses have to ‘furlough’ their employees who they can no longer afford to pay.
What does it mean if you’re an employee being ‘furloughed’?
If you’re being furloughed by your boss, it means you’re being sent home, but will still receive 80% of your monthly salary, by the Government, up to a maximum of £2,500 a month.
First, you need to agree to be put on furlough by your employer. They can then apply for the money directly to the Government. You cannot apply for it yourself.
Your employer can choose to ‘top up’ your pay with the remaining 20 per cent of your wages, but they are not legally obliged to do so.
If your annual salary exceeds £30,000, i.e. You earn more than £2,500 a month, your employer can choose to ‘pay the extra’, but again, this is at their discretion.
You will still continue to pay income tax and national insurance contributions while on furlough.
Whilst furloughed, your employer cannot ask you to perform any work duties or services which will generate revenue for the business. They can, however, ask you to do ‘training’ to improve your job skills.
Employees on zero-hour contract CAN be furloughed.
Temping through a recruitment agency or working on a flexible contract? You are also eligible to be furloughed; –
For those on zero-hour contracts, where you don’t necessarily earn the same amount each month, your employer should give you 80% of your average monthly salary since you started working.
That also applies to workers employed for less than a year.
If you have worked for your employer for 12 months, or more, you should receive 80% of your average monthly salary OR 80% of what you earned in the same month during the previous year – whichever is the higher.
If you only started work in February, your employer will pro-rata your earnings from that month. But if you’ve started working on the 28th of February or after, you are not eligible.
If you have been made redundant after the 28th of February 2020, or even if you left a job after that date, you could be re-employed under furlough if your employer is willing to do so. Otherwise, you will have to claim unemployment.
Can you be furloughed if you are off sick?
If you have fallen ill, and in the meantime, your employer has had to shut down, you should get statutory sick pay first, but can be furloughed after that.
Those who are self-isolating because of coronavirus are also covered.
What if you have been off ill and in the meantime, your employer has had to shut down? First, you should get statutory sick pay, but you can be furloughed after that.
Employees who are ‘shielding’ and those vulnerable to potential severe illness caused by the coronavirus, can also be placed on furlough.
Currently, employees can be furloughed from a minimum of three weeks up to three months, although the Government may look to extend that if needed.
Which businesses can apply?
Any company with employees can apply, including, but not limited to; charities, recruitment agencies, and public authorities.
Most public sector organisations are not expected to apply, as ‘the majority of public sector employees are continuing to provide essential public services or contribute to the response to the coronavirus outbreak’ say the Government.
Businesses who are receiving public funding specifically to provide services necessary to respond to the coronavirus outbreak are not expected to furlough staff.
Employers can furlough staff for a minimum of three weeks and are not allowed to rotate employees on furlough.
In order to access the scheme, businesses need to change the status of their employees to “furlough workers” and submit the information to HMRC.
HMRC is currently working to set up a system for reimbursing companies with access anticipated by the end of April. Due to volumes, accountants and businesses are warned that they may not be able to receive payments until mid-May.
For the Government’s full, current, official guidance click this link https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme#employees-you-can-claim-for
Astute Recruitment Ltd.
Supporting people and businesses through the current crisis.
Mary Maguire
MD Astute Recruitment Ltd
Mobile: 07717 412 911
Head Office: 01332 346 100
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