The government has introduced the Coronavirus Job Retention Scheme to support businesses and workers during the current crisis. This has resulted in employers placing some of their workforce on furlough leave.
Employment lawyer Natalie Peacock answers some frequently asked questions regarding furloughed workers.
An important disclaimer: the answers given below are as the situation stands on 1 April 2020. The advice is subject to change as this is an evolving situation.
What does furlough mean?
Furlough is a new concept in English law and means that employees can take a temporary leave of absence whilst remaining on the payroll. This differs from being laid off by the employer, whereby the employee is no longer paid.
Who is eligible for furlough leave?
Employees of UK based businesses with a PAYE scheme are eligible for furlough leave if their work has been impacted by Coronavirus and the business cannot cover staff costs. Publicly funded organisations are unlikely to be able to furlough their employees. The employee or agency worker must have been on the payroll before 28 February 2020 to be eligible. Any employees hired after 28 February 2020 cannot be furloughed.
What if I was laid off prior to introduction of the Job Retention Scheme?
The Job Retention Scheme is being backdated to 1 March 2020. This means that employees who have been laid off or made redundant prior to introduction of the Scheme can be reinstated and placed on furlough leave.
How long does furlough leave last?
The employee must take a minimum of three weeks furlough leave. If the employee returns to work during the three week period, even just for one day or on reduced hours, this will end their entitlement to furlough leave and they will not be eligible for the 80% grant. The Job Retention Scheme is being put in place to allow employees to be furloughed up to 31 May 2020.
Can an employee be placed on furlough leave without their agreement?
No. Employees must agree to be furloughed unless there is a contractual clause providing for the employee to be laid off or to receive reduced pay. If an employee does not agree to be furloughed the alternative is to make them redundant if there is no work available for them.
Am I guaranteed to return to my job after furlough leave?
Furloughed workers are entitled to return to the work they are contracted to carry out on the same terms and conditions unless agreed otherwise with their employer. If the business cannot continue after the period of furlough leave, employees with two years’ continuous service will be entitled to redundancy pay.
How can we apply to the Job Retention Scheme?
The Job Retention Scheme is still being implemented by the HMRC. It is expected to be operational by the end of April 2020. Businesses will receive guidance on how to apply through the HMRC portal. It is expected that employers access the portal and provide details of the affected furloughed employees’ earnings, National Insurance numbers and pension contributions. The employers will need to provide HMRC with their UK bank details and specify the following information:
- Number of furloughed employees
- Claim period
- Amount claimed
- Employer’s contact details
Once the portal is operational, HMRC will investigate the employer’s eligibility to claim.
How do employees get paid whilst on furlough leave?
Once the HMRC portal is operational and the employer’s claim has been agreed, payment will be made by BACS into the business’s bank account. However, as the portal is not expected to be operational until the end of April 2020, the first payments are unlikely to be received until mid-May 2020. The employee will be paid as usual through the PAYE scheme.
How much will I get paid whilst on furlough leave?
Eligible employees are entitled to 80% of their monthly pay up to a maximum of £2,500 per month. Businesses will receive the 80% grant plus National Insurance and pension contributions. Some businesses may choose to ‘top up’ the 80% grant meaning employees will receive their full pay whilst on furlough leave.
What support is available for the self-employed?
The government has also introduced the Self-employment Income Support Scheme. This provides a grant of 80% of trading profits up to a maximum of £2,500 per month for a period of three months. The grant is calculated on an average of trading profits from the years 2016-2019. Self-employed individuals are eligible for the Scheme if the following applies:
- Submitted Self Assessment tax return for tax year 2018-2019
- Traded in tax year 2019-2020
- Would be trading when apply to the Scheme but for the impact of Coronavirus
- Intend to trade in tax year 2020-2021
- Trading profits of less than £50,000
- More than half of income comes from self-employment
Self-employed individuals will receive contact from HMRC confirming their eligibility and providing guidance on how to claim.