Should you furlough your staff?

Should you furlough your staff?

Should you furlough your staff?

Updated: 23rd April 2020

In response to the possibility that a large proportion of our population would lose their jobs to the coronavirus, the government announced their Coronavirus Job Retention Scheme, where companies can “furlough” workers instead of firing them. The idea is that more employees will keep their jobs and go back to work as normal once the coronavirus pandemic calms down.

What is furlough?

The term “furlough” is not really seen in UK employment law, but it is a term regularly used in the US. So, when Rishi Sunak announced this term, it left the country a little confused. Essentially, a furlough is a temporary leave from work, whether it be due to the company not having the means to pay your wages any longer, or a global crisis. In this case, it’s the latter.

The “furlough” option has been introduced under the Coronavirus Job Retention Scheme to provide employers the option of keeping staff on the payroll, rather than making them redundant.

The scheme will run until June 2020, unless the government extend it if they feel it’s necessary.

Which employees are eligible to be furloughed?

Any employee who was on the employer’s payroll on 19th March 2020 (this was extended from the 28th February, as many people missed out!) is eligible to be furloughed. This can full-time or part-time employees and can even include agency contractors and those on zero-hour contracts.

Even employees who were previously let go can be allowed back on the payroll and furloughed instead.

How much do you get for furloughing your staff?

The government has agreed to pay 80% of the employee’s wages, up to £2500 per month, plus national insurance and pension contributions.

Let’s say your employee is on a £36,000 a year salary. The calculations for them on furlough would be as follows for April 2020:

Monthly gross income: £3000
80% wages claim: £2400
Employer NI claim: £230.18
Employer pension claim: £56.40
Furloughed days: 30

TOTAL claim: £2686.58

Remember, the cap for the wages claim is £2500 per month. So, if your employee is on a salary of £60,000 a year, then this claim amount wouldn’t be too much different:

Monthly gross income: £5000
80% wages claim: £2500
Employer NI claim: £243.98
Employer pension claim: £59.40
Furloughed days: 30

TOTAL claim: £2803.38

Process of furloughing staff

First of all, you need to decide whether you should furlough your staff. They are not allowed to work for you at all while they are furloughed, so you need to evaluate whether you will need them at all. You can rotate which staff get furloughed to keep things flexible, but the minimum furlough time is 3 weeks.

If you want to furlough a staff member, you need to write to them officially to let them know the situation. They need to agree to be furloughed and it’s a change in their employment status. They will only be getting 80% of their normal salary unless you choose to top up this amount to 100%, which you are not obligated to do.

If employees refuse to be furloughed, you are entitled to dismiss them if this is the more preferable option.

How to claim

UPDATE:

HMRC’s claim software is now complete!

You can claim on the gov.uk’s website under the Coronavirus Job Retention Scheme. You will need your company’s PAYE details, plus the NI number and salary details of each employee you have furloughed. It’s probably a good idea to have previous payslips handy as they will have all the information you need on there.

Rules

A few of these have been covered above, but the main things to remember about the Coronavirus Job Retention Scheme and the furlough process is the following:

  • Any member of staff on your payroll on the 19th March 2020 is eligible
  • You can backdate the furlough to the 1st March 2020
  • You do not have to pay the extra 20% of their salary
  • Your staff CANNOT perform any work for you while they are furloughed
  • They are entitled to find work elsewhere if it’s not in breach of your employment contract
  • You must furlough each staff member for at least 3 weeks
  • Staff members can be furloughed more than once
  • Employees must agree to be furloughed
  • The claim platform was made available on Monday 20th April 2020 and claims supposedly take about 6 days to be processed

 

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