In light of the current coronavirus (Covid-19) pandemic, the Government has guaranteed that they will contribute to 80% of wage cost for employees “furloughed” due to the current pandemic with a maximum cap of £2500 per month. Only employees who were “furloughed” from 01/03/2020 onwards would be eligible and the cut-off date is now the end of October following an extension.
Starting 01/07/2020, a more flexible version of the aforementioned scheme would be announced. Moreover, starting 01/08/2020, employers will have to contribute towards the wages of furloughed staff.
All furloughed employees will receive 80% of their normal wages until the end of the scheme in October.
Frequently asked questions
1. Am I eligible to claim for the scheme?
The answer is yes if you have created and started a PAYE scheme by 19 March and is a UK employer. You must have a bank account and has an online PAYE account. Please note that you should only furlough your employees if you are unable to maintain your workforce due to operations being affected by the coronavirus (Covid-19) pandemic.
2. Who can I furlough?
Employees (part-time and full-time), non-employee workers, apprentices and some office-holders can be furloughed as long as you pay them through PAYE and is on the payroll on 19/03/2020. As the minimum furlough period is three weeks, the last date to furlough staff is 10/06/2020. However, people returning from a form of statutory leave who would otherwise be eligible can still be furloughed after 10/06/2020. Employees made redundant since 28/02/2020 and are re-hired also qualify for the scheme.
If you transferred in an employee via TUPE transfer after 28/02/2020, they can also be furloughed. However, if there is a PAYE business succession rule which applies or a payroll consolidation, you may be exempted from the strict cut-off date.
3. Who is ineligible for the scheme?
There are 3 categories of people who are ineligible:
- Employees hired after 19/03/2020;
- Employees who are still working, for example, on reduced hours or reduced pay (only until the end of June); and
- Employees who have been on unpaid leave before 28/02/2020, but they may be furloughed from the date both parties agreed that the employee would return to work.
4. Employers will have to contribute from 01/08/2020, what does that mean?
Furloughed employees will remain entitled to 80% of their normal wages, with a cap of £2,500 per month, until the Scheme ends in November.
In August, the government will still contribute to 80% of the wages but employers will have to contribute for employer NI and pension contributions.
In September, the government’s contribution will reduce to 70% of the wages (with a cap of £2187.50. The employer will have to contribute to the remaining 10% of the wages (with a cap of £312.50), employer NI and pension contributions.
In October, the government’s contribution will further reduce to 60% of the wages (with a cap of £1875) whereas employers will have to contribute to 20% of wage costs (with a cap of £625), employer NI and pension contributions.
5. If I want to furlough my employees, must they agree to it?
Generally, the answer to the question is yes. This is because such an arrangement is equivalent to a variation of the employment contract, to which their consent is mandatory.
6. How do I calculate the cap on the Government’s contribution?
The Government is currently contributing to 80% of the employee’s regular wage with a maximum cap of £2,500 per month, the employer’s NI and the pension contributions, until the end of July. This would include compulsory commission, but bonuses and any discretionary commission would not be included.
7. Is there a minimum period of furlough leave?
Yes, the minimum period is 3 weeks. However, do note that after 01/07/2020, there will no longer be a minimum period as the new flexible arrangements will be launched.
8. What is the new flexible arrangement starting in July?
Starting from 01/07/2020, furloughed staff can return to work part time on a flexible basis as long as they have previously been furloughed. These staffs must be paid their contractual wages for all the hours they worked. Employers can claim for the balance of their normal wages under the Scheme for the extra hours they would have worked if not for the pandemic. In such a circumstance, the maximum amount of the grant will be reduced proportionately, taking into account the total number of hours worked and the leftover normal hours spent on furlough.
When the new flexible arrangement is launched, employers cannot claim for more than the highest number it included in any one claim made before 01/07/2020 but there are some exceptions for this.
9. What do I need to take into account before I implement the new flexible arrangement?
Since employers will no longer be able to furlough staff for the first time, it is advisable for employers to consider whether they would like to ask their employees to work part time. However, employers must always pay attention to the current Government return to work guidance, to finalise and secure any agreements between employees and the employer, and the personal circumstances of employees.
10. Can employees on sick leave be furloughed?
Employees cannot be furloughed if they are self-isolating or on short-term sick leave. However, they can be furloughed if the employer’s reasons for going so is due to business reasons.
Nonetheless, if an employee has fallen ill whilst on furlough, employers will be given the liberty to decide if they want to move the employee into statutory sick pay or keep them on furlough.
It is important to note that employers can only claim either the two-week coronavirus statutory sick pay rebate or the furlough grant for a certain period of absence.
11. Should I keep records?
Yes. You should confirm in writing to your employees that they have been furloughed and retain a copy of this for 5 years. Records of how the claim is calculate should also be retained.
If you decide to allow your furloughed employees to come back to work part-time after 01/07/2020 when the flexible arrangement kicks in, you should also obtain their agreement to this new arrangement and retain a copy of such an agreement.
12. Other than this, is the Government providing any other forms of support during this pandemic?
Yes. There is a wide range of financial support for businesses which the Government has come up with in light of the coronavirus (Covid-19) pandemic. The entire list of Government support can be found here.