What is a Furlough worker and how does it work?

The current COVID-19 pandemic is causing significant worries for employers and employees alike across the UK. A number of measures have been put in place by the government to help employers stay afloat.

The Chancellor on the 20th March announced that there is an unlimited support package on offer for businesses to support them with employee salaries in this time of need. This scheme has been named the ‘Coronavirus job retention scheme’ and the aim is to maintain employment and support businesses in these uncertain times.

What does this scheme mean for businesses?

High level guidance released by the government advising employers of the support that is available for businesses and its employees  is now available (click here). However, we are still waiting for the detail regarding how this is going to be implemented.

Below is a brief overview of the scheme as it is at the 23rd March 2020 and we will continue to update you in the coming weeks as soon as further updates are received.

What is the scheme?

The government has stated that there is a grant offering to fund 80% (capped at £2,500 per employee) of the total cost of wages of their workforce who remain employed but cannot currently work due to the coronavirus outbreak.

Are you eligible?

All employees are eligible whether they be sole traders, limited liability companies, partnerships or charities. The aim is to provide employers with the financial support to avoid having to consider redundancies, layoffs and short time measures.

What do you need to do and which of my employees does this apply to?

The employee needs to be identified as a designate ‘furloughed’ employee for the grant to apply. The government has indicated that to be “furloughed”, the employee needs to remain employed, and that they cannot undertake any work within this period.

Employees cannot request this it needs to be initiated by the employer.  If your employees can work from home and manage business requirements and there is work available for them to do, they will not be eligible.

How is the grant calculated?

We are still waiting for the detail behind this and HMRC are working round the clock to get this process in place as soon as possible. There is a view that the cap of £2500 will include pension contributions and national insurance payments in the “cost” and that it is not limited to basic salary.

Can the employer choose the number of designate furloughed employees?

There is likely to be more guidance around this in the coming weeks however there are businesses where work demand may still be in place in one area and not another.

There is a warning here in that employers will need to be careful not to discriminate when selecting employees to be designated as furloughed. This process can have implications from an employee engagement perspective, and this will need to be a considering when communicating and implementing this process.

Do employers have to pay the remaining wage cost not covered by the grant for employees who are designated as furloughed.

The current guidance states that your employer can chose to fund the difference between this payment and the salary however they are not obligated to do so.

You need to check what is stated in your Company’s current contracts of employment as not paying their full salary without a contractual right to withhold this could be risky and result in unlawful deductions of earnings.

We would strongly suggest you fully communicate your position with your employees and gain their agreement. After all these measures are being put in place to protect the business and employees jobs. You will need to ensure that you document these consultation process and confirm all the details in writing.

What are the timeframes of this scheme and when can the grant be applied for?

Currently the scheme is in place for 3 months however this could be extended depending on the government’s decision. The grant can be backdated to the 1st March 2020.

HMRC are working hard on the portal to enable businesses to apply for the retention scheme in the near future. More information will be made available in the coming weeks.

Can we still make employees redundant instead of designating them as furloughed?

This is a business decision, however you need to be aware of the length of service of your employees as they have employment law rights at 2 years and you need to ensure you take the relevant advice to managing this with employment law requirements in mind.

If an employee is self-isolating and receiving SSP can they be classed as a furloughed employee?

Yes, however we are waiting for more information on this point and it is likely that they will be able to receive the 80% salary, if eligible to receive full company sick pay.

So, what now…………………………………………..

We suggest that you start to identify who your potential furlough employees are and discuss this with them and seek their agreement and document these conversations. The current view is that employees will understand that these measures are in place to prevent having to make redundancies and save jobs.

We offer 30 minutes free telephone advice to any employer who needs HR support on any matters.  Call us on 01422 897152.  www.optimalpbs.co.uk

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