With substantial restrictions for everyone on the circumstances in which we can leave our homes, and many businesses being forced to close, the Chancellor has announced a scheme to reimburse up to 80 per cent of the cost of the wages of ‘furloughed workers’.
What is a ‘furloughed worker’?
Anyone designated as a ‘furloughed worker’ will remain on your payroll, rather than being laid off. However, they will not carry out any work for your business or organisation. There is no option to keep them working on reduced hours.
They will generally be people who would otherwise be at risk of being laid off or being made redundant.
Furloughed employees will still accrue continuous service and will still be entitled to the usual terms and conditions of their employment, other than pay and benefits. This means that their contractual notice period remains in effect during a period of furlough and they would remain entitled to statutory redundancy payment in the event they are made redundant during their furlough.
How do I designate an employee as a ‘furloughed worker’?
You will need to notify the relevant employee that you are changing their employment status to ‘furloughed worker’.
Designating someone as a ‘furloughed worker’ remains subject to the provisions of existing employment law and their contract of employment and so, because ‘furlough’ is a new concept, in most circumstances, it will be necessary to agree to a furlough with the employee concerned. This agreement should ideally be made in writing.
An employee cannot designate themselves as a ‘furloughed worker’.
Can I force someone to become a ‘furloughed worker’?
This is unlikely, but where the alternative is that they will lose their employment entirely, owing to being at risk of lay-off or redundancy, fewer workers are likely to decline to be designated as a ‘furloughed worker’.
What do I get if I designate an employee as a ‘furloughed worker’?
HM Revenue & Customs will provide you with a sum equivalent up to 80 per cent of each furloughed workers’ total wage costs, up to a limit of £2,500 a month, for three months initially, backdated to 1 March 2020. This includes National Insurance Contributions and Pension Contributions.
Can I pay the ‘furloughed worker’ more than 80 per cent of their usual salary?
Yes – you are free to do so if you wish but you are not required to do so. For higher-earning employees who are paid more than £2,500 a month, this could be very expensive. However, this cost needs to be balanced against the benefit of helping to retain that employee in the business.
Can workers be brought back to the business and placed on furlough where they have been dismissed owing to a lack of work?
It appears that this will be possible if the employer agrees to bring the employee back and keep them on the payroll. The cut-off date for employees dismissed in these circumstances is 28 February 2020.
How do I apply to the scheme?
HMRC is setting up a new online portal through which you will be able to make applications. The Government has said that it will be ready in time for the first payments under the scheme to reach businesses before the end of April.
What information do I need to provide?
Full details of the information that you will need to provide to access funds under the scheme have not yet been announced. However, we anticipate that you will need to provide the below:
- The employee’s name
- National Insurance Number
- The amount they have been paid in at least each of the last three months of normal employment
- Contract details, such as whether their employment is permanent or temporary and whether they work part-time or full time
- The date they were designated as a ‘furloughed worker’
- The date that they will cease to be designated as a ‘furloughed work’ if this is known.
For detailed advice please contact our employment team here