What is Furlough Leave? (The Corona Virus Job Retention Scheme)

furlough leave

The Coronavirus Job Retention Scheme is a short-term scheme open to all UK employers (Also known as Furlough Leave) for at least three months starting from 1 March 2020. It is built to support organisations whose business have been severely affected by coronavirus (COVID-19).

Organisations can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.

The scheme is available to all UK employers that had produced and started a PAYE payroll scheme on 28 February 2020.

Who does it apply to?

Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including: full time, part time, agency employee and zero hour contracts

The program also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.

To be eligible for the subsidy, when on furlough, an employee can not carry out work for or on behalf of the business. If an employee is working, but on reduced hours, or for decreased pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.

Companies should discuss with their staff and make any changes to the employment contract by agreement. When businesses are making decisions in relation to the process, including deciding on who to give furlough to, equality and discrimination laws will apply in the usual way.

To be eligible for the subsidy companies should write to their employee confirming that they have been furloughed and keep a record of this correspondence. Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.

How to claim?

Businesses need to make a claim for wage costs through this scheme. Businesses will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.

At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obligated to under this scheme.

The online service you’ll use to claim is not available yet. It is expected to be available by the end of April 2020.

Once HMRC have received your claim and you qualify for the grant, they will pay it via BACS payment to a UK bank account.

Companies should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or prior to an imminent payroll. Employers must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is approved.

When the government ends the scheme, you must decide, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to think about termination of employment (redundancy).

Employees which are furloughed have the same rights as they did previously. Which includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.

Do you need help with preparing Furlough leave for your employees? Contact Us Today

For the most up to date information and to find out when the portal is open visit the Gov.uk website