Furlough Overview

Furlough is a completely new word in employment law so don’t get too hung up on the meaning. It is a new classification of employee/worker status as part of the Governments Job Retention Scheme which sits alongside temporary lay off and means that the employer can claim a grant from the government for 80% wages to be paid.
Overview of what furlough is right now:

This may be beneficial to Organisations who are not able to provide work to their employees and may otherwise be considering redundancy. The scheme applies to employers who cannot cover staff costs due to COVID-19.

If this is something that you need to utilise you should designate the employees you wish to furlough. This may be all of them or it may be a selection of them depending on who can work from home and whether some of the activities are classed as essential.

This is only payable to employees who are NOT working. If employees are working from home or working reduced hours Furlough does not apply.

Ideally the designated employees will have been issued with a contract of employment containing a lay off clause. Lay off clauses are likely to cover changing the employment status to ‘furloughed’ however, it’s a good idea to gain agreement from the employee to change the status and make the deduction in wages.

Once you have briefed employees and implemented Furlough, the employees will not complete any further work for you until you require them to do so. You will need to notify the HMRC of your furloughed employees through the portal.

HMRC did not have the capability to pay employers money before this situation, they will need to put a system in place so don’t be surprised if there is a time lag between you paying your staff and getting the grant back from HMRC. Anticipated set up is the end of April.

The 80% is still payable through the normal payroll method. The government will pay back 80% of an employee’s wages. It is up to the employer whether or not to pay the remaining 20%. Realistically, you would expect employees to agree to the 20% reduction in wages as the alternative is to go onto lay off which is £29/day for a max of 5 days or be made redundant.

It is worth noting that the 80% is said to cover ‘employment costs’. This could include onset costs e.g. pension and NI etc.

At this stage we do not know if there will be eligibility checks for the employer to provide evidence that they would otherwise have had to make redundancies.

Once the online portal is set up, we will hopefully have more information about the finer details of the scheme.