Furlough Leave UK: FAQs & Updates

Update on the Coronavirus Job Retention Scheme – Flexible Furlough

Details have now been announced about the extension to the CJRS regarding Flexible Furloughing of employees. 

Please see below the important changes and the dates they apply from:

June 2020

• The government will continue to pay the grant under the existing rules. Employers will have to pay employees for the hours they work.
• The scheme will close to new entrants from the 30 June and you will only be able to furlough employees who have been furloughed for a full three-week period prior to this date. Therefore, the final date you can furlough an employee for the first time is 10 June.
• Employers will have until 31‌‌ July to make any claims in respect of the period to 30‌‌ June.

1 July 2020

• The government will continue to pay the grant under the existing rules. Employers will have to pay employees for the hours they work.
• Employees will be able to bring back furloughed employees on a part time basis if needed.
• The Government will continue to pay 80% of the employee’s wages for the hour they DO NOT work until the end of August.
• The employer will be responsible for paying their wages in full while working (at the pre-furlough rate of pay)
  • Example:
    • Full time hours = 40 – £8.00 hourly rate
    • Employee returns for 20 part time hours – remains furloughed for 20 hours
    • Employer pays 20 x £8.00 = £160
    • Government pays 80% of 20 hours = £8.00 x 80% = £6.40 x 20 = £128
    • Employee pay for one week = £160 + £128 = £288
• There is no longer a minimum time that you have to furlough staff for, but any working hours agreement must cover at least one week and must be confirmed in writing
• A minimum of one week must be reported and claimed for, but you can opt to make claims for longer periods, for example on a monthly or two weekly cycle.
• Employers will also be required to submit data on the employees contracted hours expected to normally work for that claim period and actual hours worked.
• Where employees are unable to return to work, or there is no workload, they can remain on the scheme and the employer can continue to claim a grant for their hours under the existing rules.

Employer contributions will change:

1 August 2020

• The government will continue to pay 80% of wages up to a cap of £2,500 but employers will pay Employer’s NICs and Employer’s minimum pension contributions.

1 September 2020

• The government will only pay 70% of wages up to a cap of £2,187.50. Employers will pay Employer’s NICs, Employer’s minimum pension contributions and 10% of wages to make up 80% of the total up to a cap of £2,500.

1 October 2020

• The government will only pay 60% of wages up to a cap of £1,875. Employers will pay Employer’s NICs, Employer’s minimum pension contributions and 20% of wages to make up 80% of the total up to a cap of £2,500.

Please note, the cap on the grant will be proportional to the hours not worked.

For smaller employers, some or all of your employer NIC bills will be covered by the Employment Allowance.

Q: What is Furlough Leave?

• This is a temporary leave of absence from work, due to economic conditions affecting one company or matters affecting the whole country. 
• This has been temporarily introduced into UK employment law in response to the unprecedented situation presented by the COVID-19 pandemic.
• The ability to furlough employees is designed to support employers who are severely affected by Coronavirus.

Q: Is this a contractural change?

• Yes; this is a change to your employment terms and conditions and a company would need written permission to place employees on Furlough.

Q: What are the rules regarding working while Furloughed?

• The Government has stated that, once you are on furlough, you will not be able to work for the employer who has furloughed you. 
• The rules state as follows:
  • You cannot make money for your employer or a company linked or associated to your employer
  • You cannot provide services to your employer or a company linked or associated to your employer
• You may work for an alternative employer who has not furloughed you or is needing temporary staff.
  • Check your contract of employment before undertaking any new employment as this may be a breach of your terms and conditions
• In many employment contracts, there is either an express or implied term that the employee should loyally and faithfully work for that employer and not work elsewhere.

Q: I own my business; can I pay myself Furlough?

• If you pay yourself a PAYE salary, then you are covered under the furlough scheme.
• The scheme does not apply to dividend payments to a director
• Shareholders who are paid partly or mainly in dividends will only be covered to the extent that they receive PAYE earnings.

Q: What is the length of time I can be furloughed?

• The minimum furlough period is three weeks
• The scheme is set to run from 1 March to 31 October 2020
• You can be put on and off the scheme throughout the four-month period as long as it if for periods of three weeks
• Many employers are rotating staff from working and furloughed to ensure they have a skeleton staff working and the system for choosing staff is fair.
• If you are not shielding but you are furloughed, you will be expected to return to work at some point providing a redundancy situation does not arise
• From August 2020 furloughed workers will be able to return to work on a part-time basis with employers being asked to pay a percentage towards the salaries of their furloughed staff.
• The employer payments will substitute the contribution the government is currently making to ensure that the staff still receive 80% of their salary up to £2,500.
• No detail has been announced yet as to the system to be used after 31 July 2020; whether the pro-rata reductions will automatically be applied to the part-time hours worked

Q: What will I get paid while furloughed?

• You will be entitled to 80% of your normal salary up to £2,500
• Your employer can claim this amount back from the government scheme
• The extra 20% is discretionary and would only be paid if the business could sustain the payments
• Most businesses are not paying more than the 80% statutory furlough salary
• National Minimum Wage rules do not apply to furloughed employees

Q: What will be included in the 80% furlough salary or £2,500 furlough salary?

• When working out the 80%, the following should be included:
  • Regular Wage
  • Variable PAYE wage
  • Fees
  • Company bonuses
  • Company commissions
• The following payments are not included:
  • Discretionary bonuses
  • Discretionary commission
  • Tips
  • Tronc shares
  • Non-cash payments such as health insurance
  • Use of company vehicle

Q: Will I still pay my pension contributions?

• Yes; pension deductions will be taken when payroll is run in the same way as normal

Q: What happens to my annual leave when on furlough?

• If furloughed workers do not book any holiday time while they are furloughed, their statutory minimum holiday entitlement of 5.6 weeks per year will accrue as normal.
• Employers can ask that any contractual (as opposed to statutory) holiday is not accrued during the furlough.
• Any holiday booked during furlough and should be paid at 100% of their salary
• Some employers may ask employees to take some holiday during this period, so they do not have too many staff wanting to take holidays when they are trying to return to normal working

Q: Can an employer ask me to train while I am furloughed?

• You are entitled to undertake training while furloughed
• If your salary falls below NMW while furloughed; the employer is expected to ensure that NMW is paid for any hours training
• Training is only permitted if it doesn’t involve employees providing a service or generating revenue for or on behalf of the business

Q: Can I continue to network while I am furloughed?

• Networking is used for the following:
  • Promoting businesses
  • A personal platform for employees to network with people they wouldn’t normally associate with
  • Raise their personal profile
  • Post about industry or sector matters of interest
  • Seek other jobs
  • Promote their employer’s business by promoting activity
  • Used as a direct sales approach
• If your networking promotes a business or is a direct sales approach, then the HMRC could state that the terms of furlough have been breached.
• As explained earlier, the Furlough rules state as follows:
  • You cannot make money for your employer or a company linked or associated to your employer
  • You cannot provide services to your employer or a company linked or associated to your employer
• Networking events provide a timely break from the lockdown routine and keeps us in touch with our friends and colleagues.
• This is good for our mental wellbeing and can be a great support in these difficult times
• If you are furloughed you may join in with video networking but do not talk about your business; keep it on a social level to be on the safe side.

Q: What can we do to support those who are furloughed?

• We can support our work colleagues, business connections and family and friends who are furloughed by chatting, keeping in touch, meeting over Facetime or WhatsApp for a glass of wine or a coffee, just to say hello, how are you?
• If they are self-isolating or shielding – do they need anything?
• We can still share ideas and knowledge and support each other through this crisis just as we do normally
• This is the time to start planning how we manage our businesses out of this crisis and get things prepared to ‘hit the ground running’ when the restrictions start to be lifted.
• Just remember….. This Situation Will Pass

If you have any questions or concerns regarding the issues raised in this article please contact Jo on 01636 701386 or complete our contact form to book a free one-hour consultation with Joanne Ferguson.

Article last updated: 02 June 2020. This article about the UK’s furlough scheme will be updated regularly to include all the latest information.