Social Good Blog Post

Furlough FAQ: What does it mean for employers?

hand holding paper aeroplane saying stay home

The Government Job Retention Scheme and the concept of ‘furlough’ is a new and, understandably, confusing topic for employers.

We wanted to answer some of the questions we have been getting from employers regarding their responsibilities to staff that have been furloughed.

This guide has been created in partnership with Activate-HR, a management consulting company based in Scotland.

What is furlough and what does it mean?

The Coronavirus Job Retention scheme has been introduced by the government in response to the Covid-19 pandemic. It allows employers to ‘furlough’ any staff on a PAYE scheme.

Furlough means that an employee is required to take a compulsory temporary leave of absence where they are unable to attend or undertake any work for their employer. The employee is retained on the payroll during the furlough period.

Payments can be backdated to 1st March 2020 as long as employees met the eligibility criteria at the time. The scheme will run until at least 30th June 2020.

The government will support furloughed employees by providing 80% of their salary, up to £2,500 a month. The employer can supplement this support by making it up to the full salary, but they are under no obligation to do so.

Why has the government introduced furlough?

Furlough is designed to support organisations that have been affected by the Coronavirus pandemic and are a direct alternative to layoff or redundancy.

How do I furlough an employee?

If you have decided to furlough an employee, you should write to the employee confirming that they have been furloughed and this should be kept as a record for at least 5 years.

You will have to create a furlough agreement between yourself and your employee which lays out:
– The date furlough starts
– How much the furloughed employee will be paid
– When the situation will be reviewed
– How the employer and employee will stay in touch during furlough

As an employer, do I need to get an employee to agree to furlough?

Unless there is a term allowing furlough/short-time working/temporary layoff in employees contracts that stipulates payment for hours worked, you will need to get agreement from employees to designate them as furloughed and reduce their pay (If you are not topping up the 80% to 100%). The agreement should be confirmed in writing.

When does the furlough start?

Furlough starts from the day after the employee finishes work to the day before they return to work.

Which employees are eligible for furlough?

Any employee who has been added to the PAYE payroll on or before the 19th of March 2020. Employers will not be able to reclaim expenses for employees who were added to payroll after this time.

How do I claim expenses for furloughed staff wages?

Any employee who has been added to the PAYE payroll on or before the 19th of March 2020. Employers will not be able to reclaim expenses for employees who were added to payroll after this time.

How do I claim expenses for furloughed staff wages?

Employers will be able to claim this support through an online portal which went live on April 20th.

In order to furlough a member of staff, you will need:

  • Your employer PAYE reference number
  • The number of employees being furloughed
  • National Insurance Numbers for the furloughed employees
  • Names of the furloughed employees
  • Payroll/employee number for the furloughed employees (optional)
  • Your Self Assessment Unique Taxpayer Reference, Corporation Tax, Unique Taxpayer Reference, or Company Registration Number
  • The start and end date of the claim period
  • The amount claimed (per the minimum length of furloughing of 3  onsecutive weeks)
  • Your bank account number and sort code
  • Your phone number

You will need to calculate the amount you are claiming yourself and HMRC retain the right to retrospectively audit all claims.

If you are furloughing less than 100 staff you will have to manually enter their details into the system, if it is more than 100 staff you will be asked to upload a file (.xls .xlxs .csv .ods) with this information instead.

As an employer what can I reclaim?

You can reclaim 80% of employees wages up to a maximum of £2,500 per month, plus Employer NI contributions and Employer statutory pension contribution of 3%. The claim for Full and Part-time employees is 80% of employee wages as at the 19th of March 2020. Employers are unable to reclaim for any increase in the national minimum living wage. If an employee’s pay varies this should be an average of the monthly earnings over the past 12 months. If the employee has less than 12 months’ this should be calculated as 80% of the average monthly earnings.

How should I contact my staff during furlough?

Details of how you will stay in contact should be outlined in your furlough agreement.

Can my employees volunteer while they are furloughed?

If your employees are furloughed, they can volunteer for a different organisation.

According to government guidance: ‘a furloughed employee can take part in volunteer work, if it does not provide services to, or generate revenue for, or on behalf of your organisation or a linked or associated organisation.’

In short, they can support other organisations but they cannot engage in any work, voluntary or otherwise, for the company from which they are furloughed.

Can employees do paid work for another organisation while furloughed?

Yes, furloughed staff can work for another company and be paid for it as long as their employment contract allows and they get agreement from their main employer.

Any employer who takes on a new employee who is furloughed from another organisation should ensure they correctly complete the New Starter checklist form, completing Statement C.

I work in the public sector, can I furlough my employees?

It is expected that the majority of public sector organisations will not be furloughing staff as they will continue to provide essential public services.

Any public, or non-public sector which receive public funding for staff costs, and that funding is continuing, are expected to continue to use that money to pay their staff in the usual fashion.

However, it has been outlined that in a small number of cases, where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the response to the pandemic, it may be suitable for an organisation to furlough staff.

I work in the third-sector, can I furlough my employees?

Yes, any employer with staff on PAYE schemes can furlough their staff. However, as many voluntary organisations receive public funding, and have seen an increase in demand for their essential services recently, the answer is not definitive.

SCVO’s advice is that:

  • Organisations should not furlough staff that are specifically associated with a grant or contract that is still being paid
  • Organisations with mixed funding can furlough staff that are not funded by the public sector, or where the majority of funding/income for the position is not available.

When will my business be reimbursed?

HMRC has said that payments should be ready to be made by 30th April 2020. Payments should be processed within 4-6 days of claiming.

If your company is struggling with cash flow, you can aim to solve this by using the deferral of VAT payments which do not have to be paid until March 2021, or by using the Coronavirus Business Interruption Loan Scheme.

Can furloughed staff be rotated?

The minimum amount of time a member of staff can be placed on furlough is 3 weeks. However, the latest guidance states that employees can be furloughed multiple times. So, it is ok to rotate staff who are furloughed as long as each staff member is furloughed for at least 3 weeks and they are immediately removed from furlough upon returning to work.

You cannot redeploy a furloughed employee into a different department.

What can I reclaim for an employee returning from maternity leave who is being placed on furlough?

Employers should claim 80% of the employee’s wage prior to them being on maternity leave.

How long will the furlough scheme run for?

The scheme will run until at least 30th June 2020.