Everything You Need To Know About Furloughing

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    One of the biggest concerns that we have found small to medium-sized businesses to be currently facing, is the question of how they are going to afford to continue to pay workers who either have to stay home and cannot carry out any work whilst there, or whose workload has ground to a halt due to the coronavirus outbreak.

    Usually, in such a situation of financial struggle, a business would make some employees’ redundant or lay them off temporarily to help reduce their overheads; however, given the extreme circumstances that we are currently in, the government recently shared a variety of financial support schemes for businesses and employers to help reduce the number of workers who will face unemployment and the number of businesses that may go under.

    One such scheme is the Coronavirus Job Retention Scheme, also being referred to as Furloughing.

    What is the Coronavirus Job Retention Scheme?

    The Coronavirus Job Retention Scheme aims to help businesses retain their employees through a period of uncertainty and potential loss in revenue.

    The scheme is for UK businesses who would have had to lay off workers due to financial struggles or a downturn in work during this crisis. Instead, the government are offering to pay businesses 80% of their employees’ wages so that they can keep them employed and on their payroll.

    How does the Coronavirus Job Retention Scheme work?

    What we know about this scheme so far is that:

    • Employers will be able to claim back 80% of their furloughed workers’ salary, up to a cap of £2,500 per month per employee – this does not include any non-monetary benefits
    • Employers can claim back 80% of fees from HMRC as well as compulsory commission and past overtime on top of their employee’s basic salary
    • The scheme will run for at least 3 months and can be backdated to the 1st of March 2020
    • The scheme will be open to workers who were in employment on the 28th of February 2020
    • Employees can start a new job while on furlough, subject to their employment contract
    • Employees can be furloughed multiple times, i.e. they can be furloughed, brought back to work and then placed on furlough again (each furlough period must be at least three weeks – although it can be longer if required)

    As a business, it is up to you, and your financial capability, as to whether you pay the remaining 20% of the salary to top this up to full pay. This will also need to be made clear to the furloughed worker in their letter so they are aware that their wages may decrease during this period.

    If this is to be the case, then you can refer them to support being provided by the welfare system, including Universal Credit.

    You will need a copy of this letter for when you make your claim via the HMRC payment portal so that you can be reimbursed the 80%

    When should/can I furlough staff?

    There are several reasons why you may decide to furlough some, or all, of your employees during the coronavirus outbreak – the main one being that they are simply unable to work from home or go on site, so cannot do any work whilst the social distancing restrictions are in place.

    You may also find that there isn’t enough work for your employees to do as demand drops, or you may have some financial worries due to a decline in revenue and furloughing your staff will help you cut down on expenses without having to make staff redundant during this difficult period.

    The scheme has been put in place to support employers and protect employees through this uncertain time and should be used with this purpose in mind.

    It has also recently been announced that if an employee is forced to self-isolate because they are vulnerable themselves and therefore shielding, or living with someone who has symptoms or is shielding, or they have children at home to care for, or any other carer responsibilities at this time, then these people can be furloughed as an alternative to putting them on dependent care leave or making them redundant.

    How do I access the Coronavirus Job Retention Scheme?

    In order to access these funds, you will need to do the following:

    Change the status of affected employees

    The employees who would have, essentially, been made redundant will, instead, need to have their employment status changed to ‘furloughed worker’. This means that the worker is still on the company payroll although they cannot carry out any work for the business, including answering calls or responding to emails.

    Company directors can also be furloughed and still perform their statutory duties, but no other work for the company.

    In order to change their employment status, you will need to inform the employee of this change in the form of a letter.

    In this letter, you should clearly explain why this is taking place, outline what it means to be a furlough worker and address the alternative options should they object to this change, which would be being made redundant or laid off.

    You will need to keep a record of this written notice for five years.

    You also need to be aware that changing the status of employees remains subject to existing employment law, and it may be subject to negotiation depending on the contracts of employment that you have drawn up.

    Submit information to HMRC

    Although the online portal is yet to be set up at the time of writing this blog, you will need to submit the details of any furloughed workers, and their earnings, to the HMRC through this new portal when it is ready.

    It has not yet been made clear what specific details they will need.

    How long will the Job Retention Scheme be in place?

    Currently, it has been announced as a three-month long scheme; however, this may be extended and is all dependent on how we cope with the coronavirus outbreak and what restrictions remain in place over the next few months.

    The aim is that this scheme will enable businesses to retain all their employees so that, once things are back on track financially, they can change their employment status back to whatever it was before becoming a furloughed worker.

    However, you may find that you still need to make some workers redundant even once the coronavirus outbreak has passed as this scheme will only be in place for so long.

    How do I pay my furloughed workers in the meantime?

    As you cannot apply for this grant until the portal is ready, and it is described as a reimbursement, your business may face short-term cash flow issues in paying these furloughed workers.

    In order to help with this, the government have also set up a Coronavirus Business Interruption Loan to support SMEs during this pandemic.

    This scheme is constantly being assessed and updated to ensure that the terms and conditions are clear to all employers, but this is the latest on the scheme at the time of writing this article (6th April 2020).

    As part of our HR support for clients, we can provide more in-depth guidance documents as well as letter templates to help implement changes in employment status to furlough workers.
    This will ensure that you are compliant with the current laws and legislations and that you are fully informed when it comes to your responsibilities, and the financial support available to you, during this coronavirus outbreak.
    For more details on how you can become a Guardian Support client and have full access to our HR services, call us today on 0845 2626 260 or email [email protected]

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