Coronavirus: Payroll 'Furloughing'

There are lots of questions about 'Staff Furloughing'.

 

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Here's what you need to know.

All UK employers can access the scheme (e.g. limited companies, sole traders, LLPs, charities etc).

• The scheme is designed to help employers retain those employees who would be otherwise “laid off”, by which we understand to mean made redundant or put on a period of “lay off” (an employment law term meaning a temporary period when employees are required to take unpaid leave because of a downturn in work).

• Employees will have to be designated by their employers as “furloughed” and notified of this designation.

• Furlough Leave has to be agreed between employer and employee. In other words, the employee cannot simply choose to be furloughed and the employer cannot furlough an employee without their agreement.

• However, if employers ask employees to agree to Furlough Leave, if faced with the choice of being furloughed (and receiving 80% of pay up to a specified cap) or being laid off without pay or made redundant, employees are likely to choose the furlough option.

• The vast majority of contracts of employment will not contain the right of employers to put employees on Furlough Leave. Therefore, employers wanting to make use of the scheme will have to obtain employee consent to vary their contracts of employment to allow the Furlough Leave.

• Whilst on Furlough Leave, employees can be paid 80% or 100% of salary. The Government will reimburse the employer 80% of salary up to £2,500 per month for each employee.

• The employer can choose to make up the remaining 20% of salary themselves. If they decide not to do this or are not in a position to do this, they should make it clear that the employee also consents to a deduction to their salary of 20%.

• In order to participate in the scheme, the employer should submit information to HMRC about the employees in question and details of their earnings via a new online Portal.

• HMRC will reimburse 80% of employment costs (thought to include employer pension contributions and employer national insurance contributions) up to £2,500 per employee per month.

• To qualify the employee must not carry out any work for the employer for the furlough period.

• This could cause some employee relations issues if some employees are not working and are receiving 80% of salary and others are having to work as normal. This will require careful and sensitive management by the employer.

• The scheme could also be open to abuse by unscrupulous employers claiming that staff are furloughed when they are, in fact, still working.

• The scheme will run for three months from 1 March 2020 but the Government has said it will be extended if necessary.