Furlough – Most frequently asked questions answered!

As the back-to-work strategy goes into action along with the ease of lockdown, you may be wondering what this means for those on furlough.

Read on for the full and comprehensive guide on everything you need to know about the rules and regulations of The Coronavirus Job Retention Scheme.

What is Furlough and Who is Eligible?

This section explains what furlough is and who qualifies for it under the Coronavirus Job Retention Scheme (CJRS).

Definition of Furlough

The Coronavirus Job Retention Scheme (CJRS), commonly known as furlough, was introduced by the UK Government to help reduce redundancies during the pandemic. The scheme allows employers to receive financial support to pay a percentage of their employees’ wages. Currently, the government reimburses 80% of furloughed workers’ wages, up to a limit of £2,500 per month.

Eligibility Criteria

To be eligible for furlough, employees must meet the following criteria:

• Be a UK employee.
• Be enrolled in the PAYE scheme on or before February 28, 2020.

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Flexible Furlough – How It Works

This section covers how flexible furlough works and the changes made to the scheme starting July 1, 2020.

How Flexible Furlough Works

As of July 1, 2020, employees can return to work on a part-time basis while still being furloughed. Employers can claim for the hours employees do not work, based on the hours they would normally have worked during that period.

Need for a New Agreement

A new written furlough agreement must be in place before employees can begin working under the flexible furlough scheme. Both the employer and employee must sign this new agreement, confirming the rules and terms of flexible furlough.

Duration of Flexible Furlough

Employees can be furloughed for any amount of time, including multiple occasions. However, if an employee is re-furloughed after June 10, 2020, but before July 1, 2020, they must be furloughed for a minimum of three consecutive weeks. Claims for furlough payments must not overlap calendar months, and separate claims must be filed for different months.

Furlough Agreements and Payment of Salary

This section discusses furlough leave agreements and salary payment during furlough.

Furlough Leave Agreement

A Furlough Leave Agreement is a signed contract between the employee and employer that overrides the usual employment contract. This agreement should confirm any salary deficits during furlough and may also include a clause on when furlough leave will end, as well as a lay-off clause for future reductions in work.

Employer’s Responsibility for Salary Deficit

Employers are not legally required to pay the remaining 20% of an employee’s salary during furlough. However, they may choose to top up the salary to 100%, but this is not mandatory under the scheme.

Activities Allowed During Furlough

While on furlough, employees are not allowed to work or take on paid work. However, they may undertake unpaid training or voluntary work, subject to certain conditions. Employers must ensure that furloughed employees do not perform work that generates income.

Special Cases and Restrictions for Furlough

This section discusses special cases such as furlough for employees on long-term sick leave, maternity leave, apprentices, and agency workers.

Sick Leave and Self-Isolation

If an employee is on sick pay or self-isolating, they cannot be furloughed during that time. However, once their self-isolation or sick period ends, they can be furloughed.

Maternity Leave and Furlough

Employees on maternity leave cannot be furloughed. However, if they choose to return early from maternity leave, they can then be placed on furlough.

Furlough for Apprentices and Agency Workers

Apprentices are eligible for furlough, but employers must continue to pay at least the National Living Wage or National Minimum Wage, depending on the apprentice’s age and stage. For agency workers, if they are paid via PAYE, they are eligible for furlough. Agency workers must discuss furlough arrangements with their agency.

Furlough for Employers – How to Claim and Select Employees

This section explains the process for employers to claim under the furlough scheme and select which employees to furlough.

Selecting Employees for Furlough

Employers can choose which employees to furlough, though there are no strict criteria. Employees who were on the payroll on or before February 28, 2020, are eligible. Employers must be mindful of potential discrimination when selecting employees for furlough, especially with vulnerable groups.

How Employers Can Claim Furlough Payments

Employers can claim furlough payments through HMRC. The claim process involves submitting the PAYE reference numbers, the total number of employees being furloughed, the claim period, and the amount being claimed.

Reclaiming Wages for Reduced Hours or Pay Cuts

The furlough scheme only applies to employees who are not working. If staff are asked to work fewer hours or take a pay cut, employers cannot claim furlough payments for these employees.

Making Redundancies and Furlough Decisions

This section discusses the possibility of redundancies while employees are on furlough, and the rules for reactivating furlough after June 2020.

Redundancies During Furlough

Employers can make redundancies while employees are on furlough or after their return. However, if an employee is dismissed while on furlough, the furlough payments from HMRC will stop immediately.

Reactivating Furlough After June 10th

Employees who were furloughed for at least three consecutive weeks between March 1 and June 30, 2020, can be re-furloughed after June 10, 2020. If employees are re-furloughed before July 1, they must be furloughed for a minimum of three weeks.

Financial Implications and Changes to the Scheme

This section explains the financial costs for employers and the changes that will take place in the furlough scheme.

Cost Implications for Employers Starting August 1st

From August 1, 2020, employers can no longer reclaim National Insurance and pension contributions. From September 1, 2020, the government’s contribution will decrease to 70%, and employers will need to contribute 10% of the employee’s wages. By October 1, 2020, the government will contribute 60%, with employers covering 20%.

Expected Duration of the Furlough Scheme

The furlough scheme is expected to end on October 31, 2020. Changes to the scheme, including reduced government contributions, will be in effect as of July 1, 2020. Employers should ensure they are up-to-date with the latest changes.

Do You Need Legal Support?

If you’re an employer or an employee with questions about the furlough scheme, our expert employment solicitors are available to provide guidance on how to navigate these changes and ensure you comply with all regulations.

TAKEAWAY

The furlough scheme has been a vital lifeline for businesses and employees throughout the pandemic. However, with frequent changes, it can be difficult to stay on top of the latest updates. Make sure you stay informed about your rights and responsibilities, and seek legal advice if you’re unsure about any aspect of the furlough process.