Officially opened to applications on 20 April, the furlough scheme is designed to put people on temporary leave during the coronavirus outbreak, so companies aren’t forced to make mass redundancies.
You will have seen in the news last week that the furlough scheme has been extended until October 2020, but this comes with a number of significant changes for businesses.
We take a look at how the scheme works, who is eligible and what these new changes mean.
What is the furlough scheme?
Also known as the Coronavirus Job Retention Scheme, it enables companies to temporarily change an employee’s status to ‘furloughed worker’, which in effect puts them on leave while they stay on the payroll.
The government is paying grants to cover 80% of wages up to a maximum of £2,500 per employee per month. The employer can then choose to top up their wages to 100%, but this isn’t compulsory.
Who is eligible?
This scheme is available to all employers who use the PAYE payroll from 28 February 2020, including:
- those who do casual work
- those who have zero-hours contracts
How can businesses apply?
Firstly, you should check if you are eligible for the scheme and if you are, which employees you can put on furlough. You will then need to work out 80% of your employees’ wages before claiming them online.
Furlough covers overtime and commission payments built into an employee’s salary, but not optional bonuses or tips.
If you need help working out how much to pay employees who don’t receive set amounts each month, please get in touch and we can take you through the process.
Claims take about six working days to process and any money claimed must be used to pay your employees or to cover their national insurance or pension payments.
What does it mean for an employee who has been furloughed?
Full-time, part-time workers and those on flexible, zero-hour or agency contracts can all be furloughed. They must be furloughed for at least three weeks and can be furloughed more than once.
All employees will have exactly the same employment rights as before, so will still be eligible for statutory sick pay, and those on maternity leave etc, will continue to receive statutory pay from the government.
Currently, people who have been furloughed cannot do any work for their employer, but can take on voluntary work.
What changes are being made to the furlough scheme?
From 1 July, flexible furloughing is being introduced, which allows an employer to bring furloughed employees back part-time. Each company can decide what hours they want employees to work and whether they want their staff to work shift patterns.
The company will pay the normal wage for any hours worked. Any hours not worked will continue to be covered by furlough pay, so employees will receive 80% of their normal wage.
From August, employers will start to pay national insurance and pension contributions again. Then in September, employers will pay 10% of their employees’ salaries, which will rise to 20% in October. The scheme will come to an end on 31 October 2020.
What dates do I need to know about?
The furlough scheme will close to new entrants on 30 June 2020. This means, from this point forward, employers will only be able to furlough staff that they have furloughed for a full 3 week period prior to 30 June.
So, if you want to furlough any staff for the first time, you must do it by 10 June to be eligible for the scheme.
Further guidance on flexible furloughing will be published on 12 June.
Want to understand more about the furlough scheme?
We are going through an incredibly challenging time and these recent changes to how the furlough scheme works can be stressful and confusing.
If you do have any questions about the impact on your business, please get in touch.
We’re here to provide advice and guidance on how to navigate the current situation and help you do the best thing your business.