5 Furlough FAQs: Explaining the Cornoavirus Job Retention Scheme

With the spread of Coronavirus causing havoc across the world, now more than ever businesses need to ensure they are watching costs and cutting back wherever possible. As part of that process many companies are looking at their workforce and considering what they can do to help them stay afloat. The government has launched several measures which may help your business, including the Coronavirus Job Retention Scheme.

But what does “furlough” mean? What is the Coronavirus Job Retention Scheme, and could it help your business?

1. What is the Coronavirus Job Retention Scheme?

The Coronavirus Job Retention Scheme provides support for all employers with a PAYE scheme to continue paying part of their employees’ salary for those that would otherwise have been laid off during this crisis. This applies to employees who have been asked to stop working, but who are being kept on payroll – “furloughed workers”.

Any large or small employer can apply to put workers on temporary leave or “furloughed” status. The government will then pay them cash grants of 80% of their wages up to a cap of £2,500, provided they keep the worker employed.

2. How do I access the scheme?

All UK organisations can self-certify that they have furloughed employees. The scheme will cover the cost of wages backdated to March 1st. All UK wide employers with a PAYE scheme will be eligible, including the public sector, local authorities and charities.

However, if your organisation receives public funding already, then it is expected that this public funding will be used to continue to pay employees and that they will not be furloughed.

The scheme will be open initially for at least 3 months, but will be extended for longer if necessary. There is no limit on the amount of funding available for the scheme.

To access the Coronavirus Job Retention Scheme, employers will need to take the following steps:

  • Decide which employees to designate to furloughed workers. It is thought that the more process you can put around this to justify which employees you furlough, the lesser the risk and the better able you will be able to defend your decisions.
  • Discuss the situation with affected employees and designate affected employees as ‘furloughed workers,’ – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
  • Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required).

HMRC is working urgently to set up a system for reimbursement, and existing systems are not set up to facilitate payments to employers. If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.

3. How do we select those to be furloughed?

If you have a group of people who all do the same job and only need half of them, then you will have to apply fair and objective selection criteria in deciding who stays and who is furloughed. This would have to be carried out quickly and probably based on what skills you will need in the short term. So for instance if you need some of the sales force, you are going to select your best sellers to stay as they have the best chance of making sales. Bear in mind that decisions must not be discriminatory.

4. As an employer, do we have to consult employees to furlough them and do we need the employee’s agreement?

Large employers must conduct collective consultation if furloughing 20 or more employees with a recognised union or, if there is no union, elected representatives. As redundancies are not being made, there is no need to wait for a certain period before furloughing employees. Details guidance on this can be found here

You will need to check your employment contracts. Some contracts have clauses which allow you to send home employees with or without pay if you do not have enough work. These are called “lay-off” clauses and are generally only found in employment contracts in industries such as manufacturing where they have peaks and troughs.

If you have such a clause in your contract you do not need your employee’s consent to furlough them. If you do not have such a clause then you need their agreement to send them home on reduced pay as you are effectively varying the contract. However, most employees faced with redundancy or a guaranteed payment at least up until 31st May 2020 are likely to agree.

5. Can an employee volunteer or do training whilst furloughed?

If furloughed, an employee cannot work for their employer during this period.

They can volunteer or train, provided that this does not involve the manufacture or creation of an item or part thereof that can yield revenue for the company, the provisions of services to the company, or the provision of any service that can yield revenue for the company. Firms can require workers to undertake training from home, provided it meets the above.

For more answers to your questions about the Cornoavirus Job Retention Scheme, or for help with your furlough process then please do get in touch.