With the pressure for employers mounting due to the spread of coronavirus in the UK, we take a look at the new Coronavirus Job Retention Scheme and what it means to furlough a worker.
What is a furloughed worker?
A furloughed worker is an employee that has been asked take a compulsory leave of absence. This is due to:
- An employer not being able to cover staff costs due to economic hardship caused by the coronavirus pandemic
- An employer not having a workload to allocate to an employee during the coronavirus pandemic
The employee must be on the businesses PAYE and will be asked to stop working, but not made redundant. When the time comes for the employee to return to work, they will return with the same job status as they had previous to being made a furloughed worker.
Under the Coronavirus Job Retention Scheme employers will be able to claim 80% of employees’ salaries back.
What is the Coronavirus Job Retention Scheme?
With many businesses having to shut in line with the UK Government's guidelines during the coronavirus pandemic, the Chancellor Rishi Sunak has set out a package of support measures to help SMEs and other businesses through this period of disruption.
Included in this package is the Coronavirus Job Retention Scheme. Under the scheme, all UK employers can access support to help pay part of their employees' salaries to prevent employees having to be made redundant. The scheme will allow employers to claim 80% of the furloughed employee's salary back from the Government while they are furloughed workers - up to a maximum of £2,500 per month per employee.
The scheme will run for an initial three-month period from 1st March 2020, and may be extended.
How does a business classify an employee as furloughed?
For business owners to be able to claim 80% of the employee's salary back under the Coronavirus Job Retention Scheme, businesses will need to assign their employees as furloughed and keep them employed in the business.
For a business to access the Scheme they must:
1. Talk to all employees that they wish to classify as furloughed workers and make their intentions clear. This must be done in line with their contract of employment.
2. The employer must outline that the furloughed worker will be kept on the employer’s payroll and remain employed while furloughed.
3. It must be made clear that the employee isn't being made redundant. No work must be undertaken by the employee for the employer while they have furloughed status.
4. Employees must be informed if the employer will fund the salary difference while they are furloughed. This is the employer's choose. If the salary is reduced, workers may be eligible for support through the benefit system.
5. Employers must keep employees informed while they are furloughed and identify when they will be due back at work as soon as this is known.
6. To access the Scheme, businesses will need to submit the information of all employees that have been furloughed and their earnings to the HMRC.
More details will be announced shortly on how to submit this information. Please regularly check the gov.uk website for updates.