What Is a Furloughed Worker?

What Is a Furloughed Worker?

We take a look at the new Coronavirus Job Retention Scheme and the process to follow if UK business owners find that they must furlough their employees

By The Fleximize Team

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:

  1. An employer not being able to cover staff costs due to economic hardship caused by the coronavirus pandemic.
  2. An employer not having a workload to allocate to an employee during the coronavirus pandemic.

The employee must be on the business' 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 employment status as they had previous to being made a furloughed worker, although they may be asked to undertake reasonably amended duties as required by the business at that time.

It's also important to bear in mind that if employers are already receiving public funds, they are expected to use them to cover staffing costs (such as wages) rather than also applying for the Coronavirus Job Retention Scheme.

What is the Coronavirus Job Retention Scheme (CJRS)? 

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. 

How CJRS works

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. 

From 1st July, employers can ask employees to work part time while on furlough. Employers will be able to claim for the hours not worked through the CJRS. Employers will need to report and claim for a minimum period of a week. 

From 1st August, the government will pay 80% of wages up to £2,500. Employers will have to pay National Insurance Contributions and pension contribution for each employee. 

From 1st September, the government will pay 70% of wages up to a cap of £2,187.50. Employers will need to pay National Insurance and pension contributions and 10% of wages so that the employee still receives 80%. 

From 1st October, the government will pay 60% of wages up to a cap of £1,875. Employers will need to pay National Insurance and pension contributions and 20% of wages so that the employee still receives 80%. 

The scheme has been extended to run until the 31st October 2020. However the scheme will close for new entrants from 30th June 2020. After this date employers can only furlough employees that have been furloughed for a minimum of 3 weeks prior to 30th June. 

How does a business classify an employee as furloughed? 

Businesses will need to assign their employees as furloughed and keep them employed by the business. 

Please note that claims can only be made for employees where the employer has notified the HMRC through an RTI submission notifying payment in respect of that employee on or before 19 March 2020. A Furlough Grant claim can only be made once every three weeks. For that reason, furloughed employees must be furloughed for a minimum of three weeks. Employees can also be furloughed more than once. There is no maximum or minimum number of employees who can be furloughed.

For a business to access CJRS 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. The employer can select who to furlough but must be careful not to discriminate. Employees cannot demand to be furloughed.

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 choice. If the salary is reduced, workers may be eligible for support through the benefits 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. 

You can find more information about the Coronavirus Job Retention Scheme and how to furlough staff here.