Furlough: What It Means, UK Statistics & Employee Rights6 May 2020
In late March, thousands of businesses across the UK were forced to close almost overnight due to the coronavirus crisis and government mandated lockdown. As many employers are struggling financially, this has left thousands of employees without work or a means of income.
With businesses struggling to survive, the pandemic has resulted in more than one million UK workers being furloughed, according to Chancellor of the Exchequer Rishi Sunak. As the crisis continues, one in four workers, which equates to over nine million people, are expected to be furloughed.
A furloughed employee means they’re still employed by their employer and are on payroll but have been asked to stop working temporarily. Typically, they wouldn’t be receiving pay during the furlough period.
When an employee is furloughed, they should be informed by their employer by a written letter explaining what they’re doing and why. It’s also necessary for an employer to receive written consent of the furloughing from their employees.
What is the Coronavirus Job Retention scheme?
Because of the pressure and financial strain felt by numerous UK businesses, the Government announced a raft of COVID-19 grants and support to help them cope, including the Coronavirus Job Retention Scheme.
With an aim to avoid redundancies, the scheme will pay 80% of furloughed workers’ wage bills up to £2,500 per month backdated from 1 March until the end of June. The scheme will also cover employer National Insurance payments, in addition to pension contributions for the minimum mandatory contribution of 3% of an employee’s earnings.
Employers need to decide whether they will pay the remaining 20% of furloughed workers’ wages and any additional pension contributions they were previously paying. However, they are not legally required to.
Who can be furloughed through the scheme?
Through the Coronavirus Job Retention Scheme, employers can claim for staff who were on their PAYE payroll on or before 19 March 2020. PAYE payroll submissions need to have been completed before that date through HMRC’s government gateway portal. This rule is causing directors with annual payroll schemes and new employees who first got paid after this date to fall through the gaps.
The employees who are eligible to be furloughed through his scheme can be on any type of employment contract, including:
Full-time and part-time employees
Flexible and temporary workers
Workers on zero-hour contracts
Only employees who are no longer carrying out any work can be furloughed through the scheme. However, there is some flexibility with directors and managers still being allowed to carry out statutory duties, such as filing annual reports.
Furloughs need to last at least three weeks, but employees can be moved in and out of furlough. An employer can also re-employ recently departed staff, including redundancies, who left the company on or after 28 February 2020, in order to put them on furlough and help them be eligible for this scheme. However, they would have still needed to be on the company’s HMRC PAYE payroll submissions before 19 March 2020.
Note: As amendments can’t be done online to PAYE submissions through HMRC’s government gateway portal, take extra care when calculating claims for furloughed employees. Accountants who are PAYE agents can file for you to ensure it’s done correctly.
How many UK businesses are using the job retention scheme?
Since the scheme was announced, two thirds of companies in Great Britain have already signed up for the government’s job retention scheme. Additionally, one in three businesses have furloughed 75% of their workforce, according to a survey by the British Chamber of Commerce. The Resolution Foundation, a think tank, projects at least a third of employees in the private sector will be furloughed or unemployed if this pattern continues, and that is estimated to amount to seven to 10 million workers.
Note: To find out if your business is eligible for the Coronavirus Job Retention Scheme, there are a few steps you need to follow. Firstly, prove that your employees can’t do their jobs because of the coronavirus measures in place. Next, give notice to the employees who are being furloughed. Lastly, submit information about the furloughed employees to HMRC and set up a way to be reimbursed. Get in touch with us on 0207 043 4000 or email@example.com if you’d like any help at all with this.
Employees rights during the coronavirus crisis
There are a range of rights employees are entitled to, and some employment laws are different during the coronavirus pandemic. For example, employees are now entitled to statutory sick pay from day 1:
If they display coronavirus symptoms
Have been advised to self-isolate
If they are in the same household as someone who has displayed coronavirus symptoms
Note: Small and medium sized businesses with less than 250 employees will be able to reclaim statutory sick pay. The repayment will apply for 14 days per eligible employee.
Employers must also pay full holiday pay if their employees take holiday during the furlough period. Furloughed employees will still build up paid holiday and can carry up to 4 weeks of leave into the next two years. Those who are typically entitled to take bank holidays will still be able to take these while being furloughed, unless the employer agrees something different.
It’s important employment laws are followed and managed as new issues continue to arise during the coronavirus crisis. Businesses are advised to get employment law advice from employment law solicitors to be compliant with the latest guidance. Our friendly team of employment law solicitors are happy to help answer any questions or concerns and guide your business through these troubling times.
How Accounts & Legal can help
As the situation revolving around the coronavirus crisis continues to change quickly, it’s important you know how to properly furlough staff, manage employment law issues, and secure any support you’re eligible for. Let us help you with all your employment law issues.
At Accounts & Legal, we provide personal and practical accounting and legal advice for small and medium sized businesses and self-employed workers. For more information on the legal and accounting services we offer, give us a call on 0207 043 4000 or get an instant quote here.