COVID-19 The Furlough Scheme
The Government recently announced its plans to help businesses that are facing financial hardship due to the impact of COVID-19. The legislation supports businesses and helps them continue to pay their employees who are unable to work due to self-isolation or lock-down conditions. We answer some of the most frequently asked questions our employment teams have been receiving during this unprecedented time.
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What is Furlough?
This is another way of referring to the “Coronavirus Job Retention Scheme.” With many workplaces forced to close due to COVID-19, the Government have put in place grants from HMRC to cover your income if you’re temporarily sent home because there’s no work, or a lack of work or your workplace has closed or reduced its operations due to COVID-19.
This scheme is intended to keep people in their jobs for those who cannot carry out their normal operations due to COVID -19. It applies to every single employer in the UK, including but is not limited to limited companies, sole traders, charities. This is a temporary scheme in place for three months starting from 1 March 2020 but the government has said that it may be extended if necessary.
Am I eligible?
You’ll be eligible if you’re working on a full-time, part-time, casual, flexible, agency or zero-hours contract and you were on the PAYE payroll as of 19 March 2020.
If you were employed as of 28 February 2020 and on the payroll and were made redundant or stopped working for your employer after that and prior to 19 March 2020, you could appeal against your dismissal and you could ask your employer to re-employ you and furlough you, but they are not obliged to do so.
In order to qualify you have to have been on your employer’s PAYE payroll before or on 19 March 2020 and your employer has to have submitted a Real Time Information (“RTI”) on or before 19 March 2020. If you’ve just started work and you’ve not been paid yet (for example, you were due to be paid at the end of March), it may be that your employer has not yet submitted an RTI to HMRC on your behalf and this may affect your eligibility for furlough.
Foreign nationals are eligible for the scheme as grants under the scheme are not counted as ‘access to public funds’ and so it does not depend on which visa category you are in.
The scheme only applies if you’re being furloughed for a minimum of three weeks and doesn’t apply to situations where you continue to work or are put on reduced hours or reduced pay.
To be eligible you cannot continue working for your employer during a period of furlough. You and your employer must agree to you being placed on furlough and your employer has to confirm, in writing, that you’ve been furloughed for you to be eligible. In the event that you do not receive written confirmation you should ask for it. If you do receive written confirmation, it’s advisable to acknowledge this, in writing, by replying to your employer.
Other workers who are eligible include:
• Office holders
• Company directors
• Salaried members of LLP’s
• Limb workers
• Contingent workers in the public sector
• Contractors with public sector engagements in scope of IR35 off-payroll working rules (IR35)
• Employee transfers under TUPE and on a change in ownership
How much will I get paid through the Furlough Scheme?
The government will pay employers 80% of wages, up to a maximum of £2,500 a month for each furloughed employee and so this is what you should be entitled to as an employee under the furloughing scheme. You’ll still pay Income Tax, National Insurance contributions and any other deductions from the amounts you’re paid through the scheme.
Your employer could top up your wages to 100% but there’s no obligation on them to do so and this is at their sole discretion. However, you’re entitled to clarification that this is the case and an explanation as to why they are not paying the difference and you should query this if you think that you may be treated unfairly.
Once the government’s new system is available through HMRC (HM Revenue & Customs), employers will be able to make a claim for financial support. Payments will be made every three weeks. This is because three weeks is the shortest period a furlough can last.
How will my monthly wages be calculated?
For full-time or part-time employees who are on a salary, the amount you’re entitled to receive will be based upon your salary figure. For further clarification, you should speak to your employer about how they are calculating this.
In the event that the amount you’re paid fluctuates (e.g. agency workers) and you have been employed for a full year, you’ll be entitled to claim for the higher of either:
• The amount you earned in the same month last year;
• Your average monthly earnings for the last year.
If the amount you’re paid varies but you have not been employed for a year, your entitlement will be based upon an average of your monthly incomes from the date that you commenced employment.
For those that have been working for less than one month, your entitlement will use that month’s earnings as a guide and then make a pro-rata calculation (i.e. estimate your likely earnings based on the information they have).
If you would normally be receiving compulsory commission and consistent overtime, the grant that your employer receives will take this into account. However, the calculation will not take into account discretionary commission, payments or bonuses, benefits in kind and non-cash payments.
Who is responsible for paying me and what do I do if I am not receiving pay?
It will still be your employer’s responsibility to pay you and you will still be taxed on your income. In the event that you’re not being paid what you believe you’re entitled to, you should firstly raise this with your employer. Having done so, if you suspect that your employer may be abusing the scheme, you’re encouraged to report any potentially fraudulent behaviour to HMRC.
Examples of an employer abusing the scheme, would include you being asked to work whilst on furlough, making backdated claims that includes time that you did in fact work or where your employer is claiming on your behalf but not paying you what you’re entitled to.
What happens if I was made redundant or stopped working after 28 February 2020?
If you’ve been made redundant or stopped working on or after the 28 February 2020, your employer can re-employ you, put you on furlough and claim for your wages under the scheme. This applies even if you’re now re-employed after the 19 March 2020, provided you were on the 28 February 2020 PAYE payroll. If you’ve been made redundant during this time, we suggest asking that your employer re-employ you and place you on furlough in line with government guidance.
Can my employer automatically put me on the Furlough Scheme?
No. Your employer should discuss this with you first. Furlough is a change to your terms and conditions of employment and you should both be in agreement before it comes into effect.
Your employer should ensure they get your agreement to be put on the furlough scheme, unless it’s covered by a clause in your contract. You should review any document you’re being asked to sign or agree to in this respect and ensure you understand what you’ll be paid, when the furlough technically starts/started, when and how often it will be reviewed and details of who you can contact during this time to keep in touch during your furlough.
If you’re unable to reach an agreement with your employer about furlough, you should consider taking legal advice at an early stage, as ultimately your employer may then take steps to dismiss you.
What happens if I am apprentice?
If you’re an apprentice, your employer can furlough you in the same way as they do other employees. This doesn’t mean that your training has to cease, you’ll be able to continue to train whilst furloughed if the circumstances allow for it.
If you’re furloughed as an apprentice, your employer must pay you at least the Apprenticeship Minimum Wage/ National Minimum Wage/ National Living Wage depending on which is appropriate for the amount of time that you’re able to spend in training. You employer has a duty to cover any difference between the amount they’re able to claim through this scheme and the appropriate minimum wage to ensure that you’re not getting less than this.
Can individuals use the furlough scheme?
Yes, if you’re for example a nanny, your employer (as an individual) can use the furlough scheme provided that they’ve been paying you through PAYE and you were on the payroll on or before the 19 March 2020.
What happens if I am pregnant and due to start maternity leave?
In this instance, you’ll start your maternity leave as you would have done, however, if you’ve been placed on furlough or were off sick before this time, it’s possible that this may impact what you’ll receive on maternity leave and your Statutory Maternity Pay. You should discuss this with your employer as soon as practically possible.
What if I am returning from family related statutory leave (e.g. maternity, paternity, shared parental leave etc.)?
If you’re a full or part time employee who’s due to return to work having been on family related statutory leave, the grant that you’re entitled to should be calculated against your normal salary before tax and not what you received during your leave. If you’re due to return to work or have already returned to work but are now a furloughed employee, we would suggest clarifying this with your employer.
If you don’t have a set salary and your pay varies (e.g. you are an agency worker) your employer should calculate your entitlement using either:
• The amount you earned in the same month last year; or
• Your average monthly earnings for the last year.
I work in the public sector, can my employer furlough me?
As most public sectors are continuing to work and provide essential services in the wake of the COVID-19 outbreak, the government does not anticipate that this scheme will be used by a lot of public sector organisations. Where employers, public sector or otherwise, receive public funding for staff costs, that funding will continue and employers are expected to continue to pay their staff in the usual way, so any organisation receiving public funding should not need to furlough staff in the same way. However, some situations may arise where the staff cannot be re-deployed to assist with the coronavirus response and in this instance the scheme may be appropriate for some staff.
I have more than one job, can I still be furloughed?
Yes. You can be furloughed for each job you have. Each will be treated separately and the payment cap applies to the individual employer.
If contractually allowed, you’re permitted to work for another employer whilst on furlough. You should check your employment contract before working for another employer and you should consider discussing this with your employer.
Can I take holiday if I am furloughed?
Yes, you can request and take your holiday in the usual way but whether this leave is granted, will be at the discretion of your employer. You must get your usual pay in full, for any holiday you take.
Working Time Regulations stipulate that your holiday pay should be paid at your normal rate. In the event that your pay varied (e.g. agency workers), your normal rate will be calculated as an average of what you’ve received over the last year.
If you do take holiday leave whilst on furlough, it will be for your employer to make up the difference between what you’re receiving through the furlough scheme and what your normal pay is.
This includes bank holidays so for those who are furloughed who normally take the bank holiday as leave, your employer will either have to top up pay to your normal rate or give you a day of holiday leave in lieu. If you usually work bank holiday days then your employer can agree that any pay you would receive for these days is considered when calculating your wage for the purposes of the grant.
If you’re a furloughed employee, you’ll still maintain your holiday pay entitlement and you’ll continue to accrue any untaken leave as per your employment contract. There’s nothing to stop you from asking your employer to vary your holiday pay entitlement as part of your furlough agreement but most workers are entitled to 5.6 weeks’ statutory paid annual leave which they cannot vary to go below.
I am self- employed, can I be furloughed?
Self-employed workers may be eligible to receive financial support through the ‘Self-Employed Income Support Scheme’. If eligible, self-employed workers may receive a taxable grant of 80% of their average monthly income, up to a maximum of £2,500 per month. HMRC will contact self-employed workers directly if they’re eligible for the scheme.
What if my employer needs to close down the business or reduce my contracted hours?
In some situations, an employer might need to close down their business for a short time or ask staff to reduce their contracted hours. If your employer needs to do this, they should talk to you as soon as possible and update you throughout any period of closure.
If you’re still working but either your hours or pay has been reduced, you’ll not be eligible for the furloughing scheme.
What if my employer has put me on unpaid leave?
If you’ve been put on unpaid leave since 28 February 2020, your employer is able to put you onto the furlough scheme instead. Like other furlough employees, you would be entitled to at least 80% of your normal salary, up to the monthly cap of £2,500.
If you were put on unpaid leave before 28 February 2020 you can only be put on the furlough scheme if a return date has been agreed. Your entitlement to pay under the furlough scheme will begin on the date you were due to return.
Can I be furloughed if I am self-isolating or on sick leave?
The Coronavirus Job Retention Scheme is not intended for short term-absences caused by sickness and so this should not be a factor in your employer’s decision to furlough you.
However, you can be furloughed as your employer is still entitled to furlough you, even if you’re unwell, if this is for business reasons. In this instance, you would be classed as a furloughed employee and you would no longer receive sick pay.
If you’re a vulnerable person being shielded or absent from work due to long-term sick leave, your employer is entitled to furlough you but it’s at their discretion to do so.
If you’re returning from time off for sick leave, you’ll be eligible to be furloughed. Your entitlement should be calculated against your gross salary that you received before going on sick leave and not what you were receiving whilst on sick leave.
If you’re not on a fixed salary and your pay is variable, your employer will calculate how much you’ll be entitled to using either:
- The amount you earned in the same month last year; or Your average monthly earnings for the last tax year.
What happens if I become sick whilst I am furloughed?
In the event that you become ill when you’re furloughed, you’re entitled to be paid at least statutory sick pay plus any contractual sick pay you may be entitled to through your contract. Whether you remain on your furloughed rate or receive statutory sick pay will be up to your employer. If your employer decides to no longer have you on the furlough scheme, and instead moves you onto the statutory sick pay scheme, the employer will be responsible for paying you but it may be entitled to a two week statutory sick pay rebate.
What if I am shielding or have caring responsibilities?
In the event that you’re unable to work because you’re shielding or need to stay at home to protect someone who is shielding, you can be furloughed.
Similarly, if you cannot work because you’re caring for someone directly affected by COVID-19, you can be furloughed. This includes those employees who need to stay at home to look after their children.
What if I do not want to go on furlough?
You may not want to go on furlough as you feel that there is work for you to do and you want to carry on receiving your full salary. This will be particularly desirable if your average monthly wage is higher than the £2,500 cap. If this has been suggested, we recommend expressing your concerns with your employer in the first instance and seeing if there’s any other work you can take on so as to avoid being furloughed. Ultimately, this will be a decision for your employer based on the businesses needs and if you refuse to be put on furlough you may be at risk of termination of your employment or redundancy, depending on the circumstances. If you do not feel that your employer is being fair, it would be worth seeking legal advice.
What if I am on a fixed term contract?
You can still be furloughed if you’re on a fixed term contract. It would not be a breach of the scheme should your contract be extended and/or renewed during the furlough period. In the event that your employer does not renew or extend your contract, they will not be able to furlough you. If you know that your fixed-term contract is coming to an end, you should speak to your employer about renewing and extending this as soon as practically possible.
What if I am an agency worker?
If you’re an agency worker and paid via PAYE, you can be furloughed and receive support, even in the event that you’re employed by as separate umbrella company.
In this instance, the agency as the deemed employer and the agency worker should agree to the furlough scheme. As is the case with employees, you would not be able to carry out work for or on behalf of the agency that has furloughed you, nor, should you carry out work for any of the clients of the agency.
If it’s the separate umbrella company that oversees PAYE, it will be for them to act as the employer and decide whether they want to furlough the worker or not.
Can I undertake volunteer work if furloughed?
Yes, you can do volunteer work while you’re furloughed as long as it does not generate revenue or provide services for your employer or linked to your employer in any way.
Will I still be liable for tax if I am furloughed?
Yes. You’ll still pay taxes in the normal way and this will come out of your salary as it normally does. You’ll continue to make pension contributions (both employer and employee) unless your employer has opted out of this.
Will I still retain my legal rights as an employee when furloughed?
Yes. You will still have the same rights as you would if you were in your normal line of employment. For example, you would still be able to bring a claim for unfair dismissal, you would still be entitled to a redundancy payment and statutory sick pay, as well as maintaining your maternity rights. These are a few examples and you should seek legal advice as soon as possible if you have any concerns about your employer’s behaviour towards you.
PLEASE NOTE: this information was correct at the time of publication on 21 April 2020
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