Furlough Explained

Posted 09/04/2020

The word ‘furlough’ has been used many times in the news as of late, mostly as a verb. People may know someone who has been ‘furloughed’ or put on the furlough system; this is something new that has been brought in to support employees and businesses through the Corona Virus pandemic. The Government will pay employers 80% of their employees’ salaries, of up to £2,500 a month, to those who have been affected by the cautionary actions the virus has brought on. This starts from March 2020, and although the Government is issuing it for three months there is an understanding this may need to be extended for longer depending on circumstances.

Any employer is eligible to apply for the furlough scheme, from individuals who employ staff for domestic jobs to businesses with a multitude of employees. This is for staff who are unable to come in to work as the business is practising social distancing measures and their employees cannot work from home. Statutory sick pay must be used for employees who are sick and are self-isolating themselves. These individuals can be put on furlough once they are no longer receiving sick pay. Similar rules apply to employees receiving other types of pay, such as maternity pay.

Employees must be designated as furloughed before the application can be made, and the employees will not be able to return to work, and are not expected to work from home, for the employer during this time. They are able to work for other employers, or take on self employed or voluntary work, or carry out training provided that their outcome does not provide income for the employer’s business. This means that apprentices can also be furloughed and can continue their training and should be paid the minimum wage for the time spent training.

The online claim process will be available at the end of April 2020. The payroll for which the furlough is to be claimed for must have been set up before the 28th February 2020. If employees were made redundant, or left their place of work, after this date then the employer can take them back on and furlough them. This has been helpful in places where someone has left a job to start work elsewhere, only to be informed their new job no longer requires them and leaves that individual without a job or income.

For contractors who are ‘deemed employees’ with regards to the IR35 rules, the furlough scheme cannot be applied to them. Although they are deemed employees, they do not have the same rights that an actual employee. If trading through their limited company and claiming a salary through their own payroll, the salary will be recovered this way. Works with a contract and payments by invoices will have to consider using Self Employment Income Support or claiming Universal Credit.

Tags: Furlough, Coronavirus, Covid-19, income support