A Furlough Summary
Our HR and OD partner Sarah Brewster from Fresh Seed offers her advice and guidance around furloughing. From what it actually means, to how it impacts you as a business owner/director and as an employee.
A Furlough Summary
This is a general overview of where furlough will apply. Because individual businesses are unique we advise that you take advice on a 121 basis to gain guidance on how to apply the scheme to your organisation. This guide is not designed to cover all eventualities and therefore please seek further support when applying furlough.
On Friday 20th March, the government announced a job retention scheme, to avoid job losses and/or redundancies. The details currently are very high level and therefore we need to approach any action with a level of caution. The detail of the scheme was then published on 26th March 2020 and further updated on 4th April 2020. This document sets out the overview of the scheme and more importantly where there are any gaps.
Overview of the scheme
Do you know what the scheme is?
Furlough is an American term which has been implemented during these unprecedented times to summarise the “Job Retention Scheme” set up by the Government to help businesses through these challenging times. It is a government grant scheme and therefore careful consideration needs to be given to the financial viability of your organisation going forward to ensure you can continue to make the payments until HMRC have the portal up and running.
Do you know which employees it applies to?
The scheme applies to all employees - full time, part time, agency, flexible or zero hours. It may also apply to leavers if they were on payroll on 28th February. However, if you re-engage a leaver you must only furlough if there is not work for them to do. Careful consideration to their status must be given before proceeding to re-engage.
Do you know what date it applies from?
The scheme applies from 28th February 2020 for a minimum period of 3 months.
Once you furlough your employees, who pays them?
You do. They will remain on payroll and you will continue to pay them. The government are working to set up a system where you would submit information to HMRC to claim the grant.
How much do you pay them?
You pay 80% of gross salary (capped at £2,500). The gross pay is then subject to usual PAYE and NI deductions. You can claim for regular payments including: wages, past overtime, fees and compulsory commission payments.
You cannot include: discretionary bonus (including tips - aka TRONIC) and commission payments and non cash payments.
You will need to claim eNIC and minimum automatic enrolment employer pension contributions in addition to claiming for gross salary. You will need to calculate these values to process your claim.
Have you got a contract of employment for your staff with a Lay Off and Short Term working clause?
Not all employment contracts contain this clause, known as LOST. If they do not contain the clause, the process for furloughing staff alters and you will be required to consult with your staff. Consultation under these circumstances varies to that in the situation of redundancy however it must still be laid out fairly and as clearly as possible. Staff do not have to agree to furlough, however if they decide to not take this option the following options then apply: Redundancy, annual leave or unpaid leave.
You will need to write to all staff informing them of the position and that letter must be kept on file for 5 years.
What happens when there is some work to do?
If the business has work, you may not need to furlough all staff, and you can apply criteria to furlough as you would redundancy. However you will need to assess what work needs to be done and who is able to do so within your organisation.
Can your staff work elsewhere if they are furloughed?
Your staff are able to work elsewhere whilst furloughed to you, however they must be able to return to work with you as soon as the business begins to recover. Staff are also able to volunteer for you but must not engage in actual work that generates income or provides a service.
How do you stay in touch whilst they are furloughed?
Whilst your staff are furloughed, staying in touch remains important. Whilst you cannot expect staff to undertake any work that generates an income or provides a service, they are still able to listen into meetings, or you can stay in touch by regular email updates or catch up calls and messages. In order to keep staff engaged with your organisation, staying in touch will help staff feel connected.
How do you bring them back when lockdown lifts and life returns to normal?
As the business begins to wake up from its dormant state, you will require staff to return to work. Whilst there’s no set guideline on timescales it would be expected that realistic notice to return would be given, anything from 24 hours upwards.
What is the minimum amount of time that employees need to be furloughed for?
Employees can be furloughed in rotation for a minimum of three weeks, if you have some work but not enough for everyone and choose to rotate the workload across your staff. The scheme itself is set up, currently, to last a minimum of 3 months however it may extend should the need apply.
What if you have work but employees wish to be furloughed due to caring duties?
To date this has been uncertain but advice released today - 6th April 2020 - states that if those shielding or with caring duties request they be furloughed for their own safety then you can agree to this.
However, if your staff are able to work from home and care for family members, it is worth exploring this option with them before proceeding with furlough
I am a company director, can I furlough myself?
This will very much depend on how you are set up to receive payment from the business. If you are on the payroll and receive all your salary through payroll you will be able to furlough. However, if you receive a small amount of your salary via payroll and top the rest up with dividends then you will only be able to furlough to the amount you are salaried at and NOT the dividend payments.
Please remember as a company director, if you furlough yourself you are not able to work to generate money for the business or services to the business but you must continue to carry out your statutory rights as a company director.
Sarah Brewster, Fresh Seed
Fresh Seed is an HR & Organisation Design and Development company. Find out more about what we do at www.freshseed.co.uk or call us on 07789 221195.
Please note guidance on the Job Retention Scheme is changing regularly and this advice was given on 10th April 2020, given the information available to us at the time.