First things first, what does it mean to be furloughed?
Furloughing means an employee’s job is put on hold. The Coronavirus Job Retention Scheme allows firms to put employees on furlough, meaning they do not work but still get paid by the employer with money provided by the state.
The government will cover up to 80% of the employee’s wage (up to a maximum of £2,500 per month), and then the employer can add the extra 20% if they wish, but they do not have to.
It is a grant, not a loan. This means whatever is granted does not have to be repaid.
How can I apply to be furloughed?
It is important to remember that individual employees cannot apply to be furloughed – they can only be furloughed by their employer. This means it is completely up to them if they allow their workers to be furloughed or not. So, you must ask your employer if you could be furloughed.
You need to have been on your employer’s payroll on 19 March 2020. When the scheme was launched, it applied to those on their employer’s payroll by 28 February 2020. However, the Treasury extended the scheme to include people who were on a company’s payroll on 19 March 2020 and which were notified to HMRC on an RTI submission on or before this date.
If you were added to the company’s payroll after this date, you may not be eligible to be furloughed.
The scheme will now run until at least the end of October 2020 with changes due in July . Companies are to be asked to start sharing the cost from the start of August, which could see employers to pay a fifth of furloughed workers’ salaries and NI contributions.
Your rights remain the same as a furloughed employee, meaning you are still entitled to things such as statutory sick pay or maternity pay, as well as redundancy payments.
How is 80% of employees’ wages calculated?
The government site now has a wage calculator which employers can use to figure out what 80% of their employees’ wages is, you can see it here.
The grant paid to your employer will be calculated based on your regular, contractual pay. It will include:
- Regular wages. These are the normal wages or salary set out in your contract for doing your job.
- Non-discretionary overtime. This applies to guaranteed overtime set out in your contract.
- Non-discretionary fees. These are fees your employer has contractually agreed to pay for you. For example: chartered membership fees if your role requires you to be part of a professional association.
- Non-discretionary commission. This is commission that is promised to you in your contract. For example: a certain proportion of a houses sale price for estate agents.
If your pay varies from month to month – for example, because you are employed on a ‘zero-hour’ contract or you are a freelance worker– the 80% will be calculated based the higher of:
– Your earnings in the same month of the previous year.
– OR your average monthly earnings from the 2019/20 tax year.
If you have worked for your employer for less than a year, it will be calculated based on your average monthly earnings while you have worked there. And if you only started with your employer in the last month, your employer will pro-rata your earnings so far and furlough will be 80% of that.
When will the money be available to employers?
The scheme has opened to employers today, and the first payments are scheduled to be made within six working days. This is to allow for some delays, including fraud checks and transfer times.
Payments, if all goes to plan, should begin to come through on 27 or 28 April. This first payment will cover March and April’s wages for eligible furloughed employees.
What do employers need to do?
You will need the Government Gateway user ID and password you got when you registered for PAYE online.
In order to make a claim within this furlough scheme, you will need the following information:
- to be registered for PAYE online
- your UK bank account number and sort code
- your employer PAYE scheme reference number
- the number of employees being furloughed
- each employee’s National Insurance number
- each employee’s payroll or employee number (optional)
- the start date and end date of the claim
- the full amount you are claiming for including employer National Insurance contributions and employer minimum pension contributions
- your phone number
- contact name
You also need to provide either:
- your name (or the employer’s name if you’re an agent)
- your Corporation Tax unique taxpayer reference
- your Self Assessment unique taxpayer reference
- your company registration number
If you are putting more than 100 employees on furlough
If you are claiming for more than 100 furloughed employees, you will need to upload a file containing each employee’s:
- full name
- National Insurance number
- payroll number (optional)
- furlough start date
- furlough end date (if known)
- full amount claimed
The format of the file you upload must be either:
There is a step-by-step guide on how to furlough employees issued by the government here.
But, is furloughing a good thing?
Furloughing is more beneficial for employees than redundancy or unpaid leave, as it allows them to still be paid nearly as much as they would usually, and also means they keep their jobs amid the coronavirus crisis. Employers are not doing anything wrong by furloughing, in fact they are doing the right thing. The government’s aim is to ‘protect financial victims of coronavirus’ and ‘enable firms and employees to quickly pick up where they were, once this all ends’. Essentially, if an employee requests to be furloughed, it makes sense for the employer to try and arrange it.
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