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A quick guide to furloughs

It sounds like a simple idea: don’t fire people and the Government will provide up to 80% of their pay each month instead. Inevitably it’s becoming a little more complicated.

The next key date is 10th June and after that new entrants cannot join, because the scheme closes for new applications on 30th June and any furlough has to be for at least 3 weeks  – so if you’re considering putting any employee on furlough in the future, you have to move quickly.

From that date, only employers who have already furloughed people – and employees who have already been furloughed – can be added to the scheme for any period in July to October.

Unless you’re returning from maternity or paternity leave. As long as your employer has furloughed an employee previously, you can still go on furlough then.

This is a quick guide and when things change, we’ll update it. It isn’t exhaustive and detailed guidance about every potential situation but those answers are available from us, HMRC and other websites, or potentially your payroll provider or accountant.

Please remember:

  • Normal employment laws still apply and Coronavirus isn’t a “get out of jail free” card – you might face Employment Tribunal claims if you fire people or don’t pay them what you should.
  • What you do now has a big impact on people and not just short-term. Don’t turn a happy workforce into a wary bunch of people only working with you until they can get other jobs if you handle this badly. This is a time to be a leader.

 

Can I put people on furloughs?

Yes, you can. Ideally, you might have some people who want to reduce their working hours or go on these subsidised breaks – and if you talk to your people, then you should know quickly.

Although employment laws still matter, the context reduces the risk of changing people’s contracts – which is what you’re doing if you furlough them or anything else. At the least, it gives you a breathing space and you have time before you have to address any issues that crop up later.

You can apply for any employee, whatever their working hours and including apprentices. Ideally you should have a solid reason and the main ones will be: there’s not enough work for them and their job is at risk (so it’s an alternative to redundancy), or they have caring responsibilities due to Coronavirus and cannot work.

 

How do I put people on furloughs?

Give them something in writing, set out the details. It’s a contract change, after all, and you should document any change to their pay and working hours, to keep it clear for any future use – including if HMRC asks for proof.

 

Can people carry on working if I furlough them?

No if it’s on a full-time basis (part-time working is an option from 1st July) and frankly it’s not a good idea to try it. They can get training while on furlough but they shouldn’t be working. HMRC are floating the threats of an employee hotline to report employers trying to do this, as well as audits if they suspect it’s happened, because it would be viewed as fraud. Anyone who’s dealt with HMRC should know it’s better not to receive their special attention.

If you need people to work, look at reducing their hours instead. Or end the furlough – as long as it’s lasted for 3 weeks, you will still receive the funding.

 

What data do I need?

You must have:

  • created and started a PAYE payroll scheme on or before 19th March (originally it was 28th February)
  • enrolled for PAYEonline
  • a UK bank account.

 

To make a claim, HMRC says you will need:

  • your employer PAYE reference number
  • the number of employees being furloughed
  • National Insurance Numbers for the furloughed employees
  • Names of the furloughed employees
  • Payroll/employee number for the furloughed employees (optional)
  • your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
  • the claim period (start and end date, between 1st March and 30th June )
  • amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
  • your bank account number and sort code
  • your contact name.

You’ll need the Government Gateway user ID and password you got when you registered for PAYE online. If you’re ready, click here and apply: http://www.access.service.gov.uk/login/signin/creds

 

How much pay counts?

Each employee can currently receive 80% of their normal salary up to £2,500 per month. That’s equivalent to £30,000 pa so anyone who’s salary is higher than this will get a bigger pay reduction – unless you choose to top it up, but you won’t get Government funding for any extra payments, of course.

For people on zero-hour contracts, either use their earnings for the same month in 2019 or their average monthly earnings for the past year.

There are grey areas about payments for various other categories, such as holiday during furloughs and additional regular payments such as bonus, commission, overtime etc. Holidays: we should have a definitive answer shortly and it depends on whether the furlough means they get 80% for the holiday taken during April, May and June, or 80% funded and the employer has to top up by 20% to full pay – or something else, including whether someone can count time off during a furlough as holiday at all. Bonus, commission and overtime: it depends whether you’re obliged to pay them (it’s a contractual requirement) or discretionary, plus whether it’s money you’re committed to paying them already.

 

Can I pay more than 80%?

Yes, you can. You’ll only get funding for up to 80% but you can pay more.

 

What about sickness absence?

If they’re off work because they’re sick or self-isolating, they cannot be furloughed and you use your usual sick pay arrangements (company sick pay and/or Statutory Sick Pay). If they return to work, you can then apply to furlough them.

 

Can I just fire people instead?

Please don’t. Whatever’s going on now and whatever the outlook is: this gives you a breathing space. Furlough for now, if you have less work and/or can’t pay everyone. Obviously that advice won’t be 100% appropriate for everyone and, worst case scenario, if you can’t afford to keep the business going even with reduced staffing costs, then you might get overtaken by events.

 

Part-time working

From 1st July, people can be on furloughs and work part-time until the scheme closes at the end of October. The employer must pay for the time the employee is at work, and the Government will pay different amounts for the time off work on furlough (see below).

 

Employer contributions

There will be a sliding scale for the following months:

  • June and July: no employer contributions. The Government will pay 80% of salary (up to £2,500 a month) for furloughed time plus the employer’s NI and pension contributions. From 1st July the employer will pay the employee for any hours worked.
  • August: the government will fund 80% of normal pay (£2,500 still) for hours that aren’t worked, but not employer’s NI and pension contributions. From 1st August the employer must pay for any hours worked.
  • September: the Government funding reduces to 70% of pay (capped at £2,187.50). Employers have to pay 10% of the furloughed person’s salary, plus the employer’s NI and pension contributions.
  • October: the Government funding decreases to 60% of pay (max of £1,875). Employers have to pay 20% of the furloughed person’s salary, plus the employer’s NI and pension contributions.

As an approximate guide to employer costs, the increases in employer contributions (for pay, NI and pensions) are from zero to 5% in August, 14% in September and 23% in October.

Here’s a link to the full HMRC guidance which provides more details about everything you can think of asking – from Salary Sacrifice to TUPE transfers: http://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

 

By Brian

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