UK law

How does furlough work for employees in the UK?

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Billy Muir from HR experts LBJ Consultants discusses what Furlough means for businesses and employees in the UK. 

The purpose of the furlough scheme is to cover employers’ costs of employment in respect of furloughed employees arising from the health, social and economic emergency in the UK. It is not limited to employees who would otherwise be made redundant, but they must be furloughed for a minimum of three weeks. The duration of the scheme is 1 March to 30 June 2020 (extended from 31 May on 17 April) and may be extended again.

What can you claim? 80% of your eligible employees’ salaries from HMRC up to £2500 a month, backdated to 1 March, plus associated employment costs (see below). The HMRC portal opened 20 April and apparently payments will be made in six working days. Salaries will be subject to tax and other deductions. You can top up your employees’ salaries to 100% if you choose. Your employees must not receive less than the National Minimum Wage.

What is included in your claim to HMRC? Payments you are obliged to make including past overtime, compulsory commission, employer’s National Insurance Contributions, pension contributions up to the level of the minimum automatic enrolment employer pension contribution. But not discretionary payments such as tips, or conditional payments, or non-monetary benefits.

What if your employees’ salaries vary? Base your payment on the same month last year, or the average monthly pay for 2019/2020 – whichever is the higher. But if the employee has been with you less than a year, go by their average monthly earnings.

Do you want to check if you can claim for employees’ wages through the Coronavirus Job Retention Scheme? Find out more here.

Who is eligible? You can furlough employees on your PAYE scheme who were employed by you on or before 19 March 2020 (the gov.uk site previously said 28 February) as long as you have notified HMRC through a real time payroll information submission of payment in respect of that employee on or before 19 March 2020. An employee can’t insist on being furloughed.

TUPE Are you a new employer of your employees? On 19 March did they have a former employer whose business you have now taken over? You may have registered your new employees on the HMRC’s real time information for PAYE after 19 March, but if on 19 March your employees were employed by another employer who was registered on HMRC real time information for PAYE they are covered by this scheme.

The scheme is open to all employers. The government expects employers who receive public money for staff costs to pay their employees and not furlough them. But what of charities who receive public funding grants and whose staff cannot be redeployed to assist with the coronavirus response? Unless the public money is given to the charity with the specific intention of paying staff costs this is a grey area.

The article originally appeared on lbjconsultants.co.uk. Read the full article here.

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