By Martin Lewis
Little more than a month ago, few had heard of the word furlough, but now it’s on millions of lips, as it has become a crucial lifeline. We now have the Coronavirus Job Retention scheme, that allows firms to furlough staff who don’t have or can’t work. The aim is to protect economic victims of coronavirus, and leave them ready to return straight to work, to kick start the economy once this is over.
Yet for some employees and small employers, especially those without HR functions, furloughing can seem complex. This in itself may be stopping some from agreeing to implement this important financial lifetime.
While it is an employer’s choice whether to furlough, my hope is this quick briefing, or cheat sheet if you like, will give enough information to hopefully to give employers confidence to furlough staff (and former staff) when appropriate. There’s full information on my website and the www.gov.uk coronavirus guides for employers and employees.
Here are my 12 need-to-knows for employees and small businesses:
Furloughing means an employee’s job is put on standby.
The Coronavirus Job Retention Scheme allows firms to put employees on furlough (a bit like a job ‘standby’ mode), meaning they don’t work but get paid by the employer with money provided by the state. Furloughing can be backdated to 1 March 2020.
Any staff on the payroll up to 19 March can be furloughed.
When the furlough scheme was first announced it only applied to those on their employers payroll on 28 Feb. That left those who’d shifted jobs in between times, taking advantage of our flexible labour market, left out, with no support, simply by a misfortune of timing. Last week the government extended the cut-off date to include anyone employed and on payrolls by 19 March, bringing more into the fold, though still not everyone.
It is a grant not a loan.
The money firms receive to cover furloughing does NOT need repaying.
All core staff costs are covered. The state will pay for 80% of a furloughed employee’s salary up to a maximum payout of £2,500 a month – plus the employers national insurance contribution and minimum pension contribution. The only liability for employers is any holiday entitlement that accrues.
Employers can top the furlough up to 100% of salary, but don’t need to.
The scheme allows employers to pay employees just the furlough amount, if its finances mean it can’t pay more. Though employees have to agree to this.
Not all employees need to be furloughed.
Some staff can be furloughed, while others keep working.
Furloughing can be for as little as 3 weeks.
Furloughing can be from 3 weeks to 3 months (though the scheme could be lengthened). So, if a firm’s work is variable, furloughing can be used to help the firm get through tough periods, then go back to work, then furlough staff again if needed.
Employees who can’t work due to school closures can be furloughed.
The Treasury has confirmed to me, those unable to work as schools are closed and they need to be home to look after children, may be furloughed.
Firms can furlough those shielding in line with public health guidelines.
If people are in the vulnerable category, so have to stay at home, and can’t work from home, they can be furloughed.
Furloughing is better for employees than redundancy or unpaid leave.
Employers aren’t doing wrong by furloughing, they’re doing right. 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’. So, if employees need furloughing, employers should try to furlough them. To help, www.acas.org.uk has produced templates employers can use to furlough staff.
Furloughing is better for most staff than cutting hours.
If only limited work hours are needed then it may be better to furlough some staff, and keep the others on full time, rather than halving everyone’s hours.
If staff left after 28 Feb for redundancy or a new job, they can be rehired and furloughed.
Employees on the payroll on 28 Feb who were made redundant can be rehired to be furloughed, providing the reason they don’t have income now is an economic knock-on effect of coronavirus (eg their new employer retracted job offer/made them redundant).
The furlough grant will come at the end of April – employers with cash flow struggles can talk to their teams. Firms may struggle with cash flow to cover salaries before the payment is made. If so, a discussion about not paying the salary in full until the payment arrives may help all parties – if it enables a firm to furlough rather than make redundant.
Martin Lewis is the Founder of MoneySavingExpert.com. To join the 13 million people who get his free Money Tips weekly email, go to www.moneysavingexpert.com/latesttip