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Furlough payments are set to change

Furlough payments are set to change, is your business ready?

At the moment, workers earning up to £2500 a month are paid 80% of their normal pay, which their employer can then claim back through the furlough scheme. From 1 July, although the worker will continue to receive 80% of their pay, the employer will only be able to claim back 70% and will have to pay the additional 10% themselves.

There will be further changes to furlough payments between August and 30 September, as the percentage government pays will reduce to 60%, leaving employers to make up the 20% shortfall.

Employers still have to pay National Insurance and pension contributions. In addition, furloughed workers are entitled to sick pay, annual leave and maternity pay at standard rates.

The job retention, or furlough scheme has already cost £66bn but has been a lifeline for workers and  businesses unable to trade throughout the pandemic.  The scheme was set up to protect jobs and to date it has achieved that. In March 2020 at the start of the pandemic, it was feared that as many as one in 10 workers would lose their jobs. Instead, the rate of unemployment is less than one in 20.  As many as 11.5 million jobs have been supported.

These huge costs make it essential that the economy opens as quickly as possible now. Government hopes that by making it more expensive to furlough workers, it will encourage employers to take more people back and only furlough those where there genuinely is no other option.

Unfortunately, some employers will find that they cannot afford to keep workers on after the government support ends and many fiscal bodies are expecting a rise in unemployment.

Sarah Naylor, employment law specialist at Atherton Godfrey, commented: “There are currently no plans to extend the scheme beyond the end of September. If that remains the government’s position, employers will be faced with the difficult decision of taking their workers back or making them redundant. Even though workers may have been furloughed for long periods of time, they will still be entitled to redundancy pay at the regular rate and that will need to be factored into any decision making.

“My advice to employers who think they will have to make redundancies is to get legal advice as soon as possible.”

A further aspect for employers to consider is whether workers want to go back to their pre-pandemic working pattern. Furlough has given people the opportunity to re-evaluate their work-life balance. It may be that they have decided they want to reduce their hours or even take early retirement when furlough ends.

There is also an issue around mental health, as raised by Dame Andrea Leadsome, who said: “For some people they’re just terrified, so it’s like ‘I’ve been on furlough so long I really can’t quite face going back to the office’”.

If you need advice about redundancy, employment contracts or workers rights, our employment law experts are here to help. Call 01302 320621 or email info@athertongodfrey.co.uk 

 

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Extended furlough arrangements will benefit thousands

Extended furlough arrangements will allow more than 200,000 additional workers to benefit from the scheme.

Initially, the scheme was only aimed at those actively employed by a UK company on 28 February 2020. However, eligibility has now been extended by a further 3 weeks so that anyone who was on a company payroll on 19 March can also be furloughed.

Furlough is a temporary paid leave of absence and is one of many financial measures announced by the chancellor, Rishi Sunak, as part of the Job Retention scheme.

Applications for the scheme can be made from Monday 20 April 2020. This will allow a business to furlough employees while the government guarantees to pay 80% of their wages, up to £2,500 per month per person, per job.

Following criticism that the scheme was going to leave thousands of recently employed workers at risk of redundancy, the government carried out a review and has now extended furlough arrangements.

In addition to the monthly salary, the government will also cover both pension contributions and National Insurance contributions.

The ultimate aim of the scheme is to support businesses whose operations have been severely affected by the coronavirus lockdown. It enables employees to continue earning and safeguards their jobs so they can return to work when lockdown has ended.

Companies applying for support under the scheme must prove that their employees are no longer able to perform their jobs because of the lockdown. They must then submit details of furloughed staff to HMRC before they set up the reimbursement scheme.

The furlough scheme will run from 1 March until 1 June and those claiming should see their first payment this month.

Working while on furlough

Employees are not allowed to work for their employer in any capacity while on furlough. However, they are able to work for other employers, subject to restrictions in their employment contract, where it is to help businesses or organisations that rely on staff to be able to survive the crisis, or to replace staff taking leave to care for relatives. This is particularly helpful to retail distribution, agriculture and care sectors.

Furlough eligibility

Any UK employer with a UK bank account can take advantage of the scheme, regardless of the nature of their business. Eligible employers include charities, public bodies, businesses and agencies.

Employers can claim the higher of either the salary paid in the same month the previous year or an average of the monthly salary before tax.

Furlough conditions

  • The employee must remain on the employer’s payroll
  • Employees must remain on furlough for at least three weeks
  • Employers can place employees on furlough more than once
  • Those self-isolating due to coronavirus cannot be put on furlough, but will be entitled to Statutory Sick Pay (SSP) of £98 instead
  • Those shielding because of chronic illness or age, can go on furlough at any time
  • Annual leave continues to accrue during the lay-off or furlough period
  • SSP, maternity and paternity rights also remain as do unfair dismissal rights and rights to redundancy pay
  • Those on fixed-term contracts can be furloughed with the possibility of contracts being renewed or extended during the furlough period
  • Apprentices can be furloughed and continue to undertake their training throughout the furlough period
  • Employees on annual leave can be furloughed, so long as the leave period started after 28 February

Additional support from employers

Employers are able to top up the 80% if they wish to, but are under no legal obligation to do so. Some employers may choose to pay employees and reclaim the amount later; again there is no legal obligation to do this.

Employees made redundant between 28 February and 1 April can be rehired and placed on furlough. However, the employer is under no legal obligation to do this and much will depend on the long-term viability of the company.

Redundancy fears

The Treasury has said that the furlough scheme could potentially run for longer. However, there is an urgent need for government to clarify whether the scheme will be extended or not. Otherwise businesses may be forced to start redundancy procedures on Saturday 18 April so that they do not fall foul of the minimum 45-day consultation period.

See the Gov.uk website for more details on the government furlough scheme

If you would like advice on any aspect of employment law, either on an ad-hoc basis or on a more permanent basis, contact us today. We are able to offer bespoke solutions for any business. Call 01302 320621 or email info@athertongodfrey.co.uk