What Does Furlough Mean & What Are UK Furloughed Workers Entitled To?

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When the UK Chancellor Rishi Sunak announced emergency measures to help those financially affected by coronavirus, he said the government was there "to support millions of Brits who have been furloughed." As companies and brands try to cope with the economic damage caused by the pandemic, terminology like this is becoming increasingly part of our day-to-day lives. But what does furlough mean and what are you entitled to if you have been furloughed?

What does furlough mean?

Furloughed workers are those who have been asked to stop working, but who have not been made redundant. Essentially, it is used by employers as an alternative to laying off staff; they remain on the payroll, but they are asked to take a leave of absence.

Previous to the coronavirus pandemic, it was very rare for a UK employer to furlough staff, and the process would vary company to company. Remuneration could take a number of different forms depending on the employer's financial circumstances.

Set out by the government to support employers whose operations have been severely affected by coronavirus (COVID-19), The Coronavirus Job Retention Scheme is open to all UK employers. When first introduced, the scheme was intended to be available until June 1, 2020, but on May 12, Sunak extended the job retention scheme until October 2020. From the start of August, furloughed workers will be able to return to work part-time with employers being asked to pay a percentage towards the salaries of their furloughed staff.

According to statistics released on May 12, 7.5 million workers and almost one million businesses have used the job retention scheme.

A change to the scheme is due to take place at the start of August, when workers will be able to return to their jobs part-time. At the moment, UK companies must choose between putting staff into full furlough, meaning they do not work at all, or keeping them on full pay. From August, furloughed workers will be able to return to work part-time with employers being asked to pay towards their salaries.

Will I still be paid if I am furloughed?

Under The Coronavirus Job Retention Scheme, UK employers can claim 80% of furloughed employees’ usual monthly wages, up to £2,500 a month, plus the associated employer National Insurance contributions and minimum automatic enrolment pension contributions (provided the employer had created and started a PAYE payroll scheme on or before February 28, 2020, and has a UK bank account). The scheme will be backdated to March 1 and available until October 2020.

While on furlough, the employee’s wage will be subject to usual income tax and other deductions.

If you have been told you are on furlough, you do not have to contact the Treasury yourself: it is your employer’s responsibility to organise payment. Any UK organisation with employees can apply, including businesses, charities, recruitment agencies (agency workers paid through PAYE) and public authorities.

If you’ve been employed for over a year, employers will calculate your monthly earnings based on the higher of either the amount you earned in the same month last year, or an average of your monthly earnings from the last year.

If you’ve been employed for less than a year, employers will claim for an average of your monthly earnings since you started work. If you started work in February 2020, your employer will calculate the claim based on a pro-rata figure of your earnings from that month. The same arrangements apply if your monthly pay varies, such as if you are on a zero-hour contract.

What happens to the rest of my salary?

Your employer is not legally required to pay out the remaining 20% of your salary, though they can if they choose to.

Unfortunately, any bonuses, commissions and fees will not be taken into consideration as part of your monthly earnings.

How do I know if I’m on furlough?

Your employer will need to notify you before putting you on furlough and should discuss any changes to your employment contract with you and make them by written agreement. When employers are making these decisions, equality and discrimination laws will apply in the usual way and your rights as an employee will not be affected by being on furlough, including redundancy rights.

Once you are on furlough you will not be able to work for your employer, but you are able to take part in volunteer work or training, as long as you’re not making money for, or providing services to, your employer.

If workers are required to, for example, complete online training courses while they are furloughed, then they must be paid at least the National Living Wage/National Minimum Wage for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

If you have been placed on furlough, you will need to remain on furlough for a minimum of three weeks. You can also be placed on furlough more than once, and furlough periods can be successive from the previous without a break while the scheme is open.

Who is eligible for furlough?

Employees placed on furlough must have been on the company PAYE payroll on 28 February 2020, and can be on any type of contract, including full- and part-time employees, employees on agency contracts, and employees on flexible or zero-hour contracts. The scheme also covers employees who were made redundant since 28 February, 2020 if they have since been rehired by their employer.

Self-employed workers and contractors have also been offered an emergency support package, too. On March 26, Chancellor Rishi Sunak unveiled a separate scheme to provide direct cash grants of up to £2,500 per month for at least three months.

Do I have to go on furlough?

As The Coronavirus Job Retention Scheme is in place to limit redundancies during the COVID-19 pandemic, refusing to be furloughed may put you at risk of losing your job. However, employees must be consulted and agree to be furloughed as it is a change to the terms and conditions of their employment, and therefore still subject to existing employment law. Remember though, any terminations to employment contracts must be in line with normal redundancy rules and protections.

Contributions from Orla Pentelow.

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