BUSINESSES are still able to claim government cash to keep staff on the payroll as the coronavirus lockdown continues.
Furloughed workers have been receiving 80 per cent of their wages, up to £2,500 a month, paid for by the state throughout the pandemic.
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The system is part of Chancellor Rishi Sunak’s Coronavirus Jobs Retention Scheme, that was first introduced in March shortly after Prime Minister Boris Johnson ordered the first national lockdown.
Sunak has since extended the scheme several times as Covid restrictions were lifted and reimposed throughout the year in line with rising and falling case numbers.
Despite the rescue package, many firms have struggled to stay afloat during the lockdown, even though they’ve been allowed to operate.
Many businesses, like British Airways and John Lewis, have also been forced to make huge job cuts amid the unprecedented downturn in trading.
What is furlough?
THE aim of the government’s job retention scheme is to save one million workers from becoming unemployed due to the coronavirus crisis.
Under the scheme, furloughed workers receive 80% of their wages, up to £2,500 a month, if they can’t work because of the impact of coronavirus.
One of the main benefits of the scheme is that it allows workers to be kept on the payroll rather than being laid off.
Furlough is available to all employees that started a PAYE payroll scheme on or before March 19, 2020, although it closed to new entrants in June.
The scheme can be backdated to March 1, 2020.
Previous rules meant that staff couldn’t undertake any work for their employers while on furlough.
But from July 1, staff members were allowed to go back part-time and they must be paid in full for the hours that they work.
From September 1, employers will have to start contributing 10% of wages, with the government paying the remaining 70%.
And from October 1, employers need to foot 20% of the bill, with the government making up the remaining 60%.
The government also paid the associated employer national insurance contributions (NICS) and minimum automatic enrolment employer pension contributions on top, although employers started paying these costs from August 1.
The scheme was due to end on October 31 but has been extended to run until March 31 2021 after it became clear tougher lockdowns may be needed throughout the winter months.
From November, workers will receive 80% of wages for hours not worked – firms must cover NICS and pension contributions while the government will pick up the rest.
The proportion of employer/government contribution will be reviewed in January.
Employers can register staff for the scheme at any time and there is no limit on the number of employees who can be furloughed.
They can do this by logging on to the Government Gateway system here, using their user ID and password.
Here, we take you through the key questions you may have about the furloughed scheme.
1. How does the furlough scheme work?
The aim of the government’s jobs retention scheme is to prevent workers from becoming unemployed due to the lockdown.
Under the scheme, the government pays 80 per cent – up to £2,500 a month – of the wages for an employee who can’t work because of the coronavirus impact.
Workers will be kept on the payroll rather than be laid off.
The employer will still need to pay for National Insurance contributions and pension costs.
The scheme has been extended to run until the end of April and can be backdated to March 1 2020.
It’s available to all employees that started a PAYE payroll scheme on or before October 30, 2020, and have a UK, Isle of Man or Channel Island bank account.
You can no longer submit claims for pay periods ending on or before 31 October 2020.
Employers can choose to top up furloughed workers’ salaries by the remaining 20 per cent but they don’t have to.
They can also only furlough certain types of employees, including those on fixed-term contracts, apprentices and supply teachers.
Firms who want to access the scheme will need to speak to their employees before putting them on furlough.
While on furlough, staff should not undertake any work for their employer during the scheme.
However, if employees are on flexible furlough, they can work for any amount of time but they cannot do work during the hours they are recorded as on furlough.
The government pays your wages through a grant to your employers.
You should normally get paid as your employer normally would so for example either weekly or monthly.
Households who are struggling with a drop in income may be able to get help through the state’s welfare system.
You can find out more information on Universal Credit here, including how to apply, when to apply and how much help you can get.
2. Can I be part-furloughed?
The government is also offering the option of furloughing employees on a flexible basis.
The flexible furlough arrangement means an employee can be furloughed for a certain number of hours per week.
They are then able to work for any amount of time except for the hours where they have been recorded as on furlough.
Agreed flexible furlough agreements can last any amount of time – there is no minimum furlough period.
Employees can also enter into a flexible furlough agreement more than once.
If you flexibly furlough employees, you will also need to agree on this with the employee or reach a collective agreement with a trade union.
You’ll also keep a new written agreement that confirms the new furlough arrangement.
3. How long will the furlough scheme last?
The furlough scheme is now due to end on April 30, meaning it will have been in place for more than a year.
However, Sunak is once again facing calls to extend the scheme once again amid fears of a cliff-edge in support for employees and businesses.
4. What happens when the furlough scheme ends?
The state of the economy and jobs market is unlikely to suddenly spring back to pre-Covid levels even when restrictions are finally lifted.
As the impact of the Covid-19 pandemic continues, the Government will still be under pressure to provide further support for businesses and employees.
So there are three potential options for what happens after April 30:
- The Furlough Scheme will be extended
- There will be no further support packages.
- The Job Support Scheme (JSS) comes into force
A cliff-edge end to support packages would likely result in mass redundancies and therefore undo all the security that was provided with the furlough scheme in the first place.
It is more likely that the government will extend the furlough scheme again to keep as many people in jobs as possible while the pandemic continues.
However, Sunak could choose the third option of introducing a new scheme that works to phase out the current levels of support.
Before the furlough scheme was extended in November, the original plan was to replace it with a new scheme called the Job Support Scheme.
Sunak announced the JSS in September with plans for it to run from November 1 for an initial period of six months.
The scheme was designed to offer a more tailored approach to businesses as the country introduced a local tiered lockdown systems.
It’s important to note that the government could introduce a slightly different model to its first JSS.
But the original was structuresd with two versions – the JSS Open and the JSS Closed.
The JSS Open would provide support for businesses that are allowed to open but need extra support keeping employees due to reduced consumer demand.
The rules as of October 2020 were:
- Employees must work a minimum of 20% of their usual hours and their employer must pay their wages as normal
- For hours not worked, the employer must pay 5% of their reference salary up to a maximum of £125 per week
- The Government will contribute 61.67% up to a maximum of £1,541.75 per month
- In total, the employee will receive at least 73% of their salary up to a maximum of £3,125 per month.
The JSS Closed would support businesses that have been legally required to close as a direct result of coronavirus restrictions set by one of the four Governments in the UK.
These businesses would be able to claim two-thirds of their employee’s lost wages up to a maximum of £2,083.33 per month.
Employees could also be eligible for other support, such as Universal Credit, which they would have to apply for themselves.
For both JSS Open and JSS Closed, the employer would be required to continue paying National Insurance and minimum pension contributions and could choose to top up their employee’s salary.
5. How does furlough affect annual leave?
Employees who haven’t taken all of their statutory annual leave entitlement due to coronavirus will be able to carry over up to four weeks of unused leave into the next two years of annual leave.
Full-time employees working a five day week must receive 28 days – or 5.6 weeks – paid annual leave a year.
Part-time staff are also entitled to 5.6 weeks of paid annual leave but this will be fewer than 28 days.
For example, if you work three days a week then you are entitled to 16.8 days leave a year (3×5.6) because that’s how long your working week is.
Many employers adopt a “use it or lose it” policy and won’t let staff carry it over.
They also have a legal obligation to make sure employees take their statutory entitlement in any one year or face a financial penalty.
But the new regulations override this to allow key workers to continue working in the face of the coronavirus lockdown without losing their annual leave.
It also eases the pressure on key businesses who could be left short-staffed during the fight against COVID-19, such as in the food and healthcare industries.
Bosses must allow staff to take their annual leave at a later date though, and can’t replace it with payment in lieu unless the worker is leaving employment.
6. Can I be furloughed if I have more than one job?
If you have more than one employer then you can be furloughed for both your jobs.
Consequently, if you are furloughed by two employers you are eligible for government support amounting to up to £5,000 per month.
Each job is separate and the £2,500 cap applies to each employer specifically.
You can also continue working one job while being furloughed on another.
7. Can you work elsewhere if you’ve been furloughed?
You can work somewhere else if your contract with your current employer lets you and getting a new job will not affect your furlough pay.
But you should speak to your employer first as you are technically still working for them.
If you get a new job, you should make sure you can go back to work for the employer who furloughed you when they decide to bring you back
Also, make sure your new employer gives you the HM Revenue and Customs (HMRC) starter checklist form – you’ll need to complete Statement C.
Some contracts may prohibit employees from taking up other work but it may be subject to negotiation.
You should also be aware that earning a second salary may affect the amount of tax that you pay which will have an impact on your take-home pay.
8. Can I do volunteer work or training while I am on furlough?
A furloughed worker can take part in volunteer work or training provided it does not generate revenue for their employer.
If a furloughed worker is required to complete, for example, an online training course then their employer will be required to pay them for the hours spent training.
But you can sign up to the army of thousands of NHS volunteers to help the health service with tasks such as delivering medicines from pharmacies, driving patients to appointments and making regular phone calls to check on people isolating at home.
9. Can I be furloughed if I am on maternity leave?
Employees on the government-mandated 39 weeks of Statutory Maternity Pay (SMP) will still have to be paid by their employer.
This covers six weeks paid at 90 per cent of weekly earnings, followed by £148.68 or 90 per cent of your average weekly earnings (whichever is lower) for the next 33 weeks.
Anything your company pays you on top of this amount can be covered by the government furlough scheme up to £2,500 per month.
10.What about if I am on sick leave or unpaid leave?
Any sick days you take must still be covered by your employer.
But, if you are restricted from working by the government coronavirus restrictions then they will be paid for like normal under the furlough scheme.
11. Can a new employer put me on furlough?
A new employer will also not be able to put you on furlough since only employees who have been on the payroll since the end of October are eligible for the scheme.
12. Can I still be made redundant if I’m on furlough?
Even though furlough is designed to keep workers employed, unfortunately, it doesn’t protect you from redundancy.
But it also won’t affect your redundancy pay rights if you are let go from your job.
Your employer should still carry out a fair redundancy process.
If you’ve been working somewhere for at least two years, you will be entitled to be consulted on the redundancy lay-off first and to receive a statutory redundancy payment.
How much you’re entitled to depend on your age and length of service, although this is capped at 20 years. You’ll get:
- Half a week’s pay for each full year you were under 22,
- One week’s pay for each full year you were 22 or older but under 41,
- One and half week’s pay for each full year you were 41 or older.
There should be a period of collective consultation as well as time for individual ones if your employer wants to make 20 or more employees redundant within 90 days or each other.
You are also entitled to appeal the decision by claiming unfair dismissal within three months of being let go.
13. Do you still have to pay income tax and NICs?
The main point of furlough is to make sure that staff aren’t laid off if a business sees a significant drop or zero revenue during the crisis, so it’s treated as a normal paycheck.
This means you will have to pay income tax and national insurance contributions on the amount that you’re paid.
If your company chooses not to top up your salary so your income drops to 80 per cent, then the amount of income tax you pay will also decrease proportionately.
“If you have been furloughed your pay will be subject to the usual income tax and national insurance,” explained Maree Firmin, Director of accountancy firm Firmin and Associates Ltd.
“Usually, for salaried workers paid through PAYE, your personal allowance and tax thresholds are divided by 12 which means your take-home pay during the tax year is the same each month, providing your circumstances, like your tax code or benefits in kind, don’t change.
“Therefore, if your furlough income is less than your normal monthly salary you would expect to pay less tax.”
16. What about my pension?
Originally, the government grants covered an employer’s auto-enrolment pension contributions so staff don’t miss out.
It paid minimum contributions of 3 per cent based on the furloughed salary, as long as employers continue to pay the minimum 5 per cent.
But since 1 August 2020, employers have no longer been able to claim minimum employer pension contributions under the furlough scheme.
This means both the employer and employee must continue to pay at least the minimum contributions in full.
Employers should continue to work out contributions based on the amount the employee is being paid even if they are part furlough or part-time working.
15. Can my employer “rotate” members of staff on furlough?
Employers can choose to rotate which staff members are put on the furlough scheme.
This gives staff equal opportunities to earn 100 per cent of their salary at alternating times.
But you must be furloughed for a minimum of three weeks and employers must decide who goes on and is take off the furlough scheme based on business reasons and not discriminatory decisions.
Staff will also need to agree to be rolled onto the scheme.
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