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Furlough rules explained

Furlough rules for employers and employees

Furlough rules explained for employers and employees

With a quarter (7.5 million) of the UK workforce on furlough, both employers and employees must understand the rules of the scheme. Here’s our summary of the furlough rules.

What is the furlough scheme?

Furlough is a process by which an employee or worker has an agreement with their employer to cease working on a temporary basis. The employee/worker still remains employed under their employment contract.

The scheme applies to both full time and part time employees/workers and includes:

  • agency staff
  • those on zero hour contracts
  • apprentices
  • those who are temporarily unable to work due to childcare issues or are caring for a vulnerable person
  • those that are shielding under NHS advice due to health conditions or shielding another within the same household

The furloughing process

The employer must be fair when selecting which employees to place on furlough in order to avoid any possible discrimination. The employer should consult the employee and the employee should agree to the furlough before it takes place. Please note that the employee must agree to furlough unless there is a lay off clause within their contract of employment.

The furlough agreement itself should be in writing and should include:

  • The date furlough is to commence
  • The amount of pay the employee is expected to receive during this time
  • When a review of furlough will take place
  • How the employee is to remain in contact

The employee is still contracted under their current contract of employment and should remain on the payroll. The furlough should last for at least 21 days.

If the employer wishes to extend the furlough period, this should be done in writing to the employee. When the employer wishes to end the furlough, this  notice should also be done in writing to the employee.  There is no required minimum notice period, but the employer should discuss with the employee any plans to end the furlough as soon as possible. This will allow the employee time to raise any issues or concerns they may have before returning to work.

Pay entitlement under the furlough scheme

The employer and employee must agree any reduction in pay at the outset in accordance with the furlough process.

The employer is entitled to claim back up to 80% or £2,500 for each employee on furlough (whichever amount is lower) from HMRC.

If they wish, the employer can choose to top up any wages from 80% up to 100%. This is not a legal requirement of the employer, but should the employer choose not to do so then they must explain why.

Those that work at national minimum wage may receive less than the minimum wage when on furlough. This will not be in breach of the National Minimum Wage Act 1998 or the National Minimum Wage (Amendment) Regulations 2016, as long as the employee is not working. If the employee undertakes any training then they must receive at least the minimum wage for those hours.

Additional advice under the furlough scheme

Any employee that is furloughed for one job, has the option to do work for another employer whilst on furlough. S/he should remain available for work should the furlough end, under the terms of the furlough agreement and the contract of employment.

The employer has the option to re-employ a person who ceased working for them, on or after 28th February 2020 and put that person onto the furlough scheme. This applies to those employees who were made redundant or left voluntarily shortly before the Covid 19 pandemic.

Conditions for the above are:

  • The employee must have been on PAYE payroll on 28th February 2020.
  • Must have been an RTI submission to HMRC on or before 28th February 2020.

As of 12 May 2020 the furlough scheme has been extended to the end of October 2020. However new flexibility measures will be introduced from August 2020, which is likely to include options for part time work and changes for contributions towards salary.

Read full Government guidance for employers and self-employed.

This article was up to date at the time of writing.

Please note that the Government is constantly updating and changing legislation in relation to the Covid 19 pandemic and as such the furlough scheme is also under constant review. Changes will likely occur as time progresses, and we shall endeavour to update this article with regards to those changes as they happen.

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