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Furlough Leave

‘Furlough leave’ and the Furlough Scheme in the UK.

What is ‘furlough leave’?

Originally a term In the United States, a furlough (/ˈfɜːrloʊ/; from Dutch: verlof, “leave of absence”) is a temporary leave of employees due to special needs of a company or employer, which may be due to economic conditions at the specific employer or in the economy as a whole.

What measures are in place for furloughing an employee, placing employees on ‘Furlough Leave’ in UK English?

The Chancellor announced 20th March an unprecedented state intervention package aimed at further helping employers beyond the measures to support the businesses. This time the measures were about protecting business employment or rather preventing mass unemployment through Furlough Leave – UK’.

These measures are understood to apply to all employers including limited companies, limited liability partnerships, charities, partnerships and sole traders who employ staff.

Financially, ‘furlough’ leave means:

HMRC will:

  • Reimburse, by way of a grant, up to 80% of the employee’s wage for all employment costs
  • Up to a cap of £2,500 per month (though it is unknown if this a net or gross salary or capitation rate reducing the benefit to the employee).
  • Set up a system to enable reimbursement which will be available shortly.
  • Backdated claims to 1st March for furloughed employees.

It will be managed through the payroll system and refunds will be made by HMRC.

What steps need to be taken by the employer?

The current guidance states that the employer will need to determine which employees are to be subject to Furlough Leave and notify them of the same. Employers should take into account the usual employment law measures that might be needed to change terms of employment. – This implies that there must be consultation and ideally agreement between the employer and employee.

Once designated and the employee is notified, a submission to HMRC will be required, confirming details of the employees on ‘furlough leave’ and their pay arrangements.

At the time of this blog, the portal to enable the payments is not yet set up and, therefore, the information required in the portal is, as yet, unknown.

What about the remaining part of the employee’s salary?

The guidance for employees’ currently states: “Your employer could choose to fund the differences between this payment and your salary but does not have to.” How this might play out will be interesting and might help identify the better employers in the UK.

As an employee, what must I do?

A furloughed employee must not work for their employer whilst on Furlough Leave.

How long will the scheme last?

The Government say that it will last at least 3 months from 1st March 2020 and so will extend it if necessary.

Other Issues
There are still areas that need clarification; for example, what about employees on irregular hours or does it apply to directors pay?

These packages have enabled many well-known brands to better protect us and their staff by minimising risk and closing their chains with reduced impact on their employees.

These measures will also reduce the risk to identified key workers from health care to supply chains like food.
Once again Brookes and Partners have helped in pulling this blog together – thank you.

This blog is offered in good faith – do not rely on it. The definitive source of information is gov.uk as follows:

Further information for employees read these.

For Business information read these.

We await with interest the measures the government may employ to help the huge number and sector spectrum of self-employed business people who are the life blood of the UK economy.

It remains vitally important that individuals and families don’t hoard resources or ignore government advice.

Author/editor – Mike Jenkins