Many businesses have taken the difficult, but understandable, decision to furlough staff during the covid-19 pandemic. The furlough scheme, officially known as the Government Job Retention Scheme, announced at the start of the UK’s response to coronavirus in March 2020, was initially in place for three months, to the end of May 2020. On 17th April 2020, the Chancellor Rishi Sunak announced that the furlough scheme would be extended until the end of June ‘and longer, if necessary’.
Initially, the cut-off date for employees to be able to be furloughed was the 28th February 2020. This meant that the employee had to be employed by the business looking to furlough them on the 28th February. This has since been extended to 19th March 2020.
What does furlough mean?
Officially, furlough means ‘a leave of absence’ and is typically a term that would be used in military or armed services. Before March 2020, many people in the UK may never have heard this term before, let alone used it regularly in everyday life. It’s a term rarely used in the UK economy, but one that is much more common in the laissez-faire US employment market.
In the UK government’s furlough scheme in response to coronavirus, their priority was to protect jobs and minimise the number of redundancies from the impact of coronavirus. This would see the government pay 80% of people’s wages, up to £2,500 per month.
The ability for businesses to be able to claim their furloughed staff’s salaries became live on 20th April, and within 24 hours, over 140,000 businesses had followed the process to register and claim the support from the government.
When can I furlough staff?
You can furlough staff at any point during the government lockdown, if they were employed by you on the 19th March 2020. Some companies took the opportunity immediately to furlough staff, especially those reliant on being able to work in the office or visit customers face to face. Others have taken a slow and steadier response, judging the impact of the pandemic on businesses, and making as few changes to their team or business as possible.
Staff can be furloughed from as few as three weeks, to three months (or more, depending on changing government guidelines).
How do I furlough staff?
You need to be aware that you will still need to pay your employee, but the money will be refunded by the state. During the time your employees are furloughed they must not undertake any work for your company. This includes staff meetings, calls and emails.
The government will cover 80% of a furloughed employee’s salary up to £2,500 per month, plus the employer’s national insurance and pension contributions. As an employer, your only responsibility will be for any holiday your employee(s) accrue during this time. You can top up the monies paid to your employees to 100%, but you don’t need to, and are not required to in order to receive the grant from the government.
Remember, you don’t need to furlough all your staff. The opportunity to furlough some of your staff, whilst others keep working, is a way for you to keep your business up and running, if possible, whilst not having to cover the costs of all your employees whilst your revenue and cash flow may be falling due to extraneous factors, brought about by the onset of coronavirus.
Likewise, employees who can no longer come to work because of school closures can also be furloughed.
What happens when furlough ends?
When the furlough scheme ends, employees can return to work as normal. There may be cases where businesses cannot afford to take staff back on, or where staff are not needed. Here, businesses would have to make decisions themselves on how to proceed; that could be termination of employment, redundancy, or negotiating fewer hours to reduce costs.
In other words, once furlough ends, it’s business as usual with regards to company decisions, who you employ and what you pay them.
How we can help at Hegarty Solicitors
We are keeping up to date every day on government announcements and the impact that the coronavirus pandemic is having on businesses so we can advise our clients when they turn to us for help and support.
You may need to make redundancies or undergo a company restructure soon due to the impact covid-19 has had on your business.
Whatever the outlook, our specialist employment law solicitors can talk you through the process, how to approach changes to make and help you understand your duty of care and the regulations you’ll need to follow whatever the outcome. We will help you manage your business through these unprecedented times, so you and your team can flourish once restrictions have subsided.