On the 20th March, the Chancellor of the Exchequer announced one of the most generous economic interventions ever put into place outside of wartime – the Coronavirus Job Retention Scheme, otherwise known as ‘furloughing’. Designed to protect jobs that may otherwise be lost in the wake of COVID-19, furloughing could be a vital lifeline for many workers and businesses in the hospitality industry.
Here, we’ll take a detailed look at the scheme and what you’ll need to consider before putting it into practice.
What is furloughing?
Although you’re unlikely to have heard it before, the term ‘furlough’ isn’t a new one. To ‘furlough’ someone is to grant them leave of absence.
In our current context in the UK, furloughing someone (or putting them on the Job Retention Scheme) is a way of keeping on employees you would otherwise make redundant.
So, if the coronavirus pandemic has resulted in a lack of work for some or all of your employees, rather than laying them off, you can temporarily dismiss them and use the government’s scheme to pay them up to 80% of their salaries. The employees you furlough won’t be able to do any work, but they will need to be ready to return to work when the situation changes.
This scheme is open to all UK businesses who pay employees via PAYE.
Are you eligible for the scheme?
Any UK employer with a UK bank account is eligible to claim on this scheme, as long as the furloughed employee has been on the employers payroll since the 28th February, 2020. This scheme does not apply to contract or self-employed workers. However a separate scheme is available to support the self-employed which they may apply for themselves.
If you're unsure whether you're eligible read the full HMRC guidance for eligibility on the government website.
How to add your employees to the scheme
1. Designate furloughed workers
You can ask for volunteers or fairly select people to join the scheme. Remember, these employees won’t be able to do any work while they are being furloughed, so you should choose employees who are short on work due to the pandemic.
2. Check the employees are in agreement
You can’t just impose furlough on employees, so you’ll need to make sure they’re in agreement. You should explain why you would like to place them on the scheme and explain the alternative, which is likely to be redundancy.
3. Confirm the agreement in writing
Placing employees on the Job Retention Scheme will temporarily change their terms of employment, so it’s important that you confirm this change in writing. A helpful template letter can be found here.
4. Tell HMRC
You’ll need to give HMRC details about your furloughed employees through an online portal. Details on how to access it haven’t yet been released.
How do furloughed workers get paid?
You’ll need to keep furloughed workers on your company’s payroll as this is a condition of the scheme.
While they are furloughed, employees will continue to receive their pay from you, the employer, rather than from HMRC. HMRC will then reimburse the employer 80% of the furloughed workers’ wages - reportedly in late April. That said, HMRC is still working to set up a system that will allow them to do this. If you’re struggling to make ends meet in the meantime, you may want to consider applying for a Coronavirus Business Interruption Loan or a Time To Pay arrangement with HMRC to defer your VAT or PAYE obligations. You can arrange a Time To Pay arrangement by calling 0800 024 1222 (9am-4pm Monday to Friday).
If you would like to fund the 20% difference between what you receive from HMRC and the employee’s full salary, you can – but you don’t have to. Employees can also consider applying for additional support from the welfare system, such as Universal Credit.
While workers are furloughed, they remain your employees despite not carrying out any work. As it stands, this means they should continue to accrue any contractual benefits, such as holiday allowance, while they are being furloughed.
Frequent furlough questions
How long will the scheme be in operation?
HMRC will cover the cost of wages backdated to 1st March 2020. It’s initially open for three months but could be extended if circumstances call for it.
Can employees ask to be furloughed?
Yes, employees that are currently working can ask to be furloughed, but that doesn’t mean you have to grant their request. Note that furloughing shouldn’t be used instead of sick pay – rather, it’s designed to protect the jobs of those who would otherwise be laid off.
Can furloughed employees work for other companies?
Yes, furloughed employees can work for other companies. Employees may also be part of different Coronavirus Job Protection Schemes by two, or more, different employers.
Will HMRC pay for 80% of employees commission/bonus, or only their base salary?
HMRC will only pay 80% of the base salary and any fees, commissions and bonuses cannot be included in the scheme. Base will be taken as the average for the tax year 19/20 or the corresponding month in 2019, whichever is greater.
Can I use put employees which I have previously made redundant onto the Coronavirus Job Protection Scheme
Yes, any employee you have made redundant since 28th February may be re-employed and placed on the scheme. You will be fully employing though and so may be forced to make them redundant again if the scheme ends and business hasn't picked up. You may wish to negotiate the terms of this potential outcome as a contract variation when placing them on the scheme.
Do I have to give back the money I receive?
No, the money you receive from HMRC for your furloughed employees is a grant rather than a loan.
Can I reduce everyone’s hours and share the scheme between employees?
You cannot share the scheme between employees by reducing their hours. However you can rotate employees who are on the scheme as long as they are on it for a minimum of 3 weeks each time they are put on the scheme. This may reduce isolation for employees who may be on the scheme for months.
What can furloughed workers do?
Although employees aren’t allowed to work for your company while they’re in furlough, you may need them to pass on enquiries that come to their personal inboxes or there may be some self-development they could undertake in preparation for their return to work. The line is a fine one, so we’ve listed some dos and don’ts for furloughed employees.
Furloughed employees can
- Use the time to upskill
- Carry out industry research for their own personal benefit
- Tell clients or suppliers they've been furloughed
- Communicate with clients or suppliers about non-work-related topics
- Take calls and emails from clients and suppliers to pass them onto someone who is actively working
- Be included in company updates and communications
- Volunteer outside the company
- Be instructed to complete training (although this time must be paid by the employer)
Furloughed employees can't
- Communicate with any clients or suppliers about work
- Work on any booked events or enquiries
- Work on any company marketing, such as posting on company socials or editing the website
Although the government hasn't yet offered clarification, it's unlikely that furloughed employees will be permitted to do any paid work for anybody else while they're on the Job Retention Scheme.
Furlough tips for the events industry
It’s no secret that the events and hospitality industry has been hit heavily by the coronavirus pandemic. After all, we’re an industry that thrives off face-to-face contact – something that simply can’t happen with the current lockdown in place. So, we expect many events companies and venues to make use of the Coronavirus Job Retention Scheme.
At Hire Space, we placed eight of our employees on the scheme just a few days after it was announced. These were all individuals in client-facing roles – roles which have experienced a reduction in workload since the coronavirus outbreak. While we can only speak from experience, we thought it would be helpful to share some of the considerations we felt were important when putting members of our team on the scheme:
1. Be honest
Talk to your team honestly and openly about any downturn in business and explain the reasons you will be placing people on the scheme. At Hire Space, we spoke to everyone together to explain our reasoning, before letting individuals know that they had been affected. This meant that everyone was on the same page.
2. Share the burden
None of us could have predicted the coronavirus pandemic. If you need to place employees on the Job Retention Scheme, they’re likely to be understanding. In fact, adversity breeds community, so we’d hope the team would support you in getting everyone through this difficult time – that’s certainly what’s happened here at Hire Space.
3. Keep in touch
They may not be able to work, but your furloughed employees are still an important part of your team and culture. They may also struggle with a lack of social contact and purpose during self-isolation. At Hire Space, we still involve our furloughed workers in team updates and virtual socials, to keep them feeling a part of what we do.
We’ll keep this page updated as the government releases more guidance about the Coronavirus Job Retention Scheme. If you have any further questions, please feel free to contact us on email@example.com, where we’ll do our best to help.
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