FURLOUGH is a word that many Brits had never heard of until the coronavirus crisis. Is the furlough payment a grant or a loan?
Chancellor Rishi Sunak is offering up to £330 billion to workers and business owners badly effected by coronavirus. The impact of COVID-19 on finances means millions more will be relying on the Government in the coming months. Furlough is one way those out of work will be supported, but what is it? A grant or a loan?
What is furlough?
Furlough is when bosses need their staff to take unpaid leaves of absence, meaning they are technically still employed but won’t work or get paid. The government has pledged to pay 80 percent of furloughed employees wages up to £2,500 a month. Employees who are placed on furlough must be furloughed for at least three consecutive weeks and then taken off when they return. You can be furloughed multiple times, but each time it must be for a minimum period of three consecutive weeks.
Is furlough a grant or a loan?
Furlough is a grant, since you don’t have to pay the money back.
The Gov.uk website explains: “If you cannot maintain your current workforce because your operations have been severely affected by coronavirus (COVID-19), you can furlough employees and apply for a grant that covers 80 percent of their usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.”
Claims can be backdated until March 1, 2020 where employees have already been furloughed.
Who is eligible for furlough?
In order to claim furlough, you must have:
- created and started a PAYE payroll scheme on or before 28 February 2020
- enrolled for PAYE online – this can take up to 10 days
- a UK bank account
Any entity with a UK payroll can apply, explains the Gov.uk website. This includes businesses, charities, recruitment agencies and public authorities.
If you made employees redundant or they stopped working for you after February 28 2020, you can re-employ them, put them on furlough, and claim for their wages through the scheme. Employees who are furloughed can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are also eligible to be furloughed.
If an employee is working on reduced hours or for reduced pay, they aren’t eligible for the scheme.
Those who are on sick leave or self-isolating will get Statutory Sick Pay, they can’t be furloughed at the same time. Those who are shielding and unable to work from home, or those who have caring responsibilities related to COVID-19 can be furloughed.
Apprentices can also be furloughed while continuing to train, but they must be paid at least the Apprentice Minimum Wage, National Living Wage or National Minimum Wage for all time they spend training.
Individuals can also furlough their employees, for example parents can furlough their nannies.
This is fine as long as they pay them through PAYE and they were in their payroll on or before February 28, 2020.
See the full list of who can is eligible here. https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
When can I claim furlough?
Workers across the nation are being furloughed every day throughout lockdown. The Government scheme is in place for 3 months starting from March 1 2020, but will be extended if necessary. However, the online service used to claim furlough is still not available.
The Gov.uk website says: “We expect it to be available by the end of April 2020.”
How do I claim furlough?
Only employers can put their staff on furlough.
In order to claim you will need the following:
- your phone number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum period of 3 weeks)
- your bank account number and sort code
- your ePAYE reference number