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News & Press: International Trade News

‘Furlough’ explained: government gives new guidance on job retention scheme

30 March 2020  
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As COVID-19 continues to wreak havoc on the UK economy, many businesses are exploring the concept of ‘furloughing’ their employees until the battle against the virus has been finally won.

But what does this new employment buzzword mean, for both employees and the firms that employ them?

In normal circumstances, furlough means unpaid leave of absence granted by employers if requested by a staff member.

COVID-19 definition

In the context of COVID-19 and the government’s measures to help businesses survive its economic fall-out, furlough has taken on a different meaning.

For staff employed on a PAYE basis, companies are being encouraged to put their jobs on hold during the disruption period, rather than laying them off, with the incentive of the state paying 80% of salaries up to £2,500 a month.

Designed to run from 1 March for three months, the government has said it will extend this period if necessary.

On Friday (27 March) the government issued new guidance on its Coronavirus Job Retention Scheme.

Businesses furloughing staff:

  •  can claim a grant covering 80% of the wages for a furloughed employee, subject to a cap of £2,500 a month
  • have employer National Insurance and pension contributions of furloughed workers covered by the government – on top of 80% of salary
  • can include full- and part-time employees, those on agency, flexible or zero-hour contracts
  • do not need to place all employees on furlough
  • must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account
  • should discuss with staff and make any changes to employment contracts by agreement
  • can make furlough claims backdated to 1 March through a government portal due to go live by the end of April 2020

For employees:

  • those made redundant after 28 February can be reemployed and placed on furlough
  • when on furlough, an employee cannot undertake work for or on behalf of the organisation, including providing services or generating revenue
  • furloughed staff can volunteer for the NHS without risking their pay
  • while on furlough, an employee’s wage will be subject to usual income tax and other deductions

(Source: www.gov.uk)

Sandwich shop chain Pret a Manager is one of those businesses availing of the furlough scheme.

Pano Christou, CEO, Pret A Manger said that protecting jobs “was our number one priority”.

The firm was committed to keeping jobs across Pret “but thanks to the government’s support can also keep paying all of 8,000 UK employees, despite the fact that our UK shops are not currently open,” Christou said.

For a more detailed guide to the scheme, please see here:

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme