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An Introduction to Furloughing

Posted: Tuesday, 7 April 2020 @ 11:06

Until only a few weeks ago no one in the United Kingdom had heard of the term furloughing. This blog post provides a brief explanation.  

What does furlough mean?

A Furloughed worker is not a recognised term in UK employment law, although it is often used in the United States. To furlough means to “lay off or suspend temporarily”, usually without pay. In the UK, the legal term would normally be “laid off”. While furloughed employees still technically retain their jobs, the furlough itself means that they stop working for their employers and do not earn a salary. The idea behind this is that this is a temporary arrangement, and workers will one day be able to return to their jobs.  

What is the UK furlough scheme and what do you get?

Under new rules from 1st March 2020 and running for at least three months, companies can now “furlough” employees rather than dismiss them. Through this scheme, the government will pay up to 80 per cent of people’s wages, up to a maximum of £2,500 per month. Anyone working in a full time job or on a PAYE basis on 28th February can be furloughed.  However, it does not apply to people that may have changed jobs between the end of February and the government announcement.

What happens if you earn more than £2,500 per month? 

You will not qualify for 80 per cent of your salary if you earn more than £2,500 per month. In that case, an employer could choose to “top up” your salary, or you could be eligible for support through the welfare system, including Universal Credit. If you receive a regular salary, the 80 per cent should be calculated based on an employee’s actual salary before tax (their gross salary), as of 28th February. If your pay varies the 80 per cent limit will be applied to the same month’s earnings from a previous year, the average monthly earnings for the 2019/20 tax year or an average of their monthly earnings since they started work — whichever is highest.

Is it the same as being on gardening leave? 

Being placed on furlough is similar to gardening leave. You would still be paid by your employer and will still pay taxes from your income but you would not be able to continue working for your employer for the duration.

Who can apply? 

All businesses registered and operating PAYE and with a UK bank account as of 28th February 2020 can apply. Employees must have been on PAYE as of 28th February 2020. They can be full time, part time, agency, flexible or zero hours contracts. Those made redundant after 28th February are eligible to be furloughed if re-hired. The employees can do no work during the Furlough period that generates revenue for the company. They can carry out training or voluntary work. Employees on unpaid leave or Statutory Sick Pay cannot be furloughed until they return.