5 Things You Need to Know About the Furlough Scheme

5 Things You Need to Know About the Furlough Scheme

As part of the United Kingdom’s response to the unprecedented COVID-19 pandemic, the government has introduced the Coronavirus Job Retention Scheme or the Furlough Scheme. In this initiative, employers will be given government support to continue paying part of the furloughed employees’ salaries until October 31.

What Is Furlough?

But first, what does the word “furlough” mean? Generally, “furlough” means temporarily taking a leave of absence from work due to economic conditions that have affected the company or the country. 

The UK government temporarily introduced the Furlough Leave in order to provide employers with an option to keep employees on payroll without them working or while they are working reduced hours between July and October. The power to furlough employees was designed so that employers who were severely affected by the pandemic can claim support from the government to keep the affected employees on their payroll. Being furloughed is different from being laid off without pay or being identified as a redundant employee. 

In the Furlough Scheme, an employer can claim for up to 80% of an employee’s current salary, with a cap of up to £2,500. National Insurance Contributions (NICs) and pension contributions may also be claimed by an employer, but they are not required to contribute anything for a furloughed employee’s salary in the month of June.

What Do I Need to Know?

If you are one of the employees who are on Furlough, this handy guide may help you set a timeline for yourself and answer your question of how long you can keep yourself on Furlough with the assistance of the government’s Furlough Scheme.

1. The Furlough Scheme is now closed to new entrants.

The final date an employer can furlough an employee for the first time was June 10, and the Furlough Scheme was finally closed to new entrants on June 30. However, the furloughed employees must have a full three-week furlough period completed before they are eligible for this scheme.

2. The Furlough Scheme ends on October 31.

Originally, the Furlough Scheme was scheduled to finish at the end of June. However, the government decided to extend it until October 31, with changes on how the 80% support for an employee will be given both by the government and the employer.

3. You can only be paid for the hours you do not work.

The Furlough Scheme only applies to employees who have been previously furloughed. They can now return to work between July and October, and their employers can still claim the support for the normal hours that they didn’t work. However, this scheme will only cover the hours that an employee wasn’t working; the employer must still pay their hours at work, even when they are only working part-time.

4. An employer will begin paying NICs and pension contributions starting August 1.

Beginning August 1, an employer will have to pay their employees’ NICs and pension contributions up until the end of the Furlough Scheme on October 31. They can no longer claim support for these contributions from the government.

5. There are changes to the government’s support from August until October.

Starting August 1, there are changes on the amount that the government and the employer will cover under the Furlough Scheme in order to continue the support until October 31.

As mentioned in the previous item, employers will have to pay their employees’ NICs and pension contributions starting August 1. 

In September, the government will pay 70% of the furloughed employees’ wages, up to a cap of £2,187.50, while the employer will cover the remaining 10% and their NICs and pension contributions. This is so an employee can still get a total of 80% support.

By October and until the Furlough Scheme ends on October 31, the government will pay 60% for the hours the employee does not work, up to a cap of £1,875, while the employer pays the remaining 20% and their NICs and pension contributions.

What Papers Do I Need to Keep?

The government conducts the Furlough Scheme in partnership with the affected employer. This is why, if you are on Furlough, it is wise to keep your records organized and ensure you have a written agreement with your employer at all times to document your employment status. Here are some reminders on record-keeping that you should keep in mind:

  • All employers must have the employee’s written consent to furlough. 
  • Employers must also stop a furloughed employee from working before the end of June, and a written agreement on the terms of their part-time work between July and October must be confirmed in writing.
  • Ensure that you and your employer keep a record of the following for six years:
    • The HR contract given to you for the furlough scheme
    • The amount claimed 
    • The claim period 
    • The claim reference number
    • Calculations made on the support you will be claiming both from the government and from your employer, as well as the amount of contributions they are making.
    • The usual number of working hours
    • The actual number of working hours
    • Any question you have had with your employer on the Furlough Scheme and their answers to your inquiries.

What Happens After October 31?

As of writing, the government has not released any plans yet on what happens to the Furlough Scheme after October 31. However, many people are ringing the alarm bells already as they consider ending the Furlough Scheme by the end of October a mistake that will drive up the country’s unemployment rate. For now, employees under the Furlough Scheme will have to wait for further announcements from the government.

Summary and Conclusion

The Furlough Scheme is a partnership of the UK government with an employer in order to support employees whose jobs were severely affected by the COVID-19 pandemic. Both the government and the employer will have to cover 80% of the furloughed employees’ wages until the end of the scheme on October 31. These are the reasons why, as an employee, you should keep records of any and all discussions on the Furlough Scheme with HR and your employer in writing. 

About the Author

Annette Ferguson 

Owner of Annette & Co. - Chartered Accountants & Certified Profit First Professionals. Helping online service-based entrepreneurs find clarity in their numbers, increase wealth and have more money in their pockets.