What Does It Mean To Get Furloughed – UK

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The reopening of essential functions and stores around the country have not curbed the rampant rise of unemployment. Millions of families have not only health and safety at the forefront of their worries but also their livelihood that supports their daily needs. The number of UK’s unemployed and underemployed citizens applying for benefits claims reached a record high, possibly the highest one ever recorded since 1970.

In April alone, 856,500 individuals are applying for a jobseeker’s loan and a universal credit claim. Some of these seekers are still employed but forced into using their statutory sick pay or put under temporary leave called furlough. The economic fallout is heavily affecting all business industries, causing employers to resort to layoffs and furloughs.

What Does It Mean To Be Furloughed?

A “furloughed” employee refers to someone who had been temporarily put under unpaid, mandated leave of absence from work. They are still considered as employed workers of their company, retaining their job positions and their names on the company’s payroll.

There are instances where furloughs pertain only to a modification of an employee’s working hours. Provided that a worker has a non-exempt status, employers can reduce their working hours, as well as their payments.

Furloughed workers are still entitled to employment benefits such as the continuance of medical or life insurances, statutory sick pay, and maternal or any other parental leaves. Employers should also give employees a 60-day notice (more or less) before enacting temporary layoffs.

Why Furlough Workers? 

Businesses have a variety of reasons to furlough workers. Private establishments may temporarily lay off their workers due to plant shutdowns, company reorganizations, financial constraints, or seasonal work while public organizations may do it due to budget cuts or unapproved funding.

There is no definite time stated by the law for furloughing workers. It is based on the company’s discretion or the agreement struck by parties involved. Furloughing is considered as a short-term workforce reduction method, so typically, employers may furlough staff from 3 weeks to 1 year.

The Job Furloughing Scheme In The UK

During the past few months in the pandemic-stricken country of the UK, many businesses subjected their employees into a mandated temporary leave of absence. A part of it is due to the declining business economy, while the other part is because of the government’s Job Retention Scheme.

The program aims to help UK employers to offer financial support to their otherwise laid-off employees. The scheme urged employers to put workers in furloughs instead of laying them off by shouldering 80% of their employees’ salaries (up to £2,500 per month). It will also cover the National Insurance payments and pension contributions of workers with a mandatory collection percentage of 3%.

Employers are responsible for claiming and distributing money. They are also given the option to top-up employee payments and contributions, but they are not legally required to do so.

Who is eligible?

Currently, two-thirds of businesses around Britain already signed up for the scheme, accounting for over 7.5 million workers. Businesses, public sectors, recruitment agencies, and any other entity with a UK payroll can apply for the scheme.

Approved organizations may claim the benefits of the scheme provided that their furloughed workers are as follows:

  • Employees on PAYE payrolls on or before March 19
  • Enrolled in PAYE online and has a UK bank account.

This includes full-time, part-time, temporary, agency workers, zero-hour contractors, and apprentices.

Through this program, the government saved over 8 million jobs, avoided redundancies, and helped the livelihood of millions of workers. Despite an apparent health crisis, it is important to provide suitable help and options for the building block of our economy—the workforce.

I talk more about this in my weekly Podcast. If you have any curious questions, feel free to get in touch with the Annette and Co. team through our socials!  

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.