What is Furlough and Who is Eligible? image

What is Furlough and Who is Eligible?

Staff Squared date icon17th April 2020

Tag iconManaging staff

Following on from the government’s instruction to stay home to help our NHS and prevent further spread of the coronavirus, many businesses are having to consider what that means for their staff.  

Some companies have the means to allow their staff to work from home, meaning that business can continue as normally as possible while employees remain working in the safety of their homes. However, this is not true for all businesses. Whether it’s due to the nature of their industry, that their clients or third parties who are relied on to provide part or all of a service or something else, some employers are just not able to facilitate remote working for some or all of their staff.  

Dismissal as a Result of Coronavirus 

In many cases, this does, unfortunately, mean that employees are having to be let go in circumstances where their employer feels they have no other choice. This might include the company having to downsize or even go into administration. However, employers should consider whether they can place their staff on furlough leave before taking this drastic measure.  

What is Furlough? 

Furlough refers to a temporary leave of absence from work. This can be due to economic conditions affecting a singular company or matters affecting the whole country.  

UK employment law has not really recognised this term until recently, but furlough has been temporarily introduced by the UK government in response to the outbreak of COVID-19 

The introduction of furlough leave provides employers with an option to keep employees on the payroll without them working, rather than having no choice but to terminate their employment or ask staff to take leave unpaid for an extended amount of time 

Who is Eligible for to Apply for Furlough? 

Employers 

Any employer, regardless of size, is eligible for the scheme. This includes: 

  • Businesses. 
  • Charities. 
  • Recruitment agencies (if the agency workers are paid through PAYE). 
  • Public authorities. 

However, an employer must have created and started a PAYE payroll scheme on or before 19 March 2020 and have a UK bank account in order to apply to the scheme.  

Employees 

Staff can agree to being furloughed if they are working for a business that would have otherwise needed to dismiss them as a result of the current climate. However, they must have been on the employer’s PAYE payroll on or before 19th March 2020. The following employees are eligible for furlough:  

  • Full-time employees. 
  • Part-time employees. 
  • Employees on agency contracts (provided they are not working at all). 
  • Zero-hour contract workers (provided that they are employees, albeit on flexible contracts). 

If an employee falls under one of the following categories, there may be some complexities around furlough (find more about this on the CIPD website): 

  • Have been on sabbatical or unpaid leave. 
  • Recently made redundant or laid-off. 
  • Are pregnant or on maternity leave or adoption/paternity/shared parental leave pay. 
  • Caring for children 
  • Migrant workers. 

Employees who have been on sick leave can be placed on furlough leave after the period of sick leave has ended if there is no work for them to do and they would otherwise be laid off or made redundant. If employees are shielding themselves in line with government advice, they can also be placed on furlough leave. 

Employees with two or more employers can be furloughed for each job separately. 

There is a £2,500 cap which applies to each employer individually. This means that an employee with two jobs can have 80% of their salary reimbursed with a cap of £5,000, or more, if the employers top the salary up above the grant level. 

Guidance provided by the government allows furloughed employees who have more than one employer to earn more from additional work provided by a second employer (if the work is still available) that would usually fall during working hours for the first employer. Basically, employees can be furloughed from one job and receive their 80% furlough payment, and work for another employer during the hours they would normally be working for the employer who has furloughed them.  

Can Furloughed Employees Pick up Another Job? 

Payments will be made to a furloughed worker by HMRC, even if they pick up alternative work during the time they are not working for their usual employer. The employee will receive the furlough payments from the first employer (either the basic 80% allowance, or their full pay if their employer chooses to top up the extra 20%) and their wages from the new employer.  

The only thing that employees are not permitted to do is do any work for the employer who has furloughed them.  

With this in mind, employees are still bound by the contractual agreement they have in place with the employer who has placed them on furlough, and so if their employment contract there is either an express or implied term that the employee should not work elsewhere while under the employment of their current employer, they should not enter into additional employment without speaking to their employer first. Otherwise, the employee could be in breach of contract.  

Business Owners and Partners 

Small business owners who pay themselves a PAYE salary are also covered under the furlough scheme. However, the scheme does not apply to dividend payments, so director-shareholders who are paid partly or mainly in dividends will only be covered for any PAYE earnings they receive from the company. 

The Coronavirus Self-Employment Income Support Scheme has been introduced to provide support to people who are not eligible under the job retention scheme. Self-employed directors with taxable profits below a £50,000 annual threshold may be eligible to apply for support under the self-employment scheme. 

Salaried partners who are paid through the PAYE payroll are eligible under the furlough scheme, too. Partner owners and LLP members who are treated as self-employed (and not paid through the PAYE payroll) will not be covered. Like directors, self-employed partners with taxable profits below the annual threshold may be eligible to apply for support under the self-employment scheme. 

Read more about furlough leave and how to apply to the scheme in the second of our two-part series which can be found here 

Written by Clarisse Levitan

Marketing and Customer Relations Advisor - Staff Squared

Clarisse works as the Lead of our Customer Care Team to provide our customers with the very best care and guidance when using their HR software and is responsible for our day-to-day marketing activities and strategies.

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