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How To Manage The Furlough Process

Gary Green
Gary Green
May 4, 2020

In today's article, some practical tips on how to manage the furlough process as a business owner. Everything you need to make sure you stay organised and compliant.

In this article we'll focus on the furlough process itself. Follow these steps to make sure you stay compliant with the rules of the Coronavirus Job Retention Scheme and don't fall foul of emplyment law.

The government's page on how to make furlough claims will be useful. If you’d like more information about the financial, political and tax changes so far, check out our Coronavirus Tips. And be sure to visit our Coronavirus Update page.

Step 1 - Discuss With Staff

The government has been clear that furlough cannot be imposed on staff. It must be an agreement. As such, you should discuss the state of the business with employees and explain why furlough is necessary to protect your future.

The alternatives to furlough are unlikely to be more favourable to staff:

  • Redundancy
  • Unpaid holiday
  • Contract renegotiation
  • Reduced pay

So it is unlikely that you will get much resistance.

Step 2 - Inform Staff

The next (crucial) stage is to formally let affected staff that they are being furloughed. You need to give them the dates of furlough (remember - the minimum period is 3 weeks).

It's important to keep records of all communication around the furlough process. As such, we strongly recommend that you do everything via email.

If you plan to furlough some staff and not others, make sure that you conduct the whole process as fairly and transparently as possible. Some furloughed staff might worry they are being sent home for performance reasons. On the other hand, staff who are asked to keep working might resent what they see as "paid holiday" for their furloughed colleagues.

You may want to consult your HR department or an employment law specialist. We would be happy to make an introduction on your behalf (please contact us).

Step 3 - Make Sure Staff Follow Furlough Rules

Don't just send furloughed staff home and hope for the best. Give them clear instructions on what they are, and aren't, allowed to do on furlough. If the rules are breached, you could find your claims invalidated at the end of the scheme. Furloughed staff:

  • CANNOT - perform services for you
  • CANNOT - make money for you
  • CAN - volunteer
  • CAN - continue professional training & development

Whatever staff choose to do while on furlough, they must follow the government's health and safety guidance.

Step 4 - Pay Staff

Furlough grants are paid in arrears. This means you should continue to pay staff as normal through the PAYE system. Staff payments are just like salary, so they need to account for:

  • Tax
  • NI
  • Pension

You have to pay staff (as a minimum) what you receive from the government (net of the usual payroll taxes). This will be the lower of:

  • 80% of salary
  • £2,500 per month

It's then up to you if you want to top up. Just be aware of the implications. If you top up some and not others, you could be accused of unfairness (and a discrimination lawsuit). If you top up furloughed staff, then staff who continue working might feel resentful.

Step 5 - Claim

You can make a claim at the end of each 3 week period. You'll need to have the following to hand when you make the claim:

  • ePAYE reference number
  • Number of employees being furloughed
  • Claim period (start and end date)
  • Amount claimed
  • Bank account number and sort code
  • Your phone number

At the moment the rules around furlough and its alternatives are changing daily. We'll have more information as soon as it becomes available. Be sure to check our blog for updates.

If you'd like to discuss your options during the coronavirus crisis, please get in touch. We are staying on top of all the announcements from the government and can help you navigate this challenging time.

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