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In today's article, we'll explain what "furlough" means, how to furlough employees and how to claim the money back.
A number of our clients have been contacting us for information on how to furlough employees. Companies are now allowed to designate staff as furloughed under the Coronavirus Job Retention Scheme.
We introduced this idea in our Coronavirus Summary Tips article. Today we'll give a little bit more detail about how the scheme works and how to apply.
Please also check out our Coronavirus Update if you haven't already.
What Does Furlough Mean?
A temporary leave of employees due to special needs of a company or employer, which may be due to economic conditions at the specific employer or in the economy as a whole.
The old definition implied that the workers wouldn't be paid while they were away. However, in the case of the coronavirus scheme, the employee continues to be paid.
When you furlough staff, you send them home but keep them on the payroll. This allows them to avoid losing their jobs. It also means that when you are ready to start doing business again, you can bring them back to work with minimal admin.
It would obviously cripple most businesses if they had to pay for this scheme themselves. So the government has agreed to cover most of the cost.
How Does The Scheme Work?
Instead of laying off staff, the government is encouraging businesses to place them on temporary furlough leave.
As a business owner, you can claim (per month) the lower of:
- 80% of the employee's regular wage
At a minimum, you must pay the employee all the money you receive from HMRC. It is then up to you if you want to make any top-ups to the payment to ensure the employee receives his normal net salary.
There may be some complications with Living Wage / Minimum Wage regulations. We encourage you to check out the HMRC guidance on this specific issue.
How Do I Apply & Claim?
As long as you pay your staff via PAYE, you will be eligible for the scheme. The government seems committed to making the process as streamlined as possible.
First of all, you need to let the employee(s) know that they have been furloughed. It's worth paying attention to the exact way that HMRC phrases this requirement:
To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication.
According to the official HMRC page you need the following details to make a claim:
- ePAYE reference number
- Number of employees being furloughed
- Claim period (start and end date)
- Amount claimed (per the minimum length of furloughing of 3 weeks)
- Bank account number and sort code
- Contact name
- Your phone number
Claims can be backdated to the 1st of March. You can only submit one claim every three weeks. And the government will pay you the money via BACS to your bank account.
If you have been affected by any of the issues in this post, please do not hesitate to get in touch. We are experts at all aspects of tax, payroll and bookkeping and can handle all the admin and red tape of the furlough process for you.
We are getting more information all the time during the crisis. Please continue to check back on our blog for updates as soon as we have them.