How do you furlough employees?
The following information is designed to help business owners understand the process of furloughing staff and is correct at 29 March 2020.
How do you work out which staff you should furlough?
The guidance is very clear in that staff who are furloughed must not work or continue to provide any services to your business. Your staff can volunteer for another organisation during this period, but they cannot work for you.
The minimum period that a member of staff can be furloughed for is 3 consecutive weeks. This does mean that options like reducing shifts or reducing the number of working days will not qualify under the furlough scheme rules.
The scheme guidance states that only employees that were present on a businesses’ payroll on 28 February 2020 are covered by this scheme. If an employee joined on or after 29 February, they will not be funded by the Job Retention Scheme.
Some businesses are looking at furloughing staff on a rota basis, if this is something that you would like to consider please speak to us.
Can you take people in and out of furlough?
The short answer to this is yes, but the minimum furlough period is 3 consecutive weeks.
Will staff still build up annual leave whilst furloughed?
Many of our clients are concerned about teams working from home and continuing to accrue annual leave and for staff working this is right and correct. However, the impact of this upon businesses, when we return to normal, has the potential to cause staffing shortages later in the year.
Another concern to employers is the fairness of the furlough scheme, working employees will rightfully continue to accrue annual leave, but what about furloughed employees?
The ICAEW issued a guidance on 25 March that stated that furloughed staff would not continue to accrue holiday. Their analysis was based on the fact that the furlough scheme is an alternative to redundancy. However, lawyers are suggesting that this may not be the case and that furlough should be compared to maternity leave or sickness where holiday would continue to accrue. We are awaiting official clarification on this point.
There are a few suggestions that have been made to deal with this, but we would recommend that you speak to an employment lawyer or HR specialist if you wish to seek clarification.
How do you continue to pay your furloughed staff?
If you have an employee earning £37,500 or less per year (i.e. their gross basic pay in February was £3,125 or less) then the grant will cover 80% of their normal salary while they are furloughed.
If the employee earns more than this, the grant will only cover the first £2,500. The grant will also cover the Employers National Insurance and Employers Auto Enrolment Pension contributions (if the employee is enrolled).
How do you manage cashflow?
Under the scheme employers must continue to pay their employees that are furloughed. The employer will then need to wait for HMRC to process their grant and this may cause cashflow issues for businesses.
Government guidance suggests that businesses take out Coronavirus Interruption Loans to cover this period.
What if you get your furlough calculations wrong?
We have not seen anything in the guidance which suggests that there will be penalties or fines although where HMRC detect fraud or find evidence of wrongdoing we would envisage that they will impose a penalty of some kind. They will have to make allowances for genuine errors or miscalculations.
The above information is for general guidance only and is our understanding of the current information available regarding the furloughing of employees.
If you wish to speak to a member of our team regarding how to furlough employees, please contact your usual ABG contact or our main switchboard on 020 7330 0000