Eligible for UK furlough scheme? FAQ on furloughing employees

21 August 2020 Consultancy.uk 4 min. read
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Covid-19 and the lockdown in the UK has undoubtedly been one of the most important events in recent history, and it has fundamentally changed the way that we live – at least in the short term. Businesses have been very heavily impacted under the crisis, and the government has set out a number of schemes in order to try to lessen the impact of the virus, and allow companies to manage.

One of the most important is the job retention scheme which allows companies to furlough employees – effectively putting them on leave as the government pays for 80% of their wages. But is furloughing staff a good solution to help you maintain your SME? A look at the furlough scheme and what it can do for you.

What to do you need in order to furlough your employees?

There first thing to note is that in order for businesses to furlough staff as part of the job retention scheme, they must have created and started a PAYE payroll scheme on or before 19 March 2020, and have enrolled for PAYE online. 

They must also hold a UK bank account. And it should be noted here that any entity that has a UK payroll is eligible to apply for the scheme. This includes businesses, public authorities, charities, and recruitment agencies. This functionally means that as long as you are an entity that employs people, you can furlough them.

Which employees are eligible to be furloughed?

There has been some confusion over who is actually eligible to be furloughed in a business, but the truth is that it is relatively simple. Businesses can claim for employees on any type of contract to be furloughed. This includes not only full-time and part-time employees, but also those on an agency, flexible, and zero-hour contracts.

Additionally, the rules surrounding foreign nationals and those on visas are encompassing too. All foreign nationals are eligible to be furloughed. Additionally, any grants under the scheme do not count as ‘access to public funds’, and you can furlough employees regardless of their category of visa.

It should be noted that salaried company directors are also eligible to be furloughed and receive support through the scheme. This is also true of officeholders, agency workers, and more. It is worth reading through the government’s guide to furloughing workers in order to establish whether a specific type of worker can be furloughed under the scheme.

Which businesses are eligible?

The government understands that these are unprecedented times, and the furlough scheme has been brought in to help all employers who have seen their operations affected by the Covid-19 crisis. It is designed to allow employers to retain their employees through the crisis, and to help protect the UK economy.

The important thing to note here is that all employers are eligible to claim under the scheme. The government is well aware that different businesses will face different and specific challenges and issues relating to the coronavirus.

Importantly, however, for businesses to be eligible for the grant, they must ensure that when an employee is on furlough they cannot ‘undertake work for, or on behalf, of the organisation or any linked or associated organisation’. In this context, undertaking work can include everything that results in providing services or generating revenue. Businesses must ensure that any business-critical tasks are carried out by members of staff who are not furloughed.

What do furloughed staff receive?

When a business has furloughed a member of staff, they are applying for a grant that covers 80% of their usual monthly wage costs of that employee. The total amount is up to £2,500 per month (as well as the associated Employer National Insurance contributions and pension contributions of the subsidised pay).

Another important thing to point is that employees who have previously been made redundant can be re-employed in order for them to be furloughed and claim their even if you do not re-employ them at the end of the scheme.

Planning for the future

It is important to recognise that the furloughing of staff must be seen as a temporary solution. The scheme will not last forever, although the scheme has currently been extended. However, it is fair to say that businesses should expect to face some of the financial challenges of the Covid-19 without the help of the scheme.

It is a smart idea then to begin planning for the future. Work with financial consultants or accountants who can help you to make a sound business plan to survive in the market following the end of lockdown.