Until a fortnight ago, it’s unlikely many British workers had ever encountered the term ‘furloughed’, but now it is a concept that has been thrust into the spotlight by the coronavirus crisis.
Chancellor Rishi Sunak has unveiled a series of measures to cover the wages of millions of people suddenly left without work and prevent businesses going bankrupt due to the coronavirus crisis – and furloughing staff lays at the heart of it.
The so-called coronavirus job retention scheme enables businesses to continue paying part of their employees’ salary who would otherwise have been laid off because of the crisis.
Sunak said the Government will cover 80 per cent of salaries up to a ceiling of £2,500 a month – equivalent to the UK average wage of £30,000 a year.
Going home: easyJet just one among the many companies announcing a two-month furlough for its cabin crew who can’t work after the company grounded all of its flights
The scheme, open to all firms with employees, will be up and running by the end of April and backdated to March 1.
But in order to access it, businesses will have to ‘furlough’ their employees who they can no longer afford to pay.
This term, until now more or less unknown in the UK, is suddenly popping up everywhere, with easyJet just one among the many companies announcing a two-month furlough for its cabin crew who can’t work after the company grounded all of its flights.
Here we explain what furlough means and what it entails for workers and businesses.
What does it mean to be ‘furloughed’?
Essentially, if you’re being furloughed by your employer, it means you’re being sent home, but will still receive 80 per cent of your salary by the Government, up to a maximum of £2,500 a month.
This Government job retention scheme is only for employed people, it does not apply if you are self-employed.
However, you first need to agree to be put on furlough by your employer, who can then apply for the money to the Government. You cannot apply for it yourself.
Your employer can choose to pay the remaining 20 per cent of your wages, although it is not obliged to do so.
If you earn more than £2,500 a month, your employer can choose to ‘top up’ your salary, but again it is not forced to do so.
You will still continue to pay income tax and national insurance contributions while on furlough.
Can I be furloughed if I’m on a zero-hour contract?
Yes. Also if you’re on a flexible contract or are employed by an agency.
If you are on a zero-hour contract, which means you don’t necessarily earn the same amount each month, your employer should give you the 80 per cent of your average monthly salary since you started working.
That also applies to workers who have been employed for less than a year.
If you’ve worked for your employer for a year or more, you should receive 80 per cent of your average monthly salary, or 80 per cent of what you earned in the same month during the previous year – whichever is highest.
If you started work only in February, your employer will pro-rata your earnings from that month. But if you’ve started working on 28 February or after, you are not eligible.
If you have been made redundant after February 28, or even if you left a job after that date, you could be reemployed under furlough if your employer is willing to do so. Otherwise you will have to claim unemployment.
Gatwick’s North Terminal has shut with the South Terminal operating from 2pm and 10pm to cut costs, meaning most of the airport’s 2,500 staff will be furloughed this week
Can I be forloughed if I’m sick?
If you’re fallen ill and in the meantime your employer has had to shut down, you should first get statutory sick pay first, but can be furloughed after this.
Those who are self-isolating because of coronavirus can also be placed on furlough.
People who are ‘shielding’ and are vulnerable to potential severe illness caused by the coronavirus, can also be placed on furlough.
At the moment, employees can be furloughed from a minimum of three weeks up to three months, although the Government may look to extend that if needed.
Where does the word furlough come from?
The term furlough refers to when employees are given a temporary leave of absence.
It is believed to have derived from a Dutch word in the 17th century as a term of absence for those in the military.
In modern terms, it generally indicates when an employee is forced to take some time off work because the company it works for may be in a difficult financial situation.
In recent history, the term started appearing in the US during the financial crisis of 2008, as many American companies furloughed its employees.
US companies have also started to furlough its employees during the current coronavirus crisis, although the US government scheme works differently from the UK’s.
In the US, companies that keep paying workers who can no longer work because of the coronavirus shutdown are given tax breaks.
However, many retailers like Urban Outfitters have not chosen to do that, leaving staff without pay, while only preserving their health coverage.
Which businesses can apply?
Any company with employees can apply, including charities, recruitment agencies and public authorities.
However, the Government does not expect many public sector organisations to apply, as ‘the majority of public sector employees are continuing to provide essential public services or contribute to the response to the coronavirus outbreak’.
Organisations who are receiving public funding specifically to provide services necessary to respond to the coronavirus outbreak are not expected to furlough staff.
Employers can furlough staff for a minimum of three weeks and are not allowed to rotate employees on furlough.
In order to access the scheme, businesses need to change the status of their employees to furlough workers and submit the information to HMRC.
HMRC are currently working to set up a system for reimbursing companies.