Furlough and the Coronavirus Job Retention Scheme explained

The Coronavirus Job Retention Scheme is part of the UK Government’s corona virus (covid-19) economic response. It aims to help businesses keep their employees by offering financial help to cover their wages. In this blog, we’ll discuss the Government’s recent update on the Scheme and explain what employees can do whilst on furlough.

The information here is correct as of 28 May.

What does it mean to be ‘furloughed’?

Furlough refers to employees who are temporarily placed on a leave of absence by their employer.

What is the Coronavirus Job Retention Scheme?

The Scheme is designed to help employers pay their furloughed employees 80% of their usual wages, up to a maximum of £2,500 a month. Employers can choose to make top up payments to make up for the 20% missing from the employee’s usual salary. Under this Scheme, employers can claim back the costs of wages backdated to 1 March 2020.

Most employees that were on the payroll by 19 March 2020 are covered by the Scheme. This includes those working full time, part-time and those on zero-hour contracts. 

Employees must agree to being furloughed and must not undertake any work that would make money or provide services for their employer when furloughed.

The Scheme was originally due to end on 30 June 2020, however, will now run until 31 October 2020.

If you’re an employer seeking the agreement of your employees to be furloughed, make a Furlough agreement letter to employees. Once they’ve agreed, confirm their status as ‘furloughed workers’ with our Furlough confirmation letter.

What is the latest Government update on the Scheme?

The Government’s announcement on 12 May extended the Scheme and introduced changes to how it’ll operate from August onwards. 

In order to continue benefiting from the initiative, employers must already be participating in the Scheme by the end of July.

From August onwards, furloughed employees can work part-time while still receiving their furlough pay and employers will be asked to contribute to the cost of the Scheme. 

Further guidance is expected to be released soon. 

Keep up to date with the latest developments by reading our Coronavirus business legal centre.

Can employees volunteer during furlough?

From now until the end of July, claims will only be available to employers whose employees are furloughed ie not doing any work that their employer can profit from.

Furloughed employees that volunteer at charities or organisations not related to their work can continue doing so. This wouldn’t affect the employer’s ability to apply for the Scheme. 

Provided that no revenue is generated or services provided, employees can volunteer at their employer’s businesses.

Furloughed employees can volunteer at their company as long as no money is made and no services are provided to the company through the activity.

An employer may be committing fraud if they claim the Government grant whilst asking furloughed employees to work as usual as volunteers. Employees can report this to HMRC, which may result in the Government clawing back any payments made to the employer.

Can employees work elsewhere while on furlough?

Employees can work elsewhere if they have multiple jobs and one employer places them on furlough. They will still receive furlough pay.

Employees should check working elsewhere is allowed in their employment contract.

Final thoughts

The Government has a difficult task of making the Scheme more sustainable. In doing so, they must strike a delicate balance between protecting people’s jobs and saving our economy.  We await further information on how the Scheme will continue from August onwards.

Chloe Lai