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Coronavirus: how to furlough someone, including company directors

5-minute read

Lauren Hellicar

4 May 2020

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Furloughing employees wasn’t something most of us had heard of before the coronavirus pandemic took hold.

If someone is furloughed, it’ll be as a result of their employer making use of the Coronavirus Job Retention Scheme (CJRS). This is one way for businesses to try and stay afloat while unable to trade (either completely or to their usual capacity) rather than closing up shop and making people redundant.

Below, we’ve taken a closer look at the definition of furlough, who’s eligible for the scheme, and how it works.

What does furlough mean?

Furlough is a type of leave from work. It lets you keep your staff on without them working, but still being paid. This is seen as better than laying them off without pay or making them redundant because of the coronavirus pandemic.

What’s a furloughed worker?

You can define your employees as ‘furloughed workers’ under the Coronavirus Job Retention Scheme (CJRS) if you pay them through PAYE (Pay As You Earn).

The scheme has been set up for employers with businesses that have been severely affected by the Covid-19 outbreak. It helps you by paying part of your workers’ monthly wages.

What happens during furlough?

It’s important that your employees don’t do any work for you while they’re being furloughed. They’ll be paid 80 per cent of their monthly earnings, up to a maximum of £2,500 a month. This money will come from HMRC.

The leave is intended for businesses to bring their workers back to working for them after the furlough period has ended. However, in some cases, furlough may then lead to redundancy.

Is my business allowed to furlough people?

Any employer in the UK is eligible for the Coronavirus Job Retention Scheme (CJRS).

Which type of workers can be furloughed?

Furloughing employees

To furlough an employee, they need to have been on your business’s payroll on or before 19 March 2020.

You must have made a Real Time Information (RTI) submission for each furloughed employee on or before 19 March. RTI means information about tax and other PAYE deductions that you transmit to HMRC every time you pay an employee.

An employee who has recently stopped working for you may still be eligible for furlough if:

  • they were employed by you as of 28 February and on your payroll (with an RTI submission as proof)
  • you made them redundant or they stopped working for you between 28 February and 19 March

You’d need to rehire and then furlough them for them to qualify for the scheme.

If your employee is shielding in line with public health guidelines or lives with someone who’s shielding, they can be furloughed. Similarly, if an employee is temporarily unable to work because of childcare responsibilities or caring for a vulnerable person at home, they can be furloughed.

Furloughing casual workers

The scheme has been put in place to support all workers (not just employees) paid through the PAYE system on or before 19 March.

This means if you have apprentices, casual workers or zero-hours contract workers, they’ll still be covered if they’re paid through PAYE.

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Can self-employed workers be furloughed?

If a worker is self-employed, they won’t qualify for furlough under the CJRS, but they can seek support in the form of the Self-employed Income Support Scheme (SEISS). This scheme has been set up to help self-employed people whose businesses have been adversely affected by the pandemic.

They’ll need to have trading profits of less than £50,000 and have submitted a Self Assessment Tax Return for tax year 2018-19.

Can company directors furlough themselves?

The guidance from HMRC appears to be that, as ‘office holders’, company directors may be furloughed and still carry out their ‘statutory duties’. They should do 'no more than would reasonably be judged necessary for that purpose', according to the government website. This means they shouldn't do work they'd be doing 'in normal circumstances to generate commercial revenue or provide services to or on behalf of their company'.

What process do I need to follow?

Before you begin the process of furloughing workers through the Coronavirus Job Retention Scheme (CJRS), they need to have agreed in writing to stop working for you and to being furloughed.

You need to claim just before or while you’re running the payroll, and claim for all employees for each period of furlough together. It’s not possible to make changes to your claim once you’ve submitted it.

You can work out your claim amount using the government’s online CJRS calculator.

Each furlough should last at least three weeks.

Furlough letter template

A furlough written agreement you make with an employee might generally include the following details:

  • the start date of the furlough
  • how much the furloughed worker will be paid
  • when the furlough will be reviewed
  • how to keep in touch during furlough

How do I apply for the Coronavirus Job Retention Scheme?

You can apply for the Coronavirus Job Retention Scheme through the online portal set up by HMRC.

You’ll need the following information to hand:

  • your UK bank account number and sort code (which must accept BACS payments)
  • your employer PAYE scheme reference number
  • the number of employees to be furloughed
  • each employee’s National Insurance number (contact HMRC if you don’t have this)
  • the start date and end date of the claim
  • the full amount you’re claiming for, including employer National Insurance contributions and employer minimum pension contributions
  • your phone number
  • a contact name
  • your name (employer name), or your Corporation Tax unique taxpayer reference, or your Self Assessment unique taxpayer reference, or your company registration number
  • your Government Gateway user ID and password (which you get when you register for PAYE online)

You can backdate your claim to 1 March 2020.

What do I need to pay my workers while they’re furloughed?

Each eligible worker can get 80 per cent, or up to £2,500 a month, paid through the Coronavirus Job Retention Scheme (CJRS). You then have the option to decide whether to top up their wages to 100 per cent, but you don’t have to if you’re not able to.

If a furloughed employee is normally paid minimum wage, as long as they’re not doing any work for you, the minimum wage threshold doesn’t have to be met. This means they can be paid 80 per cent of their usual minimum wage income.

However, if they do any training while furloughed, they need to be paid the minimum wage for the hours they spend training. For example, this might apply to an apprentice who continues with their apprenticeship studies while furloughed.

What if the worker has more than one job?

If, for example, someone has two jobs, it’s possible for them to be furloughed for one or both of those jobs.

Each job is dealt with separately. If the worker is furloughed for both jobs, they’ll be eligible for the associated financial support (80 per cent pay, or up to £2,500) for both.

This article is intended for guidance only. You should seek professional advice before making any decisions regarding furloughing workers.

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