Can you furlough yourself? How do I furlough an employee? Our guide for the self-employed explains more about the furlough scheme, otherwise known as the Coronavirus Job Retention Scheme (CJRS).
The furlough scheme will now run until September 2021, Rishi Sunak confirmed in his Spring Budget announcement.
This is the second time the scheme has been extended since it was introduced in March 2020.
Rather than closing up shop and making people redundant, furloughing employees is one way businesses can try to stay afloat while they’re unable to trade (either completely or to their usual capacity).
Here’s a closer look at the definition of furlough, who’s eligible for the scheme, and how it works.
Furlough is a type of leave from work. It lets you keep your staff on without them working, while the government pays a portion of their usual wage.
This is seen as better than laying them off without pay or making them redundant because of the coronavirus pandemic.
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.
Your employees will be off work and can’t do any work for you while they’re furloughed.
But you can furlough flexibly, meaning your employees can work for you part time – you’ll pay their usual wage.
Your employees will be paid 80 per cent of their monthly earnings for hours not worked, up to a maximum of £2,500 a month. This level of pay will continue until 30 June. After this, the government contribution will start to wind down.
After 30 June the support will be tapered – as an employer you’ll need to contribute towards hours staff don’t work as restrictions start to lift:
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.
If you're using the scheme, you'll still pay employer National Insurance Contributions (NICs) and pension contributions. You can also choose to top up your employees' wages if you wish.
Any employer in the UK with a UK bank account and UK PAYE scheme is eligible for the Coronavirus Job Retention Scheme (CJRS).
To furlough an employee on or before 30 April 2021, they need to have been on your business’s payroll on or before 30 October 2020.
To furlough an employee from May 2021, they need to have been on your business’s payroll on or before 2 March 2021.
You must have made a Real Time Information (RTI) submission for each furloughed employee between 20 March 2020 and 2 March 2021. RTI means information about tax and other PAYE deductions that you transmit to HMRC every time you pay an employee.
If you had an employee come to the end of their fixed term contract on or after 23 September, you can re-employ them and claim on the furlough scheme. This applies if you made an RTI submission between 20 March and 30 October 2020.
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.
The government says that short-term illness and self-isolation shouldn’t be a consideration when deciding whether to furlough employees.
The scheme has been put in place to support all workers (not just employees) paid through the PAYE system.
This means if you have apprentices, casual workers or zero-hours contract workers, they’ll still be covered if they’re paid through PAYE.
If a worker is self-employed, they won’t qualify for furlough under the CJRS, but they might be eligible for 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.
As restrictions are still in place, the government has extended the SEISS to cover a fourth and fifth grant. It should also cover people newer to self-employment as it takes in 2019-2020 tax returns into account.
They’ll need to have trading profits of less than £50,000 and have submitted a Self Assessment tax return by 2 March 2021.
With the fourth grant, self-employed workers can get 80 per cent of average trading profits for February, March and April.
The fifth grant covers 80 per cent of average profits if your turnover has fallen by more than 30 per cent. If you haven't been affected, you can get a 30 per cent grant.
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'.
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 be furloughed.
The government says that the CJRS extension will operate in the same way as before, in that:
So when calculating a claim you need to:
A furlough written agreement you make with an employee might generally include the following details:
Choose to download your template now, or get it directly from Farillio’s site where you’ll also get access to their full suite of customisable legal templates.
You can submit claims on the government portal.
Claims relating to February 2021 must be made by 15 March.
You can no longer submit a claim for periods ending on or before 31 October 2020.
It’ll be helpful to have the following information to hand:
Until 30 June, 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.
In July you'll contribute 10 per cent towards paying employees for the hours not worked, and in August and September you'll need to pay 20 per cent.
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.
We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer
22 June 2020 • 9-minute read
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