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What is a furloughed worker: Rishi Sunak’s rescue plan

Posted by Davenport Solicitors Team on March 24, 2020 in Employment Law

Rishi Sunak, the Chancellor, introduced the Job Retention Scheme to assist businesses and to protect employee’s wages during the coronavirus pandemic.

What is the job retention scheme?

Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been made redundant during this crisis.

What does “furlough worker” mean?

If you cannot cover staff costs due to COVID-19, as a business you may be able to access support to continue paying part your employees wage, to avoid redundancies.

To access the scheme, employers will need to discuss with their employees how to become classified as a furloughed worker. This would mean that they are kept on the employer’s payroll, rather than being made redundant.

To qualify for this scheme, the employee should not undertake work for the employer while they are furloughed. This will allow the employer to claim a grant of up to 80% of the employee’s wage for all employment costs, up to a cap of £2,500 per month.

They will remain employed while furloughed. The employer could choose to fund the differences between this payment and the employee’s salary, but does not have to.

It is likely that the Coronavirus Job Retention Scheme will run for at least 3 months from 1 March 2020, but will be extended if necessary.

Who is eligible?

All UK businesses are eligible.

How can businesses access the scheme?

Businesses will need to:

  • designate affected employees as ‘furloughed workers,’ and notify them of this change -remember changing the status of employees remains subject to existing employment law, so businesses are likely to require employees to agree to this.
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required).

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.

If your business needs short term cash flow support, you may be eligible for a coronavirus business interruption loan.

The material contained on this website contains general information only and does not constitute legal or other professional advice and should not be relied upon as such. While every care has been taken in the preparation of the information on this site, readers are advised to seek specific legal advice in relation to any decision or course of action.

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