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Coronavirus: Furlough and your employment explained

01/04/2020

With businesses across the UK closing their doors, reducing hours and cutting back their numbers of active employees as a result of the coronavirus outbreak, you, a family member or a friend may have been offered voluntary furlough by your employer.

Furlough means you won’t be able to undertake your usual work for your employer, but they’ll be able to retain you as an employee and pay a proportion of your wages with the help of the government’s Coronavirus Job Retention Scheme.

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What is the Coronavirus Job Retention Scheme?

The Coronavirus Job Retention Scheme has been introduced by the UK government to lessen the economic impact of the Covid-19 outbreak and incentivise businesses to keep their employees on the payroll.

In a historic statement on March 20, Chancellor Rishi Sunak introduced the scheme, saying:

“I have a responsibility to make sure we protect, as far as possible, people’s jobs and incomes. Today I can announce that, for the first time in our history, the government is going to step in and help to pay people’s wages.”

Who is eligible for furlough?

The scheme has been designed as a catch-all to help preserve the jobs of as many employees as possible. It’s available to full, part-time, temporary, zero-hours and agency workers, and it won’t make a difference in what sector your work in. You’ll be eligible to become a furloughed worker if:

  • You’ve been on the company’s payroll since 28 February 2020.
  • You work for an employer with a UK bank account.

Under the retention scheme, as a furloughed employee you will still be paid at least 80% of your current basic salary, up to £2500, but be aware it won’t cover any commission or bonus you would have earned. Your employer can also decide to top up your monthly salary to the full amount.

You may find yourself being designated a furloughed worker for a number of reasons. Most likely, it will be that there simply isn’t any work for you to do or the type of work you do isn’t feasible from home.

Employees do not have to apply for the scheme. If your employer has designated you as a furloughed worked, they should let you know first. After that, it’s up to them to apply via the government portal for a grant to cover your pay.

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Can I still work on furlough?

As a furloughed worker, legally you cannot make money for your employer, or provide your services to them for the duration of your furlough.

However, you can use the time productively to either volunteer or train – as long as you’re still following government and public health guidance while you do so.

Will furlough pay be taxed?

Yes, your furlough pay will still be subject to income tax, which will be calculated from your before tax salary – so if you’re recalculating your monthly budget, it’s important to remember this.

If you need to work out your new take home pay, you can use this handy tax calculator from HMRC to generate a quick estimate.

Any furlough payment due to you from your employer will be calculated and backdated from 1st March 2020. And even though you’re on furlough, you’re still entitled to Statutory Sick Pay, Maternity Pay and your other standard employee rights.

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Can furlough lead to redundancy?

Although the government’s employee retention scheme has initially been announced for three months, the Chancellor has pledged to “extend the scheme if necessary.”

And if you’ve been made redundant on or after 28th February 2020, you may have another chance at keeping your job in light of the scheme, so it’s important to make contact with your former employer as soon as you can to see if they’ll offer you this option.

Whenever the scheme does come to an end, your employer will need to consider whether or not you’re needed for your former duties. At this point, if your employer can’t afford to re-employ you, or if they can’t afford your wage, they may consider you for redundancy.

If you do think this is a possibility, it could be worth using the initial furlough period to put some money aside as savings, reduce your outgoings, and carefully monitor the job market for available opportunities.

Concerned about being left in debt as a result of the coronavirus outbreak? We’re here to listen, understand and support. Speak to one of our dedicated debt specialists today on 0808 2234 102 and start feeling better about your finances.

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