Everything You Need to Know About Furlough and the Job Retention Scheme
March 2021 has brought good news. Early in the month, the government announced an extension of the furlough scheme to 30th September 2021. The extension will bring a few adjustments to the government-oriented scheme. According to the announcement, the government will pay most of its employees while on furlough leave. A furlough leave is a temporary leave that often has no pay; you get to leave without pay. An employee usually retains these records and can use them whenever they need to. When the government first announced it in March 2020, it catered to people hit by the Coronavirus pandemic. It has since been extended and seems to be a long term plan. As an employer who needs to let go of employees due to the pandemic, you will be eligible for some help in the form of a leave pay offered to your employees by the government. It covers wages up to £2500 for every month that an employee is on the furlough leave.
Reasons for the Scheme’s Extension
Officially called the Coronavirus Job Retention Scheme, the furlough scheme has protected over 11 million jobs from when it began in March 2020. The extension was included in the 2021 budget and is expected to last until the end of September 2021. It is an instrumental initiative that will help millions of people get back on their feet during and after the pandemic. Here is why:
- Allow businesses to keep employees who cannot work
- Pay employees who companies cannot afford to pay on their books
- The government will pay 80% of the salaries while the companies handle 20%
During the announcement, Rishi Sunak stated that the Covid support would be a huge part of the budget as the chancellor plans to unveil a strong three-point plan in order to restore the glory of the economy once the pandemic ends. Other plans include rolling out over £1.65bn to enhance the vaccination process, £5bn to help businesses get back up, £400m for the field of arts, and £150m to help the communities purchase and save the dying pubs, theatres, and sports club.
The Functionalities of the Extension on Furlough
Previously, furlough meant that you put your employees on temporary leave without paying them at all. Sometimes, they are required to work fewer hours than usual without pay or at a subsidised charge. All these details were retained in the company books and was a popular way to keep the staff members active.
With the furlough, the government will pay 80% of these wages up to £2500 for every employee in the company per month. As an employer, you must not top up the funds as the employees on a full furlough. However, you are required to pay the National Insurance and employer pension contributions every month. This is a lighter load on employers during this pandemic.
According to Roshni Sunak, the government will only contribute 80% of the furlough to July 2021. Going forward, the employer will have to top up the remaining 10% for each employee. This will go on until august where the government will contribute 60% of the wages, and the employer makes 20% of the wages starting September. During this time, employees can work part-time on a flexible furlough, which helps sustain their employees. Nevertheless, while it is part-time for them, you must pay the full time they will have worked.
People Eligible for the Furlough
The furlough is eligible for both companies and employees. For the employees, one must have reported and requested a minimum timeline of 7 consecutive calendar days. Just like in 2020, the claims will be made through the government furlough website. On the other hand, companies must have a UK bank account with running UK PAYE schemes in order to claim the furlough. The good thing about this is that you do not need to have used the furlough scheme previously. The employees being furloughed must be on your PAYE payroll on 29th October 2020. If an employee was added to the PAYE system after 23:59 in October 2020, they could not be eligible for the furlough payment relief.
The government saw this barrier for most companies and has new restrictions or plans for the furlough. According to the new plan, you can furlough an employee employed on 2 March 2021, provided that you made the PAYE Real Time Information (RTI) submission to HMRC between 20th March 2020 and 2nd March 2021. These workers will include agency workers, officeholders, and members on a salary from LLPs (Limited Liability Partnerships). Another restriction input was that anyone serving a notice period could not claim the furlough.
From November, employees can furlough their employees when they meet the required eligibility criteria. Nevertheless, there are chances that the government will introduce other restrictions on putting employees on furlough at the end of the scheme. For further information on the Furlough scheme and business rates relief.
Regulations on Furloughing Employees
Before furloughing your employees, you must engage them and let them know that they are working under the furlough. Let them know that they are furloughed and whether it is a full or flexible furlough. According to the past furlough rules, employees are barred from offering services to you and other organisations that generated revenue during the furlough period. As an employer, you need to pay your employees full payment for the work done when you request them to work. While they are your employees, they can continue to work for other employers as long as the employment contract allows for these terms.
While the announcement was made on 3rd March 2021, the situation is subject to change, and both employers and employees must be ready for the next government updates concerning the job retention plan.
Has worked for many Internet marketing companies over the years, and has contributed to many online publications. If there is a story, he will find it.