Updated: 3rd March 2021
The Coronavirus Job Retention Scheme was announced by the Chancellor of the Exchequer as part of a range of emergency measures to support the economy during the coronavirus crisis.
The scheme involves furloughing employees, and provides payment of up to 80% of each furloughed employee’s wages. This payment is capped at £2,500, plus the associated employer contributions to National Insurance and minimum workplace pension contributions under auto enrolment.
The COVID-19 employee furlough scheme is designed to prevent mass redundancies and job losses due to the unique health and economic circumstances we are dealing with. So what does ‘furlough’ actually mean in practice?
What happens when an employee is furloughed?
When an employee is furloughed it means they are given a leave of absence. They don’t work for the employer but are retained on the workforce and paid a proportion of their wages by the government.
If employers intend to use the employee furlough scheme they must notify each relevant worker, who once furloughed, must not carry out any work for the company. The minimum time period an employee can be furloughed is three consecutive weeks.
How does the job retention scheme work?
The Coronavirus Job Retention Scheme is available to all UK employers who run a payroll, and the effective starting date for claims is 1st March 2020. The scheme has been extended multiple times and is now set to run until the end of September 2021. Employers will be expected to make a financial contribution of 10% from the end of July, rising to 20% in August and September, but all furloughed employees will continue to receive 80% of their salary.
In some instances it may be advisable to seek professional advice to avoid contravening UK employment laws, as these remain in place when furloughing employees – if 20 or more staff members are to be furloughed, for example, collective consultation with employee representatives may be necessary.
How employees are furloughed under the job retention scheme
An employer must take certain steps before they can furlough an employee:
The COVID-19 employee furlough scheme is intended to save jobs and help employers survive the economic effects of coronavirus. If you would like more information about the Coronavirus Job Retention Scheme or furloughing staff, please contact our team of experts at Real Business Rescue.
We can provide reliable professional guidance on this and other government measures introduced following the outbreak, and offer free same-day consultations to quickly provide the answers you need.
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