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  • Writer's picturePaul

Coronavirus 4 - What does furlough mean?

I hope you are managing as best as you can.

Furlough a term that is normally used by the military and probably not heard by many of us before.

This is what I have managed to find out. I hope it helps.                                                                                     

Only the bare bones of the scheme have been worked out. HMT/HMRC are working night and day on this. I’m trying to keep myself in the communication channel with HMT/HMRC.

  • Furloughed is being interpreted as redundant (but in limbo). An employee who is furloughed can do no, repeat no work. I would interpret this as meaning that they can’t even look at or respond to an email. Just think zero. Anything more and you’re missing the point of the scheme. That’s the message from HMT.

  • The 80% is going to be computed by reference to a previous period. The previous reference period hasn’t been worked out yet. They want to help seasonal workers. Possibly an average of past months or year but what about new seasonal workers? HMT are still working on it. What is clear is upping wages now is irrelevant.

  • It is a grant paid to the employer. Grant is 80% of the reference period wage plus employers NIC and it seems the legal minimum pension contributions. That last bit is hard to achieve. So if wages in the reference period are £1,000 a month and employers NIC was £115 and pension contribution £30. So the total is £1,145. At 80% that is £916. So, the maximum grant is £916 pm. If during the next few months the amount paid to the employee is £916 pm then there is no cost to the employer. In fact the figure would probably be £911 because of the way the employers NIC calculation works.

  • The employee is taxed as normal. Whether the grant is taxable or not will be irrelevant as the treatment will be consistent so it will net off.

  • I think some flexibility on a furloughed worker returning to work and then going back on furlough is possible, but if there is any, it probably won’t be much. They can definitely come back to work but can they be furloughed again. No decision on that yet. I think it was said that that is a decision for the Chancellor (note not the Chief Secretary to the Treasury but the Chancellor), so these decisions are at the highest level.

  • National minimum wage is not an issue because they’re not allowed to work. So an employee on NMW being paid at 80% whilst furloughed is permitted. The individual should be eligible for universal credit.

  • The desire is that employees made redundant but no change in the law so I think they keep their redundancy/pay in lieu (ask a lawyer).

More guidance is promised by the end of the week.

Keep well and stay safe

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