What is the salary cap for receiving 80pc?
The grants from the Government will cover 80pc of your monthly salary up to £2,500, this means it includes people earning up to a yearly salary of £30,000. Anyone earning more than this will be covered by the scheme but will receive the maximum £2,500 benefit.
Guidance on the scheme has said employees will still pay Income Tax, National Insurance contributions, Student Loan repayments and any other deductions (such as pension contributions) from their wage once the grant has been received.
Can I work elsewhere while on furlough?
Generally speaking, no. Most contracts will require employer’s consent to work for other companies and this should apply to furlough leave.
Mr Hammerton said: “This need for consent should act as a gateway to employees getting something of a ‘windfall’ where they earn significantly more on furlough than when in ‘normal’ employment. On the other hand, employers (and HMRC when administering the scheme) may well be more understanding where an employee is merely ‘topping up’ income lost due to being placed on furlough.”
If your contract does allow you to work elsewhere during furlough then it will not affect the Government grant. However, you must be ready to start working for your employer again as soon as they decide to take you off furlough.
You can join the 750,000 volunteers helping the NHS during the pandemic. The Government confirmed that those on furlough will be permitted to volunteer without risk to pay.
Will my company still pay pension contributions?
Pension contributions would continue to be due unless agreed otherwise in the terms of the contract, according to Mr Hammerton.
The Department for Work and Pensions has confirmed that employers remain liable for minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.
Businesses can claim grants under the job retention scheme including minimum employer auto-enrolment pension contributions on top of the 80pc of the employee’s salary. This means that businesses can get support without needing to suspend auto-enrolment.
How does furlough work for those on zero-hours contracts?
Zero hours workers who are on the payroll should be able to be furloughed and receive 80pc of their salary each month, according to Kate Martin, of legal firm JMW Solicitors.
Ms Martin said: “The nature of zero hours is that pay can be variable, but based on our current understanding, employers would need to look at recent months of an individual employees’ salary to work out what the 80pc figure would be.”
Mr Hammerton, of Eversheds Sutherland, suggested HMRC could use average earnings over a 12 or 52 week ‘countback’ period to decide on an appropriate payment when reclaiming under the Scheme. “Both of these figures have a basis elsewhere in employment law,” he added.
Can an employee request to be put onto furlough?
The decision to put someone on furlough is made by the company as it is an alternative option to making someone redundant.
Employees could ask to be put on furlough but there’s no obligation from the employer to enact that.
The Treasury has confirmed that employees who are shielding in line with public health guidance can be placed on furlough. Likewise parents can be put on furlough if they need to focus on childcare.
Mr Hammerton said: “It’s not a right to be furloughed, merely a scheme for employers to recover certain costs.”
Some employees could feel discriminated against, either because they have been furloughed or have not. Those minded to make claims should be conscious that if the business has a rationale for choosing one person to furlough over another then it is unlikely to be successful.
“In any event, many employers are facing existential threats and the risk of a small number of such claims arising is likely to be low down the priority list right now,” Mr Hammerton said.
The employers should at the very least consider the option, particularly before moving to redundancies, according to Katie Martin.
This would be in line with the government’s objective to minimise job losses during the pandemic, she added.
Can directors furlough themselves?
Technically yes, if a director is not only an “officer” of the company but also an employee then they can furlough themselves. They qualify to apply for the grant if they have a contract of employment with the employer and were on PAYE on March 19.
But you cannot undertake work of any kind for the company while you are on furlough. This might be tricky for directors who still need to steer the company through the tricky times and plan ahead.
Practically, they would be able to do very little in their officer-only capacity before they strayed into “working” as an employee, Mr Hammerton said.
They would be permitted to do tasks including reviewing and filing statutory annual accounts and Companies House requirements, however.
What are the quirks in the system?
Employers will face a moral dilemma when it comes to how they go about cutting costs.
Businesses will have to make the difficult decision about which employees they penalise and put on furlough, reducing them to 80pc pay, and which they keep on full time with full pay.
Q&A
The below is from a Q&A with readers on the furlough scheme. If you would like to submit a question for our next Q&A, you can send your queries to [email protected]
‘Am I allowed to work part-time for my employer while being furloughed?’
Our first question this afternoon comes from Jane Blaker in the comments section. Jane asks:
“I normally receive payment from my business as an employee at minimal level ( just under £9,000 a year) to get the minimum pension contribution levels which I am claiming furlough on.
“The rest of my salary is paid via a consultancy fee which due to my overall income (over £50,000) does not qualify for the self-employment scheme.
“Am I allowed to work part-time for the business as the furlough money only covers a part-time and not a full-time payment as most of my time is paid for via a consultancy fee? My employment contract says that this is payment is for one day a week.”
Here’s what Jessica has to say:
You can get another job while you are on furlough as long as your contract with your part-time employer allows for it. The Government has confirmed that it will not affect your grant under the furlough scheme if you do so. But you cannot undertake any work for the employer that furloughed you during the period so you would need to find a job elsewhere. Remember that if you do get another job, you must be able to return to work with your employer as soon as they end your furlough period.
‘Will the £2500 cap be raised?’
Our next question comes from a reader who’d like to remain anonymous. They ask:
“When the Government’s furlough scheme turns from government funded to half and half government and employer in August, will that allow for the provision of part time work? And will the £2500 cap be raised if the employer is willing to pay more?”
Here’s Jessica’s answer:
The Chancellor announced plans to introduce more flexibility into the furlough scheme to support the transition back to work but the full details are yet to be worked out. This should allow employers to bring furloughed employees back part-time from the start of August. Rishi Sunak confirmed that employees would continue to receive 80pc of their wages up to the cap of £2,500 but that the bill would be shared with businesses. Again, the full details about how much businesses will be expected to pay are yet to be released. Employers can top up pay above the £2,500 threshold but they are under no obligation to do so and there are no signs of this changing.
‘I’m in the vulnerable category, can I continue being furloughed?’
Our next question comes from L E Lucas via email. They ask:
“I was put on the furlough scheme and then had a letter saying that I was vulnerable that I shouldn’t go out. Can I continue with being furloughed or will I have to apply for statutory sick pay if I don’t go back to work?”
Here’s Jessica’s answer:
The furlough scheme is intended for people whose work has dried up temporarily and allows their employer to keep them on the payroll rather than let them go. This means that your employer can end your furlough when they need you back in work. If you feel that you would like to extend your furlough period because you are at risk, there is nothing stopping you from asking them to. But remember that they have no obligation to enact this. If they do ask you to go back into work but you need to self-isolate then you will have to claim statutory sick pay.
‘Can we furlough our employees for one or two days a week?’
Our next question comes from a reader who’d like to remain anonymous. They ask:
“We run a small window cleaning firm. My husband and two employees clean windows. Since lockdown they have continued to work, maintaining social distancing and not cleaning inside windows.
“Much of their window cleaning is carried out at business premises, and a number of homes have preferred not to have their windows cleaned at present. We are now running short of work.
“What is our position? Would it be possible to furlough our men for one or two days a week? How would we stand, if this was permitted, with the Government furlough scheme?”
Here’s what Jessica has to say:
You could reduce the working hours of your employees but you would not be able to apply for the grant under the Job Retention Scheme if you do. You would have to place them on furlough for a minimum of three weeks to be able to claim. The Chancellor did announce that the scheme would be made more flexible from the beginning of August and said it should allow for employers to bring furloughed employees back part-time. That will work in your favour but in the meantime there has been no change to the rules.
‘If I return to work and contract Covid-19 would I be on statutory sick pay?’
Our next question comes from Steve Drury via email. Steve asks:
“Currently I am furloughed from work. I work for a furniture retailer so non-essential. If I then return to work and catch CV will I then have to take sick leave ? I would be on SSP as I have no sick pay scheme.”
Here’s Jessica’s answer:
Yes, if you go back to work and are unfortunate enough to catch coronavirus then you will have to take sick leave and self-isolate so as not to infect others. You would receive statutory sick pay during that time or your employer could put you back on furlough and claim your wages through the Job Retention Scheme. If they do, then you would no longer receive sick pay but would be treated like all furloughed employees.
‘What will happen after August if I am still not working?’
Our next question comes from B Hootman in the comments section. They ask:
“As a finance contractor whose work stopped in March due to Covid-19 I am currently on furlough with my umbrella company paying me. What will happen after August if I am still not working? My umbrella company can’t make me redundant I assume but also if I am not working they can’t pay me unless they get furlough from government?”
Here’s what Jessica has to say:
The Chancellor extended the scheme by four months to the end of October. This means that if your employer decides to keep you on furlough through the summer then you will continue to receive 80 per cent of your wages up to the £2,500 cap. You employer can actually make you redundant at any point while you are on furlough or afterwards. Your rights as an employee still hold while you are on furlough however.
‘Can I start a new temporary job while furloughed?’
This question comes from a reader who’d like to remain anonymous. They ask:
“Can I start a new temporary job while furloughed from my current job?”
Here’s Jessica’s answer:
It depends on your current contract. Most contracts will require employer’s consent to work for other companies and this should apply to furlough leave. If your contract allows you to work elsewhere then you can do so and it will not affect the Government grant to cover your wages. If not, nothing stops you from checking with your employer. They may be more understanding if an employee is just topping up income that is lost due to being placed on furlough if it is done outside your normal working hours.
‘My boss is asking me to work while I’m on furlough’
Our next question comes from Sandor via email. They ask:
“I work for a hotel and I will be on furlough till mid-June, best case scenario. My employer does top up the government furlough pay by 20 per cent so I am getting full pay.
“I am getting emails and messages from my boss to work on plans for re-opening the hotel. I think I can not do that regardless of the company still paying me 20 per cent.
“Could you please give me some advice on the matter?”
Here’s Jessica’s advice:
Your boss is putting you in a very tricky position by asking you to work while you are on furlough. Your employer is breaking the rules by asking you to work during this time. Furlough is designed to be used by businesses when they do not need all their staff working at one time. The rules set out by the Government are strict in that you cannot do any work for your employer during the furloughed period. Working would void your grant and is a form of fraud on the part of your employer.
Unfortunately it’s not always easy to stand up to your boss at a time when job stability is so important but you should remind them that you would be breaching your furlough by taking on the work and that they should notify you should they want to terminate your furloughed status. In your case it sounds like your employer still needs your services, in which case it should end your furlough period.
The Government has promised to set up a whistleblower hotline that you could call for cases like this and has already received more than 800 reports of suspected fraud.
‘My mum’s furlough is being used as part of her redundancy payout’
Our next question comes Fiona Whiteway in the comments section. Fiona asks:
“I am asking a question on behalf on my mum please.
“She has been furloughed since the scheme was opened and her employers backdated the furlough (even though she worked for a week during the alleged furlough and hasn’t been paid her full wages).
“She was told that she was under consultation in April and then informed she was going to be made redundant.
“She has now been put on garden leave and still on furlough and receiving 80 per cent of her wages. She won’t be getting 100 per cent of her pay for her notice period and essentially the furlough money is being used as part of her redundancy pay out, is this correct as I can’t see it is keeping with the spirit of the scheme as ‘job retention’?”
Here’s what Jessica has to say:
You are right, your mum’s employer should not have claimed furlough for any weeks where she worked, that is a form of fraud. Guidance from the Government says that you can be made redundant while on furlough but that grants cannot be used to substitute redundancy payments. This means that the company must make these payments themselves. Your rights as an employee are not affected by being on furlough and this includes redundancy rights. The Government has promised to set up a whistleblower hotline to call in instances where you suspect your employer has not been following the rules.
‘Am I going to slip through the cracks?’
This question comes from a reader who’d like to remain anonymous. They ask:
“I left my job on March 19, and started a new job on March 23.
“My new employer has just furloughed me but without pay as I wasn’t on their payroll on or before March 19 (the cutoff date). Am I going to slip through the cracks? Because if so, this is not fair, and the furlough scheme should be fair.”
Here’s Jessica’s answer:
Unfortunately anyone who started working at their current company after March 19 will not be eligible for the government grant if they are put on furlough. This means that you would not receive any wages. There will be thousands of people in your situation, who have started a new job and were not on the PAYE payroll by the cut off.
There is little guidance from the Chancellor about what can be done for people who were between jobs, as the deadline has already been extended once. However, nothing stops you from trying to negotiate a deal with your employer if you are happy to take an even bigger pay cut and can do your work from home. Failing that, you could ask your former employer to rehire you and put you on furlough, this would mean that you could at least receive 80pc of your former wage.
‘My grandson is busier than ever at work but has taken a 20pc pay cut’
This question comes from Ralph via email. Ralph asks:
“My grandson works for one of many companies whose customer-facing section has closed but the internet side of the business is busier than ever before. Nearly all his colleagues have been furloughed at 80 per cent pay, but he continues in work and is busier than ever.
“However, his pay has been docked by 20 per cent. The company directors who earn many times his modest salary have also reduced their pay, but to me it seems petty and wrong. Is this fair or not?”
Here’s what Jessica has to say:
Your grandson is not alone in taking a pay cut but continuing to work. Ultimately, the decision to furlough workers lies with the employer so many businesses have decided that it is only fair for all employees to take a 20 per cent pay cut. But as you say, that has meant that those who are still working are receiving just as much as those who aren’t. Employers may argue this is fair because the furloughed employees did not have a say in the decision. There’s nothing stopping your grandson from asking his work to top up his wages to 100 per cent, some employers have been understanding. However, they are under no obligation to do so.
‘We are directors of a family-run business and we can’t furlough ourselves’
This question comes from Claire via email. Claire asks:
“My husband and I are directors of a family-run menswear business specialising in bespoke suits.
“We set up a limited company because we work together as a team and have a dream to grow a great company. We regularly employ between two and five employees, freelancers and subcontractors, providing jobs and further tax revenue to the economy.
“Since the social distancing measures were enforced we saw a dramatic drop in demand and revenue, with our last sale on March 6.
“We recently invested the last of our savings into the business and no longer have any savings and the business does not have any retained earnings. With no sales in the foreseeable future we have no money to pay ourselves, we also have no savings to fall back on as it was invested in the business.
“We cannot furlough ourselves as we need to be working to try to prevent the business from failing. However if we do not get any sales or government support soon, it is likely that we will lose the business and face personal financial turmoil in the next few months – which terrifies me as we have a 2-year-old little boy and a 9-month-old little girl. What can we do?
Here’s what Jessica advises:
Firstly, you can furlough the employees if you haven’t already. That eases the burden of paying their wages. You can also furlough yourself and your husband as directors but that would mean you can’t continue to do any work during that time. It may be worth furloughing one of you, in order to receive one set of wages in the form of a grant. Under the Government guidelines, furloughed directors can carry out particular duties to fulfil the statutory obligations they owe to their company, but they must do no more than necessary. This means you would not be able to do work of a kind you would carry out in normal circumstances to generate commercial revenue or provide services to the company.
You could also get a temporary job elsewhere to cover your costs of living. This is not always viable with young children, however.
On behalf of the business you could apply for a business interruption loan scheme, which is designed for small to medium-sized businesses, which can prove they would be viable were it not for the pandemic and have been adversely impacted by the coronavirus.
‘Are you aware of any plans for high-risk employees?’
Our next question comes from Stuart via email. Stuart asks:
“I was made redundant without payoff (due to only one years service) prior to lockdown. I have been lucky enough to be put on their furlough, however my family and I are high risk meaning I can’t get another job.
“If I remain on furlough for July that will be a great help too.
“The confusion comes from August as employees are expected to go back to work or be made redundant. I know I have already be made redundant but if they were to change their mind I couldn’t go back due to being high risk. This means I lose out on all payments.
“Are you aware of any plans for high-risk employees?”
Here’s what Jessica has to say:
Your employer has done the right thing by keeping you on the payroll by furloughing you while it can. You are right that the Chancellor has announced that from the beginning of August the scheme will be more flexible to allow employees to start going back to work part-time.
He also announced that businesses will have to contribute towards wages above a certain threshold but details about this are yet to be confirmed. This means that if your employer keeps you on furlough in August, it is likely they will have to pay part of your wages alongside the grant. Either they will ask you to come back to work and you could claim statutory sick pay if you need to self-isolate because you are at risk or they will make you officially redundant. In this case you should find out if you are eligible for universal credit and jobseekers’ allowance.
‘My umbrella company has added their own criteria to meet furlough eligibility’
This question comes from Louise Wheeler via Twitter. Louise asks:
“My umbrella company has added their own criteria to meet furlough eligibility. Making so many fall short. Is this something a company is allowed to do? It has been confided to me by HMRC that I am entitled for furlough but Parasol Group have made it impossible to get the support. The main stipulation is that they are saying you have to have had three or more weeks left on your contract with the end client to be eligible. It’s both discriminatory and unjust.”
Here’s what Jessica has to say:
It is up to your employer to decide which workers they furlough and which they keep on so if they want to add extra criteria then that is up to them. But the Government designed the scheme to help keep people in their job in the event that their business temporarily no longer needs their service. This sounds like the situation you have found yourself in. There is no reason why your company should not put you on furlough if you meet the Government requirements and they don’t need you to work, it should not cost them anything.
You are not alone, hundreds of thousands of agency workers who are paid via umbrella companies have been without incomes for seven weeks now. Umbrella firms have been dragging their feet on paying out due to a lack of ready cash to cover the initial payments and confusion about how to calculate pay. However, that should not be a problem now that the scheme is up and running. Unfortunately, there is little in place to help people in your situation at the moment but there’s nothing to lose from going back to your company and asking them to reconsider.
‘My husband can’t go to work in a care home and can’t be furloughed’
Our next question comes from Jane Swanson via email. Jane asks:
“My husband is 71 and is self-isolating. He works for a care home. He has not received any money from his employer, and has been told that he cannot be furloughed. Please can you advise if he can be furloughed, or how can he get some money?”
Here’s what our reporters have to say:
The furlough scheme is principally designed for people whose work dries up because of coronavirus. That is not the case for your husband: he is unable to work because he is considered at high-risk from coronavirus. Vulnerable people who are having to self-isolate should receive statutory sick pay from their employer. He should speak to the care home first and if this fails speak to his union or an employment lawyer.
‘Can I switch back to being a sole trader?’
Our last question comes from Laura via email. Laura asks:
“I have been a freelance event manager since 2015, I began as a sole trader and in my first two years earnt and switched to become a limited company in Sep 2018.
“18/19 wasn’t quite as good but as part sole trader and part limited company I filed £18,000 in sole trader income and £24,000 in dividends from my limited company. I have enough to pay my basic PAYE until October but have no worked booked in at all. Though I have managed to furlough myself to get the £575 per month.
“As sole traders can claim on their three years prior filings can I do this? Or because I earned more in dividends than in sole trader income in 18/19 am I exempt?
“I expect earnings to drop for a while due to coronavirus – can I switch back to being a sole trader? “
Here’s our reporter’s advice:
The Government has set up a self-employment income support scheme for people working from themselves whose business has been negatively affected by coronavirus. To qualify for a grant under the scheme you must make most of your money from your work as a sole trader and not be making profits of more than £50,000 a year.
To work out if you’re eligible the Government will first look at your self-assessment tax return from the year 2018-19. If you’re not eligible based on that it will then look at the previous two tax years. That means even if you don’t qualify based on your last tax return, you might still be eligible for a grant.
