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What is ‘Furloughing’ and how do I do it in my business?


Are you considering the Government’s Job Retention Scheme and furloughing members of your team?

If, like us, you have read so much you are now suitably confused, take a look at our simple guide to what it all means:

1. What is ‘Furloughing’?

  • If the effect of Coronavirus means you are unable to pay your staff and would therefore have to lay them off, furloughing gives you an alternative.
  • Effectively, you temporarily dissolve the position but continue to pay the employee an agreed salary. This is referred to as ‘furloughing’.
  • If you furlough a member of your team they CANNOT do any work for you until the furlough period is ended.

2. How does it work?

  • The Government is going to reimburse 80% of the salary (or up to £2,500 per month) to you so that you still have your staff to resume business once we are back to normal (and effectively still have your business).
  • You do need to pay the salary and then be re-imbursed by the Government. These funds won’t be available until at least the end of April (maybe longer) therefore you do need to consider your cash flow.

3. What are the catches?

  • It is only applicable to employees who commenced employment BEFORE the 28th February 2020.
  • You will need to ask for consent from your employees if your right to furlough is not already included in your contract of employment (which it probably won’t be) as it is a major change in employment terms and conditions. (See point 7 for more details.)
  • If you have more than 20 employees to furlough you will need to follow a more formal consultation process and should seek HR/legal advice.

4. Are they still employed?

  • Yes. All employment rights continue during the furlough period. For example, unfair and constructive dismissal rights, sick, parental and maternity leave and holiday is still accrued. You should also continue to pay PAYE and NI contributions as ususal.
  • You can also opt to increase the furloughed salary to 100% and add the remaining balance yourself although you are under no obligation to do so. This will of course depend on whether or not your business can feasibly sustain this top up.

5. Can it be backdated?

  • If you made any employees redundant due to the impact of the Coronavirus after 1st March 2020 you can offer them this scheme as an alternative and back date it to keep them under your employment. HR/Legal advice would be advisable in this situation.

6. How do I decide?

  • If you need to make a choice as to which employees you furlough, you will need to show reasons for your decisions and you must not discriminate.
  • Your decision should be based on how much of an impact the Coronavirus pandemic is having on the position, i.e is it something you can still justify paying for and will they have anything to do?

7. How do I tell them?

  • To apply for the 80% reimbursement payments from the Job Retention Scheme you will need to show evidence of furloughing your staff.
  • Letters should be dated, sent and written consent received. You should retain all copies of communication.
  • If an employee does not consent, and you cannot afford to keep them on, you will need to initaite redundancy procedures.

Where do I start with the furlough letter?

If you would like support with your letter your accountant should be able to help you or please drop us a line and we can point you in the right direction.

If you would like to talk to us please contact us here.

Other resources you may find useful and should refer to:

Government Guidance

CIPD Factsheet for Businesses

ACAS Advice

NI Direct

Please note: we are not lawyers and we provide advice to the best of our knowledge based on the current information available and without prejudice. Contract and employee relations remains the ultimate responsibility of the business owner and we encourage you to always do your own research.

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