Furloughed workers – Q & A

On 20 March 2020, the Chancellor announced the Coronavirus Job Retention Scheme. At that time the workings of the Scheme were unclear, but the government has since provided further guidance. In this article our employment partner, John McShane, provides clarity on some of the key points.

Q.1      How is pay calculated?

During the period of furlough, the employer should pay the employee at least the lower of 80% of salary or £2,500. For full-time and part-time salaried employees, the employee’s actual salary, before tax, as at 28 February 2020 should be used to calctulate the 80%. 

Q.2.     How is pay calculated for employee’s whose pay varies?

  1. In the case of employees who have been employed for at least a year, the employer will be able to claim for the higher of the employee’s earnings in the same month the previous year or the employee’s average monthly earnings in the 2019/20 tax year.
  2. In the case of an employee who has been employed for less than a year, the employer will be able to claim for an average of the employee’s monthly earnings since he or she started work. In the case of an employee who only started in February 2020, the employer will be required to pro-rate the employee’s earnings so far.

Q.3.     What about income tax and employee national insurance of furloughed employees?

Wages of furloughed employees will be subject to Income Tax and National Insurance as usual.

Q.4      What about employees who have been made redundant?

The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.

Q.5      Are there any employment law issues?

Any changes to contracts (e.g. to amend the contract to include the ability to furlough employees) should be discussed and agreed with employees. Also discrimination laws apply in the usual way and therefore it is recommended to have an objective selection process to selected employees to be furloughed and record the rationale for each decision to furlough someone.

Employees have the same rights as they did previously e.g. Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.

If you wish to discuss the above article, or require further clarification, please contact our employment department for expert advice.