Coronavirus (COVID-19)

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A guide to furlough for employers and employees

What does ‘furlough’ mean, who does it apply to and how might this key part of the Job Retention Scheme end up saving many small businesses?
A guide to furlough for employers and employees

The phrase ‘furlough’ has been discussed quite a lot lately. It simply means a temporary leave of absence for employees and it’s a key part of the government’s Job Retention Scheme - a scheme which is designed to help businesses cope with the effects of coronavirus.

Under the scheme, companies that meet certain conditions can ‘furlough’ their staff, who will then temporarily stop working for the company while the government pays their wages. Furloughed employees will receive 80% of their wages per month, up to a cap of £2,500.

Why is this scheme in place? Well, with the UK government’s lockdown measures causing the closure of thousands of businesses across the country, both employees and employers alike need some temporary support to avoid a mass loss-of-jobs which could potentially affect individual’s daily lives and destabilise the economy.

What are the benefits of furlough?

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Small businesses are the core focus of the Job Retention Scheme, and the option to furlough your employees is intended to help:

  • Workplaces who cannot afford to pay their staff and would have to make employees redundant or let them go.
  • Workplaces who are struggling with general costs due to a temporary decline in sales.
  • Workplaces who are experiencing a lack of business; and so may not want to pay staff without having any work for them to do.

Generally speaking, it’s a lifeline that could help businesses stay afloat. But here are the potential implications and benefits of furlough:

For employers

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As an owner of a small-to-medium sized business, the chances are you’ve given your all to make the company succeed. That may mean that you’ve made personal sacrifices; working late nights, and spending more time than you probably should have, thinking about work- probably even while you’re in the shower.

So, having the option to pause your operations and furlough your staff is a huge benefit for some business owners, who may have otherwise found themselves shutting shop if this measure had not been made available.

Furloughing your employees means you can be confident that they’re guaranteed at least 80% of their normal wages, relieving you of the pressure of feeling like you’re letting your team down if you can’t afford to pay them at the end of the month. Some employers choose to top up this 80% where possible, which is legally fine to do but not required.

Unfortunately, not all companies who have applied to have their employees furloughed have been successful. The Guardian has reported on a ‘furlough trap’- whereby people may not be covered by the scheme if they have recently switched jobs or are seasonal workers who were about to start posts at holiday parks, airports and youth hostels. So, it may be worth double-checking the eligibility criteria before applying.

For employees

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As a furloughed employee, you aren’t allowed to do any work that generates revenue for your employer’s business. So, you can really do whatever you want- although for the first couple of days this will may well involve catching up on some sleep.

It’s natural to worry about job security a little when you’re furloughed as an employee. The circumstances that have led to the Job Retention Scheme being implemented are unprecedented; we’ve never experienced anything quite like this before. Roughly one in five workers across the country, or nine million people, are currently furloughed, so remember that you’re not alone in facing this challenge.

That said, there are some steps you could think about taking to improve your furlough experience - and make the most out of your time. Here are some of the options:

Undertake some training

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While you can’t work for your employer while furloughed, you are allowed to do some training. It may be worth investing some time in your personal development, and letting your employer know about the type of training you’re looking to take on and how the skills/knowledge you acquire could benefit them.

Many free courses can be found online- from Google courses for marketers to technical skills courses. If you feel that you’ve already invested a lot of time in training and that you’re unsure of a next step to take, consider what challenges your business may face after the coronavirus lockdown ends and what you could do to help.

Volunteer for the NHS or your local community

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You could also look to dedicate some of your free time to support either the NHS or your local community in its time of need. Volunteering opportunities could involve helping vulnerable people get the essential products they need, or supporting a particular charity with their workload.

It’s worth noting that some volunteer work can be done from home too- so you can follow the social distancing rules while still helping others. Both training and volunteering are likely to be considered productive uses of your time- which may make it easier to answer the question ‘what did you do during furlough?’

Mental health and self-care during furlough

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It goes without saying that it’s incredibly important to take care of your mental wellbeing during lockdown- and this is true for employers and employees alike. It’s possible that being on furlough could pose a new challenge to employees’ mental wellbeing; as they may find their routines thrown out of sync and loneliness creeping in as they’re parted from their family, friends and colleagues.

Boredom could be a real challenge too, for employees who do not have much to do. As an employer, you could look to check-in on your employees from time-to-time, hold update meetings where you keep everyone in the loop despite them not actively working, or put together a proper training program to help them occupy their time in a way that is mutually beneficial.

How long can a furlough last?

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When the furloughing process was first announced by the government, it was originally intended to run until 1st June 2020. If employees had been working for their current company since 1st March 2020, and on the company’s payroll since 19th March, their pay could be back-dated to March 1st 2020 too.

More recently, we’re beginning to realise the scale of the challenge coronavirus is posing to our nation, so there’s no guarantee that the lockdown, or furlough scheme, will end on 1st June 2020.

How can I apply for furlough?

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Only employers can apply to have their employees furloughed. Employees themselves are not able to do so. That said, employees are able to reject the furlough proposal, however the government’s guidance does make clear that there is no guarantee you’ll be able to keep your job if this is the case.

If you’re looking to apply to furlough your employees, you can check whether you’re able to claim for your employees’ wages on the government’s website. The application process itself is done online, and HMRC check all claims made through the scheme.

Furlough FAQs

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Who is eligible for the furlough scheme?

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All UK employers are eligible to claim under the scheme. The government’s criteria for approving claims do require that the claimant has:

  • created and started a PAYE payroll scheme on or before 19 March 2020
  • enrolled for PAYE online
  • a UK bank account

What does the word ‘furlough’ mean?

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The word ‘furlough’ derives from the early 17th century Dutch word ‘verlof’, which is modelled on the German verb ‘Verlaub’; meaning ‘to leave’. This seems appropriate for a temporary measure!

Who do I contact for support with my furlough claim?

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As an employee- be aware that your employer is your main point of contact around furlough claims and is responsible for completing them. For employers, you can sign in on the government website using your Government Gateway ID to review your application.

The government are using a web chat as the main point-of-call to handle furlough queries, and have requested that applicants use this chat rather than phoning-in where possible, due to the high volume of applications.

Do you get paid while on furlough?

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While furloughed as an employee, you’ll receive up to 80% of your wages paid by the government. After that, your employers may choose to top up your wage, but are not required to do so.

How could Esme Loans help?

These are difficult times for many businesses, so it’s important now more than ever, to take good care of yourself and your team. If you’re concerned about your business being impacted financially due to coronavirus and want to understand the support available to you, please visit our advice page for information.