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Coronavirus Job Retention Scheme: What is it and how does it work?

In addition to a number of finance support measures, like the £330bn CBILS loan scheme, in late March the government announced they would step in to pay people’s wages.

For the first time in British history the government covered 80% of employees’ salaries, to help businesses retain staff rather than let them go.

The scheme was tapering down in the summer, and was due to end completely on 31 October, however following the second national lockdown it has now been extended by five months until 31 March 2021.

How does the Coronavirus Job Retention Scheme work?

If a company wants to take advantage of the job retention scheme, they should speak to affected members of staff about being classified as a ‘furloughed worker’.

Furloughed workers will be asked to stop working by their employer, but will remain on the payroll. Their employer will continue to pay 80% of their wages, up to £2,500 per month, which HMRC will reimburse.

The scheme is paid through grants, rather than loans, via an online portal on the gov site.

Due to the amount of time the scheme has now been running, and the changes that have happened since it launched – there are quite complex rules regarding who can claim. The best place to find up-to-date information is in this gov article. 

What is a ‘furloughed worker’?

In this instance, furloughed workers are employees who have been asked to stop working, but have not been made redundant. Rather than being laid off or going without pay, their wages are subsidised by the government.

Furloughed staff must not work for their employer during the period of furlough. Some companies are calling for a more flexible offering, which allows them to take advantage of the scheme while employing staff on a partial basis.

How long will the scheme last?

The Coronavirus Job Retention Scheme has been running since the 1 March 2020. With the new extension it will have been running for over 12 months. The government plan to review the scheme in January 2021 to assess next steps. 

Who is eligible for the scheme?

Initially all UK businesses were eligible for the scheme and it was available to all UK employers using PAYE and to employees on the payroll at 29 February 2020.

As the scheme has been extended and changed there are now additional eligibility criteria. These may change again with the extension so it’s best to check here for the latest information.

Do companies have to pay 20% of workers’ wages?

No. Companies should pay 80% of workers’ wages up to £2,500 a month once they have been furloughed, which the government will pay back.

They should do this using their payroll systems as normal, deducting tax and national insurance. Companies can choose to pay the additional 20% if they wish.

What if a furloughed member of staff becomes ill?

Furloughed workers still keep their employee rights such as sick pay, annual leave and maternity and paternity pay.

Can employers lift a furloughed member of staff in and out of furlough, if work becomes available and then ceases again?

Yes currently you are able to flexibly furlough employees – this means you can bring your employees back to work for any amount of time, and any work pattern.

Where can you find out more information?

This guide was originally created when the furlough scheme was first introduced. With the new five month extension there are some additional points that still need clarifying and we will update as and when we know more.

The key government page will also be updated shortly.

We’ve adapted Fluidly’s Goal Planner tool in response to coronavirus, to help business owners predict the impact of a drop in revenue or costs. You can join Fluidly for free or log in here if you’re already signed up. 

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