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Furloughed job scheme opens: how does it work?

Diageo worker James Ashall

Some workers now at home can expect a portion of pay

Applications are open for government support for workers furloughed because of the coronavirus outbreak.

Under the Coronavirus Job Retention Scheme, the government will cover 80% of workers’ wages, up to £2,500 a month, if they are put on leave.

This means for someone earning £24,000 a year they will receive a gross income of at least £1,600 a month on the furlough scheme.

Chancellor Rishi Sunak said: “It’s vital that our economy gets up and running again as soon as it’s safe.”

The Treasury said the system can process up to 450,000 applications an hour. Employers should receive the money within six working days of making an application, it said.

Mr Sunak announced on Friday that the wage subsidy scheme would be extended by a further month, until the end of June.

How does the scheme work?

Employers will pay workers and reclaim the money from HM Revenue and Customs (HMRC) online after the service goes live on 20 April.

The minimum amount of time that an employee can be furloughed is three weeks, and firms are not expected to start receiving money until at least the end of April.

What is furlough?

Anyone who is furloughed is kept on the employer’s payroll while a business sees work levels fall.

While on furlough the individual cannot undertake work for, or on behalf of, their employer.

Who can apply?

A furloughed employee’s employer is responsible for claiming through the Job Retention Scheme on the employee’s behalf and for paying what the individual is entitled to.

Employees cannot apply for the scheme on their own behalf.

Employee and employer must agree to put the individual on furlough.

When making the application, all the information must be submitted at once i.e. there is no option to save and return to the form later.  In addition, amendments cannot be made to the form after submission, so it’s important that the application is submitted fully and accurately at the first attempt.

Who is eligible?

Any UK organisation with employees can apply for the Government help as long as they had set up a payroll scheme before 28 February.

This means that people who work for businesses, charities and public authorities will be entitled to the money if their employer signs up.

Anyone starting a job after February 28, 2020, is not eligible for the scheme.

Those made redundant since 28 February can be put on furlough if their employer rehires them.

Is tax payable?

While on furlough an employee’s wage will be subject to the usual income tax and other deductions.

How does it affect holiday and sick pay?

Careful calculations are required in relation to holiday pay, maternity pay, sick pay, pensions and salary sacrifice as these can give rise to anomalies.

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