It’s a word most people hadn’t heard of until a few days ago, but it’s one that’s resonating deeply now as businesses struggle because of the coronavirus crisis: furlough.
What exactly does it mean?
If you’re furloughing employees, you’re getting them to take an unpaid leave of absence as there’s no work for them. This means they’re still – to all intents and purposes – employed by you and on your payroll but you won’t be paying them, nor will they be working for you. It’s being seen by a lot of employers as the best way of ensuring that at some point in the future the employees have a job to go back to.
What is the benefit to us as an employer?
Businesses risk closing down permanently if they stay open now and there is very little money coming in. This measure will help them ride out the storm and be able to trade again when we are over the worst of the situation.
Do I have to close completely to qualify?
No. Dealers and garages trading at a distance can keep some staff on and furlough others.
Isn’t the government supposed to be helping out with this?
That’s correct. It’s stepping in with a £330bn measure – called the Coronavirus Job Retention Scheme – to compensate workers who are being furloughed. This includes car dealership staff.
What’s the deal?
HM Revenue & Customs will pay people up to 80 per cent of their salary up to £2,500 per month.
How will this happen?
As the employer, you must get in touch with HM Revenue & Customs via an online portal to apply for a grant to cover the 80 per cent. The scheme is still being set up, and isn’t expected to be in operation until the end of April at least. In the meantime, you’ll very probably have to pay them and then claim the grant. If you can’t afford to do so, a Business Interruption Loan is an option, which can be repaid when you get the grant, but as it’s a loan you’ll be paying interest of some sort.
How long will it last for?
The government has said it will back the Coronavirus Job Retention Scheme for at least three months and backdate it to March 1. It could, however, be extended, depending on how things go.
Can the employer make up the missing 20 per cent?
If they want to, yes, but they’re under no legal obligation to do so.
What’s the cut-off date for qualifying?
Individuals originally had to be employed on February 28, 2020 to be eligible for the scheme, but on April 15 the Treasury extended it and employers can now claim for furloughed staff who were employed and on their PAYE payroll on or before March 19 – the day before the scheme was announced.
How much notice do I have to give employees?
Give them as much notice as possible, even though it might only be a few days – these are extraordinary circumstances.
Can I put all employees on reduced hours and claim the furlough 80 per cent for them?
No. Furloughed employees can’t work for you at all – or even volunteer to do so.
Can directors be furloughed?
Yes, so long as they’re employees and on the PAYE system.
What about National Insurance and pension contributions?
The grant that you apply for as the employer will also cover the associated employer National Insurance contributions plus pension contributions – the latter up to the level of the minimum automatic enrolment employer pension contribution – on the subsidised furlough pay.
What do I need to be aware of to approach this delicate issue with an employee?
Our friends at Lawgistics say that for an employee to be furloughed their contract must include a clause that allows suspension from work for reasons other than disciplinary. If it doesn’t, then you will need specific employee consent for them to be furloughed.
Lawgistics has created two template letters that employers can use in either instance, ie, one for where there is a specific clause and one for those whose consent is needed because there is no such clause in their contract.
Car Dealer hosted a live YouTube interview with legal experts at Lawgistics about the topic earlier this week, which has proved phenomenally popular.
Since then, the team have been inundated with queries, and a follow-up interview is lined up for Wednesday, April 1 at midday, so make a date in your diary for that. The government is releasing new legislation on furloughing early next week to clarify things, but in the meantime, here, in association with Lawgistics, we’ve updated our Q&A about it to explain to employers all about the furloughing process.