What could it mean for you to be furloughed, and how could it affect you? We explain all in a practical guide for AAT students, apprentices and members.
In the same way that few people had heard of a ‘coronavirus’ (Covid-19) before 2020, scarcely anybody knew what “furlough” meant either; many assuming it had something to do with horse racing. But just like Covid-19, furloughing has rapidly and unexpectedly altered the lives of millions of people.
Late on Friday 17 April, the Government announced the scheme will be extended until 30 June and rushed out further guidance ahead of the launch at 8 am on Monday 20 April. We will update this page soon. Meanwhile, here are the links:
Whether you’ve just been furloughed and feel at a loss, or colleagues have suddenly dropped off the radar as your workload ramps up, it’s a lot to handle.
We’ve spoken to a few HR experts to get you some quick facts on what this situation means.
1. What are the rules of furlough?
Being furloughed by your employer is similar to gardening leave: you’ll be sent home, banned from undertaking any work, but will still get paid. This payment – outlined as part of the government’s job retention scheme – will see you receive 80% of your wages (paid by the government), which will be capped at £2,500 a month (in line with the average UK salary of £30,000).
This ensures workers are kept on the payroll rather than being laid off.
The payment is available to all employers that started a PAYE payroll scheme on or before 19 March 2020. If you’ve started a new job since then (or are between jobs and/or made redundant), things are a bit more complicated and you may find yourself unsupported by the scheme. One possible solution is to ask your former employer to rehire you so that you’re eligible for the scheme.
Can you continue to study?
Put simply, yes. The government’s guidance is as follows:
“Furloughed employees can engage in training, as long as in undertaking the training the employee does not provide services to, or generate revenue for, or on behalf of their organisation or a linked or associated organisation. Furloughed employees should be encouraged to undertake training.”
“Training could include time spent on increasing product knowledge, or studying for exams after lockdown but companies need to tread very carefully. This must be ‘real training’, and not ‘work’ in disguise,” says Kirsty Senior, Director of Citrus HR.
Happily, you will get paid whilst training. “Employees must be paid at least the national living wage or national minimum wage for 100 per cent of the time spent training, even if this is more than the furlough subsidy,” says Toni Trevett FCIPD, Director at CompleteHR.
Can apprentices continue the 20% off-the-job element?
Apprentices can be furloughed just like any other employee.
They can also continue to train while being furloughed (as long as it doesn’t financially profit their employer). Apprentices will receive a government subsidy too, consisting of the highest amount of either:
- the apprenticeship minimum wage
- national living wage
- national minimum wage
- or 80 per cent of your usual wages.
The required 20 per cent ‘off-the-job’ training can be continued on furlough. This training could include online learning and assignment completion, or employers setting tasks to be conducted at home.
2. How do the finances work?
If you’re currently being furloughed, HMRC will reimburse 80 per cent of your wages, capped at £2,500 per month. The amount you receive will be 80 per cent of your salary before tax (ie gross salary) as of 19 March 2020.
If you’re on maternity or parental leave, the usual rules will apply.
Got more than one employer? If both firms furlough you, then you’ll receive separate sums from each company (the 80 per cent of your wages and £2,500 monthly cap applies for each employer individually).
If you need support through the welfare system while being furloughed, such as universal credit, then this should be available to you.
What’s included in furloughed salary?
1. Pension contributions
You’ll still need to pay your usual pension contributions (both employer contributions and any usual automatic contributions from yourself). Under automatic enrolment, the minimum you must pay is 4% of your qualifying earnings, and for your employer it’s 3%. If you’re unsure what you currently pay, check with your HR team.
If your wages have been supplemented by past compulsory overtime, fees or compulsory commission payments, this will be included in the calculations of the income you receive. Non-compulsory overtime etc will not be included.
3. Income tax and National Insurance
Income tax and National Insurance contributions will still be deducted from the wages you receive on furlough.
The income tax rate you pay is determined by:
- how much of your income is above your Personal Allowance of £12,500 (though this figure may differ based on other circumstances)
- and how much of your income falls within each tax band.
Individuals earning up to £12,500 may pay 0% in income tax, whereas those earning over £150,000 in taxable income may pay 45% in tax. That’s a big chunk of your furlough wages.
There are a number of rules around National Insurance, but you may pay between 0% and 12% of your earnings, depending on previous rates.
Your employer will deduct these directly from the government grant.
4. Annual leave
“You will continue to accrue holiday if you’ve been placed on furlough because your employment contract continues – the same principal applies as when someone is on maternity or paternity leave,” explains Senior.
“In practice, this means people will accrue lots of holiday, and it has been widely debated as to whether you can be on furlough and holiday at the same time. We believe (note that we do not yet know) that you can be on holiday, but should probably receive 100 per cent of pay rather than 80 per cent of pay for the time when you are on holiday.”
“We expect employers to ask that staff take at least a week, possibly more of holiday during the furlough period to prevent everyone wanting to take all their holiday when lockdown is over and the business is trying to recover and rebuild.”
If you haven’t taken your allocated holiday time due to coronavirus, your bosses must give you the opportunity to take it at some point over the next two years of annual leave.
- The remaining 20 per cent of your pay-packet. Some lucky souls may receive their full wage, but only if their boss decides to top it up.
- Bonuses, tips, non-cash payments and benefits-in-kind.
- If your salary usually exceeds £2,500 a month, you won’t get any more than the statutory, capped £2,500 figure.
3. What’s the furlough process?
The initial consultation
It starts off with a consultation between you and your employer. HR expert Toni Trevett explains:
“Firstly, your employer will speak with and then write to you, stating that it intends to place you on furlough along with an explanation of what that means. They’ll also ask for your consent. You’ll be asked to sign a letter or furlough agreement, or send your employer an email confirming this consent.”
It’s no surprise that most people will agree to be furloughed, especially as the alternative will usually be dismissal by redundancy. Your employer should then confirm in writing that you’ve been furloughed.
Some employers, says Trevett, may choose to “rotate staff on furlough but the minimum rotation period will be three weeks.”
- You may be paid on your normal pay day, with a payslip from your employer as usual, or your employer may be forced to delay your wages until they receive the government grant after 20 April.
- Your employer handles everything around the HMRC grant, so you don’t need to do anything.
Your company will initially apply to the government for the grant. The online HMRC portal where your employer will manage your furloughed status is set to go live on 20 April. You’re unlikely to be paid before then, but some employers may choose to pay their staff first – and claim the money back from the government later.
“In most cases you should get paid on your normal pay day, and this will be paid by your employer in the normal way, with a payslip detailing what you’ve been paid, the tax and any deductions,” points out Senior. “Your employer will submit a claim to HMRC separately and request a grant to cover these wage costs – if the portal goes live on 20 April as planned, then HMRC should make payments to employers around the 30th of the month.”
The grant officially begins for each individual on the day you were placed on furlough. The government will backdate payments to 1 March if you’ve been furloughed since then, and employers will receive a lump sum for both March and April’s wages.
“In some exceptional circumstances, if your employer doesn’t have enough cash to cover the wage bill, and hasn’t been able to access any emergency funding, they may ask to delay the payment until they receive the money from HMRC – you would technically have to agree to this. The claim process would likely take much longer than the length of any delay.”
Trevett advises furloughed staff “to ensure they understand what they’re signing up to, as essentially they are being asked by their employer to agree to ‘unpaid leave’, so that their employer is able to apply to the job retention scheme instead. A furloughed employee will want to ensure that if for any reason their employer is refused the payment from the government, they’ll still get 80 per cent of their pay up to the £2,500 maximum.”
How long will I be affected by the furlough?
Citrus HR’s Senior explains here:
“The scheme is open for claims from 1 March to 30 June, which is a 16-week period. There is a strong possibility that this will be extended if coronavirus restrictions remain in place into May, and the government has committed to extending it if it is needed.”
Initially the scheme was only due to run for 12 weeks until 31 May, but the Chancellor extended it to the end of June as of 17/04/2020, and it may be extended further at a later date.
What happens next is a big unknown. Economists and business analysts are predicting a huge recession, therefore I think we should certainly expect some turbulence over the coming months. At the moment our clients are putting lots on hold until there is some more certainty, but they’re also forecasting and planning to adjust their staffing levels quickly if they need to.”
Anybody placed on furlough will technically be taking temporary leave of their job for a minimum period of three consecutive weeks. If you’re furloughed for a period of time shorter than this, you won’t receive any payment from the government, so raise this with your employer.
Note that you could be on furlough for longer than four weeks if the job retention scheme is extended beyond 30 June by the government.
You can be furloughed more than once, and anybody who returns to work will be taken off furlough.
People who are isolating can still be placed on furlough.
What you can’t do on furlough:
Work for your company
If you’re placed on furlough, you can’t undertake any work for your company. This includes working from home and checking emails.
Do this and you could risk not receiving any reimbursement of your wages. However, you can still use your email to keep in touch with your employers. Tread carefully.
What you can do on furlough:
Furloughed employees can make good use of the quarantine downtime by taking part in volunteering work (such as volunteering for the NHS which still needs people to deliver medicine and drive patients to appointments).
Work for somebody else
If you want to earn extra cash by taking on a weekend job at a supermarket or delivering groceries in the evening (both are in demand at the moment), Trevett says, “The answer whether somebody who is being furloughed can work for another employer appears to be ‘yes’, if it’s allowed under your current contract of employment.”
“This includes agency workers, but they mustn’t do any work for, through or on behalf of the agency that has furloughed then, including the agency’s clients. You’ll also need to return straight to work if your employer chooses to recall you.”
4. Where does this leave my future?
The good news? While you’re on furlough, you’ll be safe from redundancy. However, on 1 June, when the government’s furlough scheme ends, your employer will make a decision on whether you can return to your duties. However, the government may choose to extend its job retention scheme, meaning you’ll be furloughed for longer.
Enhance your employability by studying and adding skills
Furloughed downtime gives AAT students the perfect opportunity to learn new skills and continue studying. AAT president John Thornton advises: “If you are furloughed or spending time on lockdown, I would say use that time productively to do your studying. Keep your motivation up. Keep a structured approach.”
To help you with this, AAT have recently launched the new Learning Portal feature on their website for learning content and resources. It’s accessible via login, and gathers all of your study support resources into one place, enabling you to easily track and evaluate progress with flexibility.
“It would be unrealistic to think that the government could save all the jobs that might be affected, so some level of redundancies should be expected,” says Senior. “But the jobs retention scheme has given a lifeline to many.”
The government’s wage bailout scheme is unprecedented and complex. If you do find yourself being furloughed, stay in regular contact with your employers and/your HR department, and ask any questions you may have.
Keep abreast of any developments via the gov.uk website, AAT or reputable news sources such as the BBC.
- Coronavirus help and information
- Financial assistance for businesses affected by Covid-19
- How AAT members are helping problem-solve around coronavirus
- Digital transformation is the new necessity – and a big opportunity
*The information in this article was correct as of 14 April 2020. Click here for the latest government guidance on furloughing.
Christian Koch is an award-winning journalist/editor who has written for the Evening Standard, Sunday Times, Guardian, Telegraph, The Independent, Q, The Face and Metro. He's also written about business for Accounting Technician, 20 and Director, where he is contributing editor.