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FRS 102: What the Changes Mean for Your Business
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COVID-19. What is a furloughed worker?
We define what the term means for businesses
The term ‘furlough’ relates to the temporary leave of an employee/employees due to the special needs of a company or employer, attributable to the economic conditions at a specific employer, or in the economy as a whole.
It has recently been announced by Rishi Sunak that if employers cannot cover staff costs due to Covid-19, they may have an option of accessing support to continue paying a portion of employees’ salaries. The overall objective of the scheme is to keep people at home while enabling employers to retain staff who will be needed when they begin to rebuild their businesses in the future. This will enable work to begin again with a critical core who have the necessary knowledge.
The scheme is only intended to cover employees registered for PAYE. Self-employed individuals (independent contractors) are not covered by the Scheme.
The scheme cannot be applied to employees who have already been dismissed or made redundant. The Scheme is designed to help employers keep their employees on the books during the COVID-19 crisis by offering a significant wage subsidy.
It cannot be used where shorter hours or reduced pay have been negotiated in response to the COVID-19 crisis or for employees on sick leave or in isolation.
Employers will need to discuss and negotiate with employees salary payments that will continue to be made whilst furloughed, (a standard letter is available on request) changing the status of an employee remains subject to existing employment law and contract.
It is worth remembering that employees should not complete any work for the employer during the time that they are furloughed
The scheme is available to employees on the payroll as at 28th February 2020
All businesses are eligible
This is a grant, not a loan.
The employer will, continue to pay the employee through the payroll, a negotiated rate of salary, and RTI will continue as normal. Further details on the scheme
Maximum grant will be calculated per employee and is the lower of:
• 80% of ‘wages’. The notes published so far, use the phrase ‘wage for all employment costs up to a cap of £2,500 per month’, It is understood that this includes employers’ NIC and minimum employer pension contributions based on qualifying earnings. Wages will be determined by reference to a defined period (yet to be announced).
• £2,500 per month.
It is a matter for employment law whether the employer is required to pay this top up. Discussions with employees may have agreed that the employee has agreed to a different arrangement during their furlough.
If you have any questions please contact your usual Alliotts partner or contact Alliotts.
For more information relating to COVID-19, please view our COVID-19. Information Quick Find page