It has been months, and the threat of the Corona crisis remains looming on the landscape of major countries worldwide. With this, Health Disaster accompanied a significant Economic Crisis for a considerable chunk of the global population.
The United Kingdom has been battling the Pandemic with all its might. As a result of a long Lock Down Period, many of its citizens have been burdened with Financial Issues. The UK Government has come to the aid of its citizens with numerous schemes and reliefs. One of the popular initiatives is the Furlough Scheme, which was rolled out from 1st March 2020. The Bank of England has put out its opinion that the Scheme is one of the crucial efforts for Economic Recovery. More than One-Fourth of the total jobs are already furloughed, which sums up to about 8.7 million workers. This Scheme has already cost the Government’s treasury an estimated £10 Billion to date.
Introduction to the Furlough Scheme UK
In light of the widespread COVID-19 Pandemic, the Furlough Scheme was introduced to provide some relief to the affected business entities.
Under the Furlough scheme, the UK Government has asked Organizations to Furlough their Employees and not terminate their employment for a stipulated duration. The Employer can claim a specific amount as financial support from the Government to pay the Furloughed Employees.
The term Furlough usually refers to the temporary suspension or layoff of workers generally without any salary payment.
Which workers can be furloughed under the Scheme?
As per HMRC Regulations, under the Furlough scheme, any of the Full-time or Part-time Workers, Employees, Apprentices, Agency Workers, or Workers on hourly contracts can be temporarily laid off from work by an Employer.
The Employer also has the option to furlough any worker if:
- He has Parental responsibility of Childcare,
- He has been advised to stay home or shield himself by the NHS as a result of an Underlying Medical Issue,
- He has a shielding family member in his house or
- He has a person susceptible to significant health problems at home.
Any Employer who wants to Furlough his workers needs to do so in a fair manner in the form of an agreement. The Furlough Agreement must be in writing with relevant details.
A Person who has more than one job is also eligible under the Scheme. For the same purpose, each of his employments will be treated separately. The worker can continue to work for any of his jobs, or he can be furloughed from all his jobs. They shall be eligible for financial assistance for each of the jobs from which he is furloughed.
What amount can be claimed for Furloughed workers under the Scheme?
As per the policy, the Employers can acquire Financial aid from HMRC under the Coronavirus Job Retention Scheme.
An Employer is entitled to claim:
- Up to 80 Percent of each Furloughed Employee’s Regular Monthly Wages
Whichever is Lower
The Payment transferred to the workers can be less than his regular wages. There needs to be an agreement between both the Employer and Employee regarding the same.
The Employer has the authority to top up the wages of his furloughed employees to 100 Percent. It is not mandatory to pay in full; however, the Employer must provide the necessary explanation for not paying the whole sum.
The Pay Entitlement for Statutory leave periods is not affected by the Furlough scheme. The Furloughed workers will remain eligible for Statutory Pays like Statutory Maternity Payment or Statutory Paternal Pay if, he goes on family-related paid leaves on or after 25th April 2020.
Is it Mandatory for Employers to adhere to the Furlough Scheme?
Employers don’t need to compulsorily use the Furlough scheme and temporarily suspend their employees for a Furlough. The adoption of the Scheme depends on the circumstances of his business. The Employer can go for termination of his employees if there is no other suitable alternative left for him. The Employee will, however, remain entitled to the outstanding payments until the date of effective termination.
Important Month-wise Updates introduced for the Furlough Scheme.
The Furlough Scheme has been subject to amendments from time to time in line with the changing scenarios. As per the latest notification, the Scheme has been extended till 31st October. Here are the chronological month-wise updates for 2020, from June to October:
The last date for Employers to opt for Furlough for their employees for the first instance shall be 10th June 2020.
From 1st July 2020, Employers can avail of a Flexible Furlough, whereby they will be able to bring Furloughed Workers on a Part-time Basis. Furlough Scheme Payment will be available for the unworked hours.
The Employer will need to pay the amount due to the Employer’s National Insurance and Pension Contribution from 1st August 2020. The Grant amount of 80 Percent will remain unchanged.
With effect from 1st September 2020, the Employer’s Contribution to Insurance and Pension will continue. The Government will now pay only 70 Percent of the Wages. The Employer will need to reimburse for the remaining 10 Percent or more to meet the minimum 80 Percent criteria.
The Government’s contribution will reduce to 60 Percent of the Wage Amount. Employer will be responsible for topping up to the 80 Percent Wage Requirement as agreed upon with his Employees.
The Furlough Scheme will effectively come to an end on 31st October 2020.
How can Initor Global be of your assistance in these troubling times?
The reliable and adept team of experts at Initor Global is always agile about the latest information the UK Government notifies from time to time. Our team can provide complete Outsourced Accounting and Taxation Advisory Services as per your Business Needs. We assure you of Thorough Compliance with all the Regulatory Matters. Ameliorate your Business to new horizons with our Professional Accounting and Financial Outsourcing Services.