What Is Furlough? The Government Scheme That Pays 80% Of Your Wages Explained

With measures for isolation in full force and many businesses therefore unable to operate, more and more people are being told they’re being ‘furloughed’? But what does it mean?

What does it mean to be furloughed?

The Coronavirus Job Retention Scheme was announced by Chancellor Rishi Sunak, and means that if you are furloughed, the government will pay 80 per cent of your wages, up to £2,500 a month. These people have not been made redundant - they continue to be employed by their companies. But in order to not have to make mass lay-offs, companies who cannot operate, can ask the government for this support, in order to continue to pay wages. The grant will start on the day you were placed on furlough and this can be backdated to 1 March. You’ll still pay Income Tax, National Insurance contributions and any other deductions from your wage. Bonuses, commissions and fees are not included as part of your monthly earnings.

Could I earn more than 80 per cent of my wages?

Yes, your company can choose to fund the difference between the government payment and your usual salary, but it doesn’t have to.

What if this isn’t enough money for me?

The Department for Business, Energy and Industrial Strategy says: ‘If your salary is reduced as a result of these changes, you may be eligible for support through the welfare system, including Universal Credit.’

How long will this be available for?

The Chancellor, Rishi Sunak has extended the scheme until the end of October. It was going to end at the end of June.

The scheme will also now focus around returning people to work part-time to help wean the country off furlough. In Tweets, the Chancellor added: 'From August to October the scheme will continue, for all sectors and regions of the UK, but with greater flexibility to support the transition back to work. Employers currently using the scheme will be able to bring furloughed employees back part-time.'

He also said government will ask companies to 'start sharing' the cost of the scheme from August onwards.

Can I do work while I’m on furlough?

No, you should undertake no work while you are furloughed by your company – doing this could mean you lose the government money. If you are working reduced hours, you are not eligible for the scheme. The government scheme doesn’t stop people applying for other roles while on furlough, but this may be subject to your employment contract.

This is the case until August, when the scheme will change - the Chancellor will give more details on this at the end of May.

But what if I’ve got two jobs?

You can be put on furlough by one job and still do the other if it’s permitted in your contract. The 80 per cent of your normal way up to a £2,500 monthly cap applies to each job.

Who can apply for help under the scheme?

Any UK employer can apply to be included in the furlough scheme, including public authorities, but the government says they don’t envisage paying public-sector employees as they will likely be carrying out essential services. If an employer is already receiving public funding for staff, they will be expected to use this money, not the furlough scheme. It is for companies that are unable to operate or have no work because of the coronavirus crisis.

What about if I get sick while on furlough?

The government’s advice page says, ‘If you’re on sick leave or self-isolating because of coronavirus (COVID-19), speak to your employer about whether you’re eligible - you should get Statutory Sick Pay (SSP) while you are on sick leave or self-isolating, but can be furloughed after this.’

What if I was made redundant before this scheme was announced?

The government says: ‘Your employer can agree to re-employ you and place you on furlough instead. They’ll still be able to claim a grant to cover 80% of your monthly earnings, up to a monthly cap of £2,500.’ Your employer can still make you redundant while you’re on furlough or afterwards.

Can I refuse to go on furlough?

The government says: ‘If your employer asks you to go on furlough and you refuse, you may be at risk of redundancy or termination of employment, depending on the circumstances of your employer. However, this must be in line with normal redundancy rules and protections.’

What about if I’m on maternity leave?

If you are eligible for Stautory Maternity Pay, normal rules apply. If your employer ‘tops up’ your SMP, then this is included as a staffing cost and so your employer can claim to pay you through the scheme. The same applies to contractual adoption pay, paternity pay and shared parental pay.

How does it feel to be furloughed?

Eva, who has been furloughed indefinitely, tells Grazia: ‘It's hard. On the one hand, you accept that it's this or your job may not exist at all pretty soon. On the other, no one wants to be labelled as inessential in any job they do. It's not a pleasant feeling. You just do your best to be sanguine and accept that there are bigger issues at the moment.’

What if I'm self-employed or freelance?

People who are self-employed or freelance can't apply under this scheme - for full details on the government's separate package for them, see our article, here.

For more information, visit the government’s advice pages here.