How Furlough Can You Go? - Support for Companies during COVID-19

Updated on 12th May 2020 to reflect latest furlough scheme changes.

With all of this Coronavirus madness going on in the world, it can become quite difficult to cut through the noise and figure out what to do in business with all of the uncertainty. The UK Government have released a lot of support for businesses to increase survival rate and retain jobs. While this is all very helpful, it's not always easy to decipher!

We've written, with the help of our glorious accountant Emma Cooke, explanations of the support available for UK Businesses. This blog is all about furloughing and what it could mean for you.

The coronavirus Job Retention Scheme (Furloughing)

The UK government know how important it is for people to still have a solid income to be able to survive and provide for their families. The Job Retention Scheme or 'Furloughing' as most people will know it as, allows UK companies to give garden leave to it's employees while the government pay 80% (Up to £2,500pm) of their salary from March 1st until October 31st PLUS the National Insurance amount to match.

The scheme was recently extended from June to October with more flexibility to support the transition back to work in August and September. Further detail will follow from the government by the end of May regarding this extension.

Employers can choose to top up an employee’s salary with the additional 20% but are not obliged to if this has been agreed with the furloughed employee (as above). If in doubt, seek legal advice.

Furlough is from 1 March so you can backdate to when the employee was furloughed. This will be in place currently until the end of October. You may only backdate if employees were NOT working in that time period. 

​As we say during the PopUp course, we are not legal professionals. If you are unsure if you are eligible or have any specific concerns, ask for professional advice or consult the UK Government webpage for those who can and cannot claim. 
gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

How do you claim?

Before you claim, you need to know the following:

Are you eligible to claim?gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

How much are you going to be claiming?
gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme

Once you're comfortable with the above (and read through our deciphered version) you can proceed through to the claim portal here:
access.service.gov.uk/login/signin/creds

Further information can be found here:
​tax.service.gov.uk/coronavirus-job-retention-scheme

​ Why would you do this?

The main reasons you would do this in your company are:
To increase the financial runway of the business
At a time like this, a lot of businesses may struggle financially. A big cost in a company is employee's. At PopUp, it's our majority cost as we have no other major overheads. By furloughing employees, you are taking away a large cost to the business for that time period, therefore increasing the time that your money will be able to support the business.

To give your employee's security and certainty
Security and certainty are some of the biggest impacts this pandemic has brought with it. People are uncertain about their jobs, uncertain about their financial situation and do not feel secure. This leads to fear, which leads to panic, which leads to things we don't want. By furloughing employees, it gives them security and certainty for two reasons: That you are being active in finding solutions and that their job is safe. At least for this period of time.

Who can claim this allowance? (Must tick all boxes)

• Any UK business or charity who had created and started a PAYE payroll scheme on or before the 19th March 2020.
• Actively enrolled in PAYE online
• Have a UK bank account
• Any entity with a UK payroll can apply (business, charity, recruitment etc.)

Who can they claim it for?

This can be claimed for furloughed and redundant employees (on any type of contract) who were on the payroll on 28th February 2020.
​Employees hired after this date cannot be eligible for this scheme.

• The scheme is only for employees who are not working – they cannot undertake any work for the organisation (including training) while on furlough.
• Directors of Limited Companies.
• Apprentices - Must meet the minimum wage for apprentices in the UK. Meaning you will need to cover the difference between what you claim and the minimum amount they would be earning.
• Administrators - If a company has gone in to administration, the administrator can also access the job retention scheme (providing these is a reasonable likelihood of rehiring workers).​

The effect on morale and having the conversation

​
​Before we get too far into the details of this scheme, this subject trumps the rest as the most important.

​You need to think about the effect on you and your employees.

Be transparent.
Transparency = trust. If you don't have 100% trust with your employees, this is going to be a difficult time for you and the business. NOTE: trust goes both ways.
If you're thinking about this route for your business and your employees, we'd advise a team call or 1-2-1 communications with your team and get them involved in the decision. This will bring them closer, feel valued and also give them a chance to tell you their thoughts. The worst thing you can do is make this choice and tell them how it is. That will be difficult and painful. They will also bring up amazing points that you won't be thinking about, this will help you make a better choice for everyone involved.

Things you should talk about with your employees.
This will differ with every business, but here's a quick list from us. This mirrors exactly what we spoke about whilst making this decision at PopUp:

• What does this ACTUALLY mean? 
  You first need to educate your team on what this all means. If you are to be furloughed, here's what you can/ can't do, what it looks like financially, what that means for their job and so on.​
• Why is this being considered?
  Are you protecting the company financially? Making use of the situation to give everyone some time off? Have you been advised? Getting buy-in on the goal will make your journey through this much easier.
• What's the short-term plan?
  If you do this, what does that mean for the next 3-4 weeks? How does it look in 2 months time? With a plan in place, people will feel safe. With no plan, people will doubt the idea.
• What do your employees want?
  Some employees might love the thought of furlough... A chance to recuperate and chill. Some might hate it... "but what will I do for that long?!" you need to hear your people out. Without this you will have blind-spots and could potentially make the wrong call.
• "How are you feeling?"
  ​Never underestimate this question. And not just referring to the topic, but as this generally. This will give you amazing insight in to what's going on.

 
Managing delivery.
Once you've made your decision, you need to tell everyone this. Dependant on the size of your team, i would set up group calls and inform everyone at the same time UNLESS you are part-furloughing (see more below) then do this 1-2-1.
Group calls when announcing things that have a company-wide impact are key. This brings the team together and boosts the morale when hearing news, whether it's good or bad.

Follow these group calls up with everyone on a 1-2-1 basis and talk them through what happens next. Even if all of these calls are exactly the same, your team need to see you caring for them on an individual basis. This also gives you the opportunity to answer any questions they have that they wouldn't want to ask in a group scenario.

​What should employers do?

Employers should discuss with their staff as soon as possible and make any changes to the employment contract by agreement (seek legal advice where necessary). Transparency is key.
Employers should write to their employee confirming that they have been furloughed and keep a record of this communication (again, seek legal advice on this where necessary). 

What CAN you claim?

What CAN'T you claim?

You will receive a grant to cover:

• 80% of an employee’s regular wage OR £2,500 per month (whichever is lowest)
• The associated Employers National Insurance contributions
• Minimum automatic enrolment employer pension contributions on that subsidised wage.
• Employees who are not working (backdated until March 1st)​​ 

You should not include:

• Fees
• Commission
• Bonuses
• Dividends
• Employee's working since March 1st (if backdating)​

How is the employee's wage calculated?

• Full/Part time employees
  • Claim the actual salary before tax as of 28 February.
• Employees where pay varies (employed more than a year): Claim the higher of: The same month’s earnings from the previous year OR average monthly earnings from the 2019-20 tax year
• Employees where pay varies (employed less than a year): Average of their monthly earnings since they started work
• Employees who started in February: Use a pro-rate for their earnings so far​​

Once the claim has been calculated, then you must work out the Employer NI and pension contributions on the reclaimed salary.

​There is a calculator and full information on the UK Government website here:
​gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme

Can you part-furlough?

You are able to furlough some people and not others. You do not have to furlough the whole company. We've been looking at this as a time to get back in to Start-Up mode. If you're trying to kick it in to a high gear to be agile and fast moving, you'll struggle with a larger team... It's not like it once was when you started! You could, if you wanted to, down-size to essential people (Sales, Product development) and furlough the rest to save cash but not stunt growth. Just some food for thought...

Can directors of Limited Companies claim it?

Where a company director can no longer work through the business, they should be eligible to claim in the same way as for employees or even if they're the only employee. You can furlough the PAYE element of their income - ie, get 80% of salary up to £2,500pm. This isn't likely to be huge as it's likely more of your income is dividends (and there's no help there), but it's something...
Directors must not be able to do any work, including administration work, during this time. This is the most difficult part!

How can I get further business advice and support?

• ​You can call the Business Debtline on 0800 197 6026 to get further advice
• The Federation of Small Businesses has a page which is kept regularly updated offering advice here: fsb.org.uk/resources-page/advice-to-small-businesses-and-fsb-members-about-the-novel-coronavirus-covid-19
• There is also a “Coronavirus and your money” facebook group run by the money advice service where you can get latest news: facebook.com/groups/678203076335430/

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Henry Nicholson
Henry Nicholson is COO of PopUp Business School.
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​You can find out more about Henry though other PopUp Content or find him on instagram at @HenryMNicholson