Advertisement

Furlough: what does it mean and how does it affect me?

Many companies have “furloughed” employees after they have shut down because of the coronavirus. But what does furlough mean and how does the scheme work?

The coronavirus outbreak has put the future of many businesses, both big and small, at risk. To help, and to avoid permanent job losses, the government has said it will cover 80% of “furloughed” employees’ wages under the Coronavirus Job Retention Scheme. But what does being “furloughed” mean?

What is furlough?

Being furloughed is essentially a leave of absence, similar to being laid off. But it differs from being laid off in that you will continue to be paid. The government will cover most of your salary to help employers hang on to staff if they are forced to shut their business temporarily.

So I still get paid if I am furloughed?

Yes. Under the Government’s Coronavirus Job Retention Scheme, all UK employers can access financial support to continue paying part of workers’ salaries. Employers can claim up to 80% of workers’ wages, up to a cap of £2,500 per employee per month.

But will my pay get cut?

Employers can choose to fund the differences between the government’s contribution and a worker’s usual salary, but they don’t have to. So, yes, your pay could get cut.

Do I still have to work during furloughed leave?

No. It’s important that you do not undertake work for your company in order for you to qualify for the Coronavirus Job Retention Scheme.

How do I apply for the scheme and claim my money?

You don’t – your employer must apply for you. Once an employer applies for the scheme, it will inform furloughed employees of this change. Employers then submit furloughed employees’ wages through an online portal created specifically for the Coronavirus Job Retention Scheme. Your employer will inform you of any pay cuts, but money should still come in as normal, as your employer will have 80% of your wage reimbursed by HMRC.

How long does this scheme run for?

The Department for Business, Energy and Industrial Strategy said: “We intend for the Coronavirus Job Retention Scheme to run for at least three months from 1 March 2020, but will extend if necessary.”

What happens afterwards? Will I be kept on?

Unfortunately, we can’t answer that one. The point of the scheme is to avoid redundancies and staff cuts, so ideally yes. However it’s unclear how much longer this will go on for and the state companies will be in after.

Advertisement
Advertisement

Recommended

The coronavirus is scary – but it's irrelevant to your investments
Investment strategy

The coronavirus is scary – but it's irrelevant to your investments

The spread of the coronavirus is causing alarm around the world. And, while it could be a serious short-term threat to human health, it’s not somethin…
24 Jan 2020
Small business: how to chase late-paying customers
Small business

Small business: how to chase late-paying customers

Many small business have trouble getting their customers to pay up on time. Here's what you can do about it.
23 Jan 2020
Will insurers cough up over Covid?
Small business

Will insurers cough up over Covid?

Hundreds of thousands of small businesses should hear in September whether their insurers are legally bound to pay out on business interruption polici…
3 Aug 2020
HMRC defers tax deadline for millions of self-employed people
Small business

HMRC defers tax deadline for millions of self-employed people

The coronavirus pandemic means the 31 July payment on account date has been postponed for six months.
31 Jul 2020

Most Popular

Gold hits the big $2,000 level – are Aim miners about to play catch up?
Gold

Gold hits the big $2,000 level – are Aim miners about to play catch up?

With the price of gold shooting through $2,000 an ounce, the yellow metal looks unstoppable. Things are so bullish, even Aim-listed junior gold miners…
5 Aug 2020
Don’t despair on dividends – these companies could be set to bring them back
Income investing

Don’t despair on dividends – these companies could be set to bring them back

The value of dividends paid out by UK stocks has plummeted this year as companies “rebase” their payment policies. But things could soon start to look…
6 Aug 2020
Too embarrassed to ask: what is “real return”?
Too embarrassed to ask

Too embarrassed to ask: what is “real return”?

MoneyWeek's latest "too embarrassed to ask” video explains what a real return is and why it's so important for investors.
5 Aug 2020