You've been furloughed during the coronavirus pandemic. What does that mean?
As the coronavirus pandemic collapses businesses, many employees find themselves on the government's furlough scheme. But what does furlough mean for UK workers?
What is furlough?
The word 'furlough' means to 'lay off or suspend temporarily'. It had never before been used by UK employment law until the coronavirus pandemic hit. In the context of COVID-19, furlough is the Coronavirus Job Retention Scheme, launched by the UK government in March 2020.
The scheme supports businesses affected by coronavirus by temporarily paying the wages of employees they would otherwise have to lay off. Instead, the employees remain on the payroll even though they are not working. Struggling businesses can claim up to 80 per cent of their employees' wages, capped at £2,500 per employee per month. This money is then distributed to furloughed staff.
In short, 'furlough' is the term for businesses negatively affected by the pandemic using the government to temporarily pay their employees during the crisis.
What's the difference between furlough and layoff?
Whilst furlough and layoff are both cost-saving employment actions, there is a stark difference.
If you are on furlough, your employer has decided that you should stand down from work, but they will claim 80 per cent of your wages for you from the government. It's very similar to gardening leave as you will still be paid, pay your taxes and remain employed, but you cannot physically work for your employer for the duration of the furlough.
A layoff, however, is slightly different. It's usually considered a temporary separation from employment as there is a lack of work. Often, it is written into the employment contract and it allows employers to place their staff on a period of short-time working. Staff are not paid during a layoff period, but they do have statutory rights to claim 'guarantee pay' and statutory redundancy pay if appropriate. Laid-off employees may be recalled for work, or it may be a permanent situation.
It is worth noting that the term 'layoff' is often mistaken to mean the termination of an employment contract with no intention to rehire, but that is actually known as 'reduction in force'.
Why do companies furlough?
When COVID-19 hit the UK, it caused thousands of businesses across the nation to close overnight. Restaurants, pubs, cafes, gyms, travel firms and estate agents were among those impacted. As a result, employers could not afford to maintain their current workforce.
The furlough scheme was introduced to save jobs, rather than let them, businesses and the economy collapse. It was designed to help put people on leave due to the coronavirus outbreak and to prevent employers from having to make mass redundancies.
By the end of May 2020, £15bn of furlough claims had been made.
Will I be paid if I am furloughed?
If you are furloughed, you will be paid ‒ but there are terms and conditions.
From 1 March, the government will pay up to 80 per cent of furloughed people's wages, up to £2,500 per month. If you were working in a full-time position (including zero-hours and flexible contracts) on 19 March, you are still eligible for furlough.
However, if you switched jobs between the end of February and 1 March, furlough does not apply to you, so you will not be paid.
If you receive a regular salary, the 80 per cent will be calculated on your salary before tax. But if your pay varies (as you are on a zero-hours or flexible working contract, for example) the 80 per cent cap will apply to an average of your monthly earnings since you started work, the same month's earnings from a previous year or the average earnings of the 2019/20 tax year – whatever is highest.
If you typically earn over £2,500 a month and are furloughed, you will not qualify for 80 per cent of your salary ‒ your payment will be capped at that amount. However, an employer may choose to 'top up' your salary, or you could qualify for support via the welfare system, including Universal Credit.
Can I get another job if I am furloughed?
Getting a new job will not affect your eligibility for furlough pay. You can work somewhere else (so long as you are not breaching your contract with your current employer).
If you decide to get a second job or start a side hustle, make sure you can return to work for the employer who furloughed you when they decide to bring you back. It is also sensible to work outside of the hours you would normally work with the job you have been furloughed from.
If you are interested in getting another job while furloughed, it's best to check with your current employer first.
Will I have a job when my furlough ends?
There is no guarantee that your employer will continue your employment with them after the furlough scheme ends. However, the Coronavirus Job Retention Scheme paves a way for furloughed workers to begin a return to work – from August, workers will be able to return to their jobs part-time.
This means it's less likely for employers to make furloughed workers permanently unemployed. Plus, lockdown in the UK is beginning to ease, with non-essential retail stores the latest to reopen. The hope is that by the time the scheme ends in October, restrictions will have lifted and businesses can begin to pay salaries in full again.
For more advice on the coronavirus job retention scheme, visit the GOV.UK for guidance.
Whilst on furlough, it's a good idea to improve career tools like your CV. Get a free CV critique to see how your document stacks up.