Coronavirus job furlough scheme extended - how does it work?

12 May 2020, 13:48

The Government scheme opens on Monday morning
The Government scheme opens on Monday morning. Picture: PA
EJ Ward

By EJ Ward

The Government scheme to help pay people's wages and support businesses amid the coronavirus crisis has been extended for four more months, but how does the Coronavirus Job Retention scheme work?

Announced by Chancellor Rishi Sunak, the Coronavirus Job Retention scheme will give people 80 per cent of their usual earnings.

This means employers can furlough staff rather than having to make staff unemployed as businesses and workers attempt to cope with the impact of coronavirus.

The furlough scheme currently supporting 7.5 million workers through the coronavirus crisis will be extended until the end of October, Chancellor Rishi Sunak announced on Tuesday.

Read more: Chancellor Rishi Sunak extends furlough scheme until end of October

What is furlough?

Furlough is designed to support firms that have been badly hit by Covid-19, and to prevent mass unemployment. It is part of the scheme to temporarily help pay the wages of people who can't do their jobs, to help companies retain them.

Being furloughed means employees are kept on the payroll, even though they aren't working.

While on furlough you cannot undertake work for or on behalf of your employer.

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Who is eligible?

Any UK organisation with employees can apply for the Government help as long as they had set up a payroll scheme before March 19.

This means that people who work for businesses, charities and public authorities will be entitled to the money if their employer signs up.

If you started your job after March 19 2020 then you are not eligible for the scheme.

If you were made redundant since March 19, you can be put on furlough if your employer rehires you.

How much will I get paid?

Businesses will be able to pay their employees 80 per cent of their regular monthly wage, or £2,500 a month, whichever is lower.

If on the scheme, your employer must pay you at least the 80 per cent of your usual income, however, they are also free to top this up if they wish.

This means that if you earn £24,000 a year, you will earn a gross income of at least £1,600 a month on the furlough scheme.

How long will it last?

The Coronavirus Job Retention Scheme was originally intended to run to June 1 2020, however, it has been extended until at least the end of October.

In a statement, Chancellor Rishi Sunak said: "Our unprecedented job retention scheme will protect millions of jobs across the country and is now up and running.

"It's vital that our economy gets up and running again as soon as it's safe - and this scheme will allow that to happen."

What have businesses and trade unions said about it?

The two groups have broadly welcomed the scheme and its extension.

Trade bodies and business groups said the Government must ensure speedy access to the funds so staff can be paid.

Unions said there would be "no reason" for redundancies and called on ministers to ensure workers are protected longer-term during a recovery.

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Who runs the Coronavirus Job Retention Scheme?

The Treasury said in a statement that about 5,000 HMRC staff will work on the project, which is intended to assist thousands of UK firms, with the money due to reach bank accounts within six working days.

Phone lines and web-chat services will be available to help answer applicants' questions, with the scheme launching 10 days ahead of schedule, it added.

Do I still get taxed?

While on furlough your wage will be subject to the usual income tax and other deductions, the Government guidance says.

What are my rights?

According to HM Revenue and Customs (HMRC) furloughed employees have exactly the same rights they did when working.

This means you are still entitled to statutory sick pay, maternity and other parental rights, the right against unfair dismissal and redundancy payments should you lose your job.

What if I do not want to go on furlough?

The Government say you may be at risk of losing your job if your employer asks you to go on furlough and you refuse.

If this is the case, it must be in line with normal redundancy rules and protections.