Guest Q&A: I can’t pay my staff so I’ve decided to furlough them. How do I do this?

Stephanie Hammond, director of accounts at Beatons accountancy firm, looks at the finer detail behind the Coronavirus Job Retention Scheme.

As with all of the brand new changes, benefits and grants coming in right now, it is hard to work out who can benefit and how.

If you are having trouble paying your staff you are quite right that there is help available to you to pay their wages. This is under the Coronavirus Job Retention Scheme which is where furloughed staff have 80% of their salary paid to them by the government up to £2,500 a month.

Furloughed is a new categorisation for staff and relates to someone who remains on the payroll but is effectively mothballed.

During the period where they are furloughed, it is imperative that they do not carry out any work for the company.

To designate an employee as furloughed you have to notify them of this in writing. This letter must include:

  • the date, the employee’s name and their address.
  • the employee’s position, department, reason for the furlough, and information about any changes to employee benefits. It is also advisable to tell the employee that this action does not reflect dissatisfaction in job performance.
  • An explanation about what a furlough is, the length of the furlough, and details of all employee benefits during this period.
  • Detail of how to communicate with you in future communication

It is worth mentioning that furloughing an employee is changing their employment status, and it is therefore important to talk to your lawyer or HR specialist first.

You then submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal.

The above summarises the position as it is currently known, but the finer details of the Coronavirus Job Retention Scheme are still to be announced.

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