Until recently, the word ‘furlough' meant very little to most people in the UK. It's not a recognised term in employment law, and while it's commonly used in the US, it has more often been associated with government employees and members of the military than with small businesses.
But since the Government announced its coronavirus job retention scheme, which reimburses 80% of furloughed employees' pay, the word has become a familiar part of any conversation about the way businesses are dealing with the outbreak.
The scheme has offered welcome support to struggling businesses that have been unable to operate as usual because of the social restrictions and economic impacts of the virus, but that want to retain their workforce throughout this period. Ultimately, it aims to prevent large-scale redundancies and lay-offs, and protect jobs as far as possible.
Over the last few weeks, increasing numbers of businesses have been taking the option to furlough their staff.
According to a survey by the British Chambers of Commerce (BCC), 66% of firms have already furloughed some or all of their staff, with 31% having furloughed more than three-quarters of their workforce.
Analysis of the BCC's figures by the Resolution Foundation suggested more than nine million workers are expected to be furloughed under the scheme - around 27% of the UK's 33m people in employment.
Accessing the coronavirus job retention scheme
Organisations of any type and size can apply for the job retention scheme, and it can be used for any kind of employee, including full-time, part-time, zero-hour, or agency workers.
However, you can only claim for employees who were on your payroll on or before 28 February 2020.
To use the scheme, you'll first need to consult your staff and make any necessary changes to their employment contracts. You'll need to write to each employee confirming they have been furloughed, and keep a record of this communication for at least five years.
Once you've designated and agreed your employees' furlough status, you'll need to continue paying your staff through payroll, and make a claim with HMRC for the 80% grant. After confirming that you are eligible, HMRC will pay the subsidy by BACS to your UK bank account.
If you had already furloughed employees before the scheme was announced, you can backdate your claim as far back as 1 March 2020.
While on furlough, your employees cannot do any work that makes money or provides services for your business. They can, however, carry out volunteer work or training.
You can choose to top-up their salary to cover the remaining 20% of pay, but you don't have to - and doing so will not change their furlough status or allow them to carry out work for you.
What can you claim?
Through the scheme, the Government will reimburse 80% of employees' wages, up to a limit of £2,500 a month.
This includes employers' national insurance contributions as well as minimum employer auto-enrolment contributions of 3%.
However, it does not currently include discretionary bonuses like tips, or commission payments.
What happens next?
The scheme is currently open for three months from 1 March 2020, although it could be extended beyond that if necessary.
Once the scheme has come to an end, HMRC has advised that employers should decide whether employees can return to their duties, or consider alternatives such as terminating their employment.
This is, of course, subject to the situation at the end of June, and it's possible that the scheme could be extended or further measures introduced.
We'll keep you up to date on any new measures announced - or you can check the Government's guidance page for businesses for more support.