Until recently, many of us had never heard of furlough. But the impact of coronavirus on the jobs market and economy means that already millions of people are relying on the Jobs Retention Scheme, announced by Rishi Sunak last month.
The scheme grants employees 80 percent of their monthly salary, up to £2,500 a month.
The company can top up this pay to 100 percent if it chooses.
Furlough can be claimed for full and part-time employees, as well as agency workers and zero-hour contractors.
Pubs, restaurants, cafes, airline workers and estate agents are among those hit.
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The Jobs Retention Scheme also covers employees who were made redundant since February 28 of this year, so long as they are rehired by their employer.
Anyone on the scheme has the same employment rights as before, including company directors.
It is estimated that nine million people will be put on furlough throughout the crisis.
Can company directors be furloughed?
There has been no black and white confirmation from the Government about whether directors can furlough themselves.
However, there is evidence to show that directors might qualify if all of their salary comes from PAYE like it would for an ordinary employee.
Where a director or shareholder takes a low salary which is topped up by dividends, only the PAYE salary element is covered by the Job Retention Scheme.
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Dividends do not qualify and thus the grant may be correspondingly low.
During a daily coronavirus webinar hosted by the CBI last month, Ben Kerry, Head of Labour Markets at HM treasury, said: “With respect to Directors and owner managers, that does not disqualify them from being furloughed so long as they are on PAYE payroll.
“I understand that they will have some statutory duties and obligations such as filling up their accounts and they will still be allowed to undertake those statutory duties whilst they are being furloughed so that would not count as doing work.”
Earlier this week HMRC provided some guidance for company directors: “As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme.
“Company directors owe duties to their company which are set out in the Companies Act 2006.
“Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed.
“Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.
“Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.
“This also applies to salaried individuals who are directors of their own personal service company (PSC).”
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