Furlough – what’s in a name?

Ian Hunter | 06 Apr 2020 | General

The last few weeks have seen multiple new words and phrases quickly become a regular part of our news cycle.  Some such as ‘flatten the curve’, ‘social distancing’, are self-explanatory.  Others like ‘furlough’ are more opaque and confusing as there can be a UK / US divide.


The US

In the US the word and practice is much more common due to government shut downs resulting in the furloughing of public sector workers.  The big difference between the UK and US regarding furloughing is that during this period US employees are likely to retain their health-insurance benefits (though that’s not guaranteed).  Meanwhile across the pond, the NHS fills such a void.

Furloughed workers in the US still typically qualify for unemployment benefits, which have been expanded under the $2 trillion coronavirus relief package that was passed last week.


The UK

Furloughing is still a very new concept in the UK.  In a nutshell, a furlough is a temporary leave of absence due to the special needs of a company or employer, which may be due to economic conditions in the economy as a whole.

In recent days UK firms are now furloughing their workforce due to COVID-19.  As a result financial support for furloughed workers will be provided to employers through the ‘Coronavirus Job Retention Scheme’.  Under this scheme the UK Government confirmed it will subsidise the salaries of furloughed employees up to 80% of their pay to a maximum of £2500 per month.

Airlines are currently availing of the scheme with Easyjet furloughing nearly half of its workforce.  British Airways also reached a deal to temporarily suspend more than 30,000 of its cabin crew and ground staff.


What’s the goal?

In the same way the UK government is seeking to flatten out the coronavirus curve to protect the NHS, furloughing is designed to support firms and industries that have been badly hit by policies designed to slow the spread of corona.  The goal is to prevent mass unemployment as the government temporarily steps in to help pay the wages in order to help companies retain them.


The Rules

The scheme is open to all UK employees which were operating a PAYE payroll scheme on or before 26 February 2020. The scheme will operate for at least three months from 1 March.

Given that the goal of furloughing is to create social distance, employees who are furlough must not undertake work for their employer.

An employee cannot demand to be furloughed.  And likewise, an employer should ask for an employee’s consent before placing them in furlough.  Under the current scheme it is to the employees benefit to be furloughed, as the alternative could be redundancy.  Interestingly it is possible to move employees in and out of furlough on a three-week basis where needs be.


“I volunteer”

Finally, furloughed employees can undertake training courses or voluntary work during the furlough period.  You can also volunteer for your company as long as you aren’t generating revenue revenue or providing a service.


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