What does furlough mean?

Blog number 2 from our Regional Director Caroline Oberman discusses fuloughing. What does furlough mean, and just what is the Coronavirus Furlough Scheme?

What is Furlough?
It’s hard to believe that only a few months ago I had never even heard of this word “furlough”, whilst now, for the last 6 weeks, it has been a part of the topic of conversation in at least 90% of my calls both inside and outside of work. 

What Does Furlough Mean?
Working in recruitment, I was almost instantaneously expected to be an expert in this scheme -when in reality I am still not 100% certain how to even pronounce it correctly ( are you Furl”offed” or “fur”lowed”?!). I have however committed to learning everything I can about it and have tried to offer the most sensible advice to our workers – some of whom are eligible and some whom unfortunately are not.

The Furlough definition as given by the Government states “Under the scheme announced by Chancellor Rishi Sunak last month, employers can claim a grant covering 80% of the wages for a furloughed employee, subject to a cap of £2,500 a month”. This only applies if you were employed and on the payroll prior to March 19th 2020.

Personally I think the scheme has been a great response from the Government to allow people to not only keep their jobs when otherwise they would be lost, but also maintain an income whilst being at home without work. Having worked throughout the last recession from 2008, there was nothing like this to help people and I myself had to make consultants redundant from my team, knowing in my heart there were not a lot of other opportunities out in the market.

How does Furlough Work?
My first experience of furlough was once again with my own direct team, and me having to inform them that they were being furloughed. I have seen a number of posts on LinkedIn from various sources asking consultants whether they feel they have been unfairly furloughed, and I have had some rec to recs contact me with candidates they have gained from this sort of marketing and honestly, it scares me. I can only hope that I communicated to my team how important they are to the business and how that by putting them on furlough it was to protect their own jobs for the future – but this is my first rodeo!

Then there are our temporary workers on site who, having seen the Government’s daily briefing and read the online advice, believe we can also offer this to them…..but this is where it has become more complicated.

As the portal only opened this week, the results remain to be seen, but we are confident that we have been able to successfully furlough our PAYE temps. Our Limited Company Contractors are responsible for their own businesses and our CIS workers should be eligible to apply for the self employed scheme. There is, however, still a question mark over whether umbrella companies will be able to furlough their workers and if they can, how they will measure the 80%, as their payments are calculated on NLW plus bonuses, which means someone on £11 an hour will get the same pay out as someone on £20 per hour – both of them receiving 80% of NLW pay. In addition to this problem is the issue of holiday pay; legally the worker accrues holiday pay but the government is not paying this nor the apprenticeship levy within the 80%.

Of course Umbrella companies could pay the workers 80% without the holiday pay, but should these workers decide to pursue this money in the future it could likely bankrupt the umbrella company completely. The FCSA have said this is not being reviewed any further so now these companies have to make the decision – do they pay the money without holiday pay and risk financial ruin in the future, or do they decide not to, leaving workers with no income?

Can all Businesses Apply for Furlough?
This has been a question has been repeatedly asked in the press – with one of the most controversial companies applying for the Coronavirus Furlough Scheme being Victoria Beckham’s Fashion range. There is no “means testing” for the eligibility of the scheme and undoubtably it will be us, the tax payers, responsible for paying back the debt, so surely there should be a moral responsibility for companies to only really ask for this bail out if they really need it?

I would love to hear your opinion on the scheme and share experiences please feel free to contact me regarding anything Furlough!

Next week I am going to be looking at the subject of making sales calls to clients during this pandemic…