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Document updated/added on 30.03.2020

Topic: Changing terms & conditions and TUPE

Letter designating employee as furloughed
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Letter designating employee as furloughed

Letter designating employee as furloughed

To be eligible for a subsidy under the Coronavirus Job Retention Scheme (CJRS), you must first write to your affected employees confirming they have been furloughed and keep a record of this communication. Use our letter.

Formal notification

Once you’ve obtained an employee’s consent to furlough leave and pay (see our Letter Seeking Agreement to Furlough), you’ll then need to notify them in writing that they’ve been designated as a furloughed employee and you must keep copies of all your correspondence for five years. This is where our Letter Designating Employee as Furloughed comes in. It simply cross-refers to your earlier letter and the employee’s signed consent form and then formally confirms that they’re now a furloughed employee from whatever date you originally proposed for them to finish work (but this can be no earlier than 1 March 2020). This constitutes a temporary variation to their employment contract.

Amount of grant

You can apply to HMRC for reimbursement of 80% of furloughed employees’ regular wage costs, provided they remain employed and on your PAYE payroll, up to a cap of £2,500 (gross) per employee per calendar month, plus the associated employer NI contributions and minimum automatic enrolment employer pension contributions on that reduced subsidised wage. You can only claim for any regular payments that you are contractually obliged to pay your employees, e.g. wages, fees and compulsory commission payments. Discretionary commission payments and bonuses, and any additional pension contributions and non-cash benefits, can’t be claimed for. Payments under the CJRS are still subject to the usual income tax and NI deductions. The reimbursement is a grant, not a loan. For salaried employees, the employee’s actual salary before tax, in their last pay period ending on or before 19 March 2020, is used to calculate the 80%. For those whose pay varies, e.g. shift workers, if they’ve been employed for a full year prior to the claim, you can claim the higher of either the employee’s same month’s earnings from the previous year or their average monthly earnings from the 2019/20 tax year. If they’ve been employed for less than a year, you can claim for an average of their monthly earnings since they started work. You can choose to top up an employee’s wage, e.g. to 100%, or to pay salary above the cap, but you’re not obliged to do so under the CJRS. Once you’ve made your claim (which you can only do once every three weeks) and it’s been approved, your grant is paid via BACS payment to your UK bank account. The CJRS will cover the cost of wages backdated to 1 March 2020 if applicable and is now open until 31 October 2020 (but note that from 1 August 2020 changes will be made to the CJRS to enable furloughed employees to be brought back to work on a part-time basis and you will be asked to start sharing the cost of the scheme).

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