Furlough Letter Template (E137)

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Who can use this furlough letter template?

If you are an employer who wants to  access the UK governments Coronavirus Job Retention Scheme , you can use this furlough letter template.  it will allow you to recover 80 % of the salary costs of “furloughed” employees – i.e. employees put on temporary leave.  This is a temporary scheme, initially for a three month period ending on 31st May 2020.

The basic requirement is that you are an employer with a PAYE payroll scheme which has existed since before 28 February 2020.

You can use it for full-time, part-time and flexible working or zero-hours personnel.

What is this furlough letter template for?

Our template sets out the proposed terms on which your employee is put on furlough leave. Once it comes into effect, you will be able to start claiming the 80% subsidy.

What are the main issues?

You need to have the consent of employees who will be put on furlough leave because it involves a change to their employment contract terms.  This is likely to be quite easy to obtain if the choice for an employee is to be placed on furlough leave or to be made redundant.

You and your employees must follow the rules in order to recover the 80% subsidy from the Government. These include a requirement that your employee does not do any work for you or generate revenue for you during the furlough period.

Decide how much salary will be paid by you during the furlough period: some employers will pay full salary, some will reduce salary to equal the 80% that is recoverable.

HMRC said on 15th April that  the scheme will be operational on 20th April and claims received and processed before the end of the month will enable the subsidy to be received by employers in time for salary payments on 30th April.

What detailed terms does the furlough letter contain?

  • A brief explanation of the reasons for the proposed furlough
  • The start date the furlough begins and at least the initial period – which must be at least three weeks
  • the salary that will be paid during the furlough – either the full basic salary or else a reduction to equal the 80% recoverable from the government
  • no work statement: a clear statement that the employee is not allowed to provide work or services for you during the furlough period
  • how the furlough will end: either when you or your employee is no longer eligible for the scheme or you ask the employee to return to work or their employment contract is terminated.

For more information, see our Explanatory Notes below which you will also receive when you download the document from our website.

When I download the document, can I change it and/or use it more than once?

Yes, all ContractStore’s templates are in MS Word and you can use the contract on more than one project. For more information, watch the video on this page of our website or see our FAQs

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ContractStore supplies templates and is not a law firm.  But all our templates are written by experienced lawyers so we can arrange legal assistance for customers who need special terms in one of our documents or a bespoke template. . For more information see our Legal Services page.

 

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Explanatory Notes

Among the initiatives to support business during the coronavirus crisis, the UK Government has introduced a Coronavirus Job Retention Scheme.  Under the scheme, any UK employer who operates a PAYE payroll which existed on 28 February 2020 can claim a subsidy on payroll costs of up to 80 percent of salary (up to a maximum of £2,500 a month) for each employee who is put on temporary leave. This is a temporary scheme covering the three months to 31st May.

Employers can claim for full-time and part-time employees including those on flexible contracts.  The scheme can also apply in the case of employees who were made redundant after 28 February if they are rehired by their employer.  Employees who are continuing to work on a reduced salary are not eligible, although it seems they could be eligible if they stop working and are put on the scheme.

Known as Furlough leave, affected employees are not allowed to attend their normal workplace nor undertake any work or services or generate any revenue for their employer during the Furlough period.  However, recent guidance indicates that they are able to work for someone else or undertake voluntary work, although they may require the consent of their employer to do this.

Furlough leave requires the employee’s consent and we have prepared a short template form of letter for an employer to send to an employee who is to be placed on Furlough leave.  If an employee does not accept the letter, then the chances are the employer will want to terminate their contract.

The Furlough period must be for a minimum of three weeks. In practice, it is likely to continue for so long as lockdown affects the employer’s business unless the scheme is terminated.  HMRC will be operating the scheme and the 80 percent subsidy will be paid to the employer’s bank account. The scheme is due to become operational on 20th April and a senior HMRC executive told the BBC that claims received and processed before the end of the month will enable the subsidy to be received by employers in time for salary payments on 30th April.  .

Also, please note that the Government guidance is being updated on a regular basis and the scheme is not operational at the date of this note.  Therefore, it is important that you take legal advice before finalising a Furlough arrangement with any of your employees.

Template Furlough Letter – some points to note

 Our template assumes that there has already been some discussion or, at least, communication with the employee to whom it is addressed.

The second paragraph briefly describes the Furlough scheme and employers are recommended to provide further details to their staff, probably using guidance issued by the Government.

The letter sets out the changes to the employee’s contract of employment which will come into effect.  These will begin with a statement of the commencement date for the Furlough period.  We have some optional wording that allows for the Furlough leave to be for an initial agreed period, at the end of which, the situation will be reviewed by the employer.

The requirement not to work for the employer is spelt out – if this is breached, the employer might not recover the subsidy.

With regard to salary, we have two options: Either the full salary will continue to be paid by the employer, in which case he will recover 80 percent Or the salary is reduced during the Furlough period to equal the subsidy – i.e. the employer will pay 80 percent of basic salary and recover the same amount.

Since the employer will recover not only the 80% of salary but also National Insurance contributions and auto enrolment pension contributions, these are mentioned in the last bullet point.

The letter contains a paragraph saying when the Furlough leave will end – namely when the employee is required to return to work or when the Furlough scheme ends so far as the parties to this letter are concerned or when the employees contract is terminated.

Since Furlough leave has to be agreed by the employee, the letter should be issued in duplicate with one copy countersigned by the employee and returned to the employer. Both employer and employee should keep those documents as they may be required at a later date.

In our template we have not referred to sick pay entitlement or holiday entitlement.  These are matters among which you should obtain legal advice or, at least, check the Government guidance.

For more information see: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme