Furlough Definition Explained – Plus FREE agreement template

Furlough Definition Explained – Plus FREE agreement template

< Back to all Posts


What is Furlough and what does it mean for you?

Furlough definition

The Cambridge Dictionary describes the ‘furlough definition’ as the action of “granting a leave of absence to”. The word originated in the US, and does usually cover military personnel, or service people, but has come to apply to workers who have been granted a ‘leave of absence’ in the case of the COVID-19 pandemic.

The process of furloughing is otherwise known as the government’s Employee Retention Scheme, which supplements 80% of a worker’s pay up to £2,500 per worker per month. It will also reimburse employers’ National Insurance contributions and any auto-enrolment pension contributions payable on the 80%.

Many companies across the UK have been under pressure to continue to pay their workers, but with very little income for some, it’s proving difficult to keep up. This is when Furlough is a great alternative to help keep companies afloat. Meaning that employees still have a steady income, and the company can focus on covering costs essential to its future as a business. 

Furlough gives companies particularly affected by the lockdown an alternative to redundancies or laying off workers. 

If you’ve been sent a Furlough Agreement

Typically your employer will inform you ahead of sending a written confirmation, that you’re being moved onto furlough. Once you’ve had this conversation, an agreement letter will be sent to you to sign off.

If you’re an employer you need to send off a furlough letter to your employees to form legal documentation of the employee’s agreement to furlough. With help from our HR department, we’ve put together a legally-binding sample furlough agreement for you to use.

The template includes a full definition of Furlough and why it’s necessary at this time, with links to help support those with mortgages and rent to pay. The template is fully customisable and compatible with all document editors.

Download the Furlough Template Letter below:

furlough definition

When will Furlough end? 

Furlough was initially set to carry on for 4 weeks but has since been extended to the end of June. Chancellor of the Exchequer, Rishi Sunak, said:

“We’ve taken unprecedented action to support jobs and businesses through this period of uncertainty, including the UK-wide Job Retention Scheme. With the extension of the coronavirus lockdown measures yesterday, it is the right decision to extend the furlough scheme for a month to the end of June to provide clarity.”

“It is vital for people’s livelihoods that the UK economy gets up and running again when it is safe to do so, and I will continue to review the scheme so it is supporting our recovery.”

It’s not a reflection on you or your role

Furlough is not a reflection on your performance or your current role in the company. Furlough is simply a safeguard for affected companies to ensure that your job will still be there for you when lockdown is lifted. If you feel you need some support, or are feeling low due to being Furloughed, check out mental health coach, Nick Elston’s tips for lockdown happiness.

Can you work while on furlough?

Furloughed employees are able to work for another employer, but they are not allowed to work for their current employer while on furlough. If an employee is to work for another company they have to ensure that it doesn’t breach their existing contractual obligations.

Employees should only work for another company outside of their usual working hours, so if usual working hours are 9 am – 5 pm employees can take up evening or weekend jobs.

If you’ve started or are about to start a side-job or are going freelance, take a look at our webinar on how Signable helps self-employed professionals & freelancers send documents for an affordable price:

How do I Furlough employees? 

Firstly you need to check if your company is eligible for The Employee Retention Scheme, you can do so via this link

You then need to claim via PAYE, to do this you will need:

  • to be registered for PAYE online
  • your UK bank account number and sort code (only provide bank account details where a BACS payment can be accepted)
  • your employer PAYE scheme reference number
  • the number of employees being furloughed
  • each employee’s National Insurance number
  • each employee’s payroll or employee number (optional)
  • the start date and end date of the claim
  • the full amount you’re claiming for including employer National Insurance contributions and employer minimum pension contributions
  • your phone number
  • contact name

You also need to provide either:

  • your name (or the employer’s name if you’re an agent)
  • your Corporation Tax unique taxpayer reference
  • your Self Assessment unique taxpayer reference
  • your company registration number

If you’re still unsure about the furlough definition and what it means for you see the official government guidance: 

Follow the Government’s guidance here, on claiming via The Employee Retention Scheme.

To download our FREE Furlough Agreement Template Click below 

OR Take a look at our complete guide to remote working and electronic signatures