Furlough: the new buzzword. What does it mean?

Helen Oparinde, Development Officer in VAL’s Sector Support team looks at how the government’s new Coronavirus job retention scheme might help with financial sustainability.

Financial sustainability is a key priority for all charities and social enterprises (VCSE). However, with the recent lockdown rules various ways of fundraising is becoming a lot more difficult. For example the National Lottery Community Fund is only providing grants for COVID-19 response over the next six months. You can apply for other types of funding needs but it is unlikely you will hear back from them for six months.

Therefore if your VCSE has had to close some of it services, or trading functions, then you might be able to consider using this government scheme to continue to pay some of your staff costs which will help to reduce the burden of salaries costs from your expenditure.

Whether to furlough or not

The starting point is to look which services might be relevant for the scheme and what staff work within that service.

The government says “Where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them.”

The government is advising commissioners which public services should continue. For example they feel that drug and alcohol services are important to keep operating as they protect vulnerable people who are at greater risk from Coronavirus (COVID-19) and help reduce the burden on other healthcare services

One thing to remember is that the employee cannot do any work for the employer that has furloughed them. This includes providing services or generating revenue.

Therefore in the VCSE sector, it is more likely to be where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the Coronavirus response, that the scheme may be appropriate for some of your staff.

If you want advice on whether it is appropriate to furlough your staff, then just send us a message using the online contact form and use the drop down box of support for your voluntary organisation in the reason for contact section.

How will it help financially?

You can claim 80% of wages up to a maximum of £2,500 per month per furloughed employee. Those employees need to be on your PAYE payroll on or before 19 March 2020.

The scheme is quite versatile. You can furlough staff for a minimum of three weeks.

Therefore if you come up with a COVID-19 response idea and get funding for it, then those staff could come off furlough after that initial period and deliver a new service using the new funding to pay those salaries.

You will receive payment six working days after making an application.

Furlough agreements

Finally to be eligible for the scheme an employer must agree with the employee that they are a ‘furloughed worker’. Employers must select people for furlough in a fair way, especially as an employer you may not be able to afford to top up the extra 20% of a furloughed workers salary. Employees must be notified that they have been furloughed. We recommend drawing up a written furlough agreement to include, the date furlough starts, how much the furloughed worker will be paid, when the furlough will be reviewed, and how to keep in contact during furlough.

Get support from VAL

If you are a charity or community group and you need additional support to deliver services during the pandemic, VAL is here to help.

We can offer advice on issues that affect charities, from fundraising to proper governance and managing volunteers.

You get can in touch via:

0116 257 5050

Helen Oparinde

Helen Oparinde is a Development Officer for VAL as part of the Voluntary Sector Support team. Helen is an expert in charity governance and provides face-to-face and telephone advice to local charities and community groups. You can contact Helen at helen.o@valonline.org.uk.