Returning to work after being furloughed? Here is what to expect

Published on 21 May 2020

The Prime Minister has announced that anyone who cannot work from home, for instance those in the construction or manufacturing sectors, should now be encouraged to go to work where possible. Here we help workers understand what this might mean for pay, tax and benefits.

Illustration of a man leaving the house and returning to work
(c) Shutterstock / eamesBot

On 10 May 2020, the Prime Minister outlined his plan to begin lifting lockdown measures over the coming months.

There are a huge number of considerations around returning to the workplace, including around health and safety. However you may be wondering what happens with your money if you have been recalled after a period of paid furlough leave.

Your furlough ends when you return to work (if you have any questions about whether you can be compelled to return or whether your employer has to give you any notice, please refer to ACAS).

Assuming you have been furloughed on 80% pay, and provided your contractual hours or pay haven’t altered, this means that you should return to full pay as normal – taking into account the minimum wage increases that apply from April 2020.

If you are on UC, then if your income increases as a result of coming out of furlough (because you have gone back to full pay after receiving 80% furlough pay), in most cases your UC award should adjust downwards automatically. If you are on tax credits, you should have been treated as continuing to work your normal hours during your furlough period, however you might want to update HMRC with an estimate of your income for 2020-21.

Is my furlough pay affected if I return to work?

If you have been furloughed for a continuous period of at least 3 weeks as at the date you return to work and have been receiving pay under the Job Retention Scheme, you should continue to be covered by this until the date you return to work.

If the timing of your return to work means you won’t have been furloughed for a continuous period of at least 3 weeks, then your employer will not be entitled to the Job Retention Scheme grant to help cover your wages and so you may receive nothing for this period, depending on what is in your contract. In reality, for most employers, asking their employees to return to work after a period of furlough due to the coronavirus outbreak is likely to be a gradual process and it is likely most employers would not ask you to return to work until after the required 3 weeks minimum period had elapsed, if this was a particular risk.

If for whatever reason, you return to work and are furloughed again, please note that there will be another 3 week minimum furlough period to meet before your employer can receive another Job Retention Scheme grant for you from the government.

What if I return to work part time?

Under the Job Retention Scheme rules in place between 1 March 2020 and 31 July 2020, if you are asked to return to work on reduced hours while your employer implements a phased return to normality, your employer will not be eligible for a grant through the scheme to top-up your wages. However, it is worth mentioning that the scheme has now been extended to October 2020, with changes from August to accommodate some degree of part time working, so the rules are likely to change over the coming months.

In the meantime, in situations where employers have work for some staff but not enough work for all, it would appear to be possible to rotate employees in and out of periods of full work/furlough to help make sure that employers can treat staff equitably and employees can access some support (so long as each employee spends a minimum of three weeks on furlough). If you are worried about returning to work on reduced hours and the impact this will have on your finances, perhaps this possibility is something to check with your employer.

If you do return to work on a part time basis and this means a reduced income, if you are on UC, your UC award should adjust upwards automatically. If you are on tax credits, and this is a temporary reduction in your hours due to the coronavirus situation, HMRC will treat you as continuing to work your normal hours (those before the reduction), so there should be no change to your working tax credit entitlement, although you may want to update HMRC with a new estimated income for 2020/21.

Will my taxes be affected?

If you have continued to be paid during furlough (albeit at a reduced rate), you are unlikely to see much change in your taxes as a result of returning to work. However if having your pay dropped to 80% during furlough meant that you earned less than the tax free amount for each pay period that you were on furlough, as PAYE tax normally works cumulatively, you may be given a tax refund by your employer through the payroll upon your return to normal work.

Example

Josh has a job in which he normally earns around £260 a week. This is just over the threshold at which you start to pay tax (£240 a week, £1,042 a month, £12,500 a year) so usually, he would expect to pay a little tax each week. He has been furloughed since the beginning of April 2020 and will return to work on 18 May 2020.

His employer paid him 80% of £260 for the six weeks he has been on furlough so far in 2020/21, so £208. This is below the threshold at which he starts to pay tax. All the unused tax free amounts from each week (around £32 a week) will be carried forward and used against his pay from the 18 May 2020 onwards.

Even if Josh gets a pay rise because of the minimum wage increases, he can expect to pay no tax for the first couple of weeks that he returns to work, while the extra tax free pay is used up. This is totally normal and is just the system catching up with him. He should not be worried that something has gone wrong.

What if I'm self-employed?

Many people who work in the sectors that have now been encouraged to go back to work may be doing so on a self-employed basis – for example, those under the Construction Industry Scheme. We will be looking at what being recalled to work means for the Self Employment Income Support Scheme grant in a future article.

Contact: Meredith McCammond (click here to Contact Us)
(21-05-20)