Furloughing employees - FAQs for employers on the coronavirus job retention scheme
10 August 2020
The furlough scheme ends on 31 October 2020, with employers starting to contribute from August and a new flexible furlough option from July.
Key latest developments
- The CJRS will close on 31 October 2020. It is now too late to put employees on furlough for the first time, unless they are returning from maternity or other family leave or service as an armed forces reservist.
- Any furlough arrangement from 1 July will be treated as a “flexible furloughing” arrangement. This is to enable employees to return to work on a part-work, part-furlough basis. When working, employees will be paid their normal wage, whilst they will receive the furlough grant for the remainder of their usual working hours. Any holiday taken during a flexible furlough period is to be treated as furlough, even if it is on days the employee was otherwise due to work.
- The flexible furloughing arrangements use a complex set of calculations requiring employers to calculate the baseline number of “usual hours” so they can be compared with the actual hours worked. It is only possible to avoid the flexible furloughing calculations if an employee is on furlough for the whole of the claim period.
- From 1 August, employers will be required to contribute employer national insurance and pension contributions. In September, employers will also be required to contribute 10% of wages and the government will contribute 70%. For October, the employer contribution increases to 20% and the government will contribute 60%.
- All claims for the period ending 30 June must have been completed by Friday 31 July.
- From 1 July, claims cannot straddle two calendar months and the number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim (plus those returning from family leave or armed forces reserve roles).
- The government has confirmed that employees can continue to claim the grant for employees who are serving their notice period (whether contractual or statutory notice).
- The rules on calculating statutory redundancy and notice payments have also been amended to ensure they are paid at the employee’s normal full rate of pay rather than reduced furlough pay.
- The government has announced a new job retention bonus of £1,000 for every worker who is brought back from furlough. We have written about this here.
Key documents and guidance
- To help employers with their next steps, we’ve produced a timeline of the wind-down of the furlough scheme showing the key dates and questions for employers.
- HMRC has produced guidance for employers on the Coronavirus Job Retention Scheme (CJRS) and separate guidance for employees. Both sets of guidance have been amended multiple times and were last updated on 3 and 7 August. There is also guidance on which employees you can put on furlough, a step-by-step guide for employers on how to claim through the scheme, guidance on how to work out 80% of wages, and information on claiming back Statutory Sick Pay (SSP). The government has also published guidance on changes to the CJRS.
- The Treasury Direction (TD) under the Coronavirus Act 2020 sets out the legal framework for the scheme and was last updated on 25 June 2020.
- The government has also released guidance on holiday entitlement and pay during coronavirus.
How will the extension of the scheme until the end of October affect us?
We have employees currently on furlough – what are our options from 1 July?
Employees can remain on full-time furlough until the scheme closes at the end of October – although you’ll need their agreement to remain on furlough for this period if you do not already have it.
You could also agree that employees will return to work part-time from 1 July, whilst remaining on part-time furlough.
Instead of bringing all employees back on a part-time arrangement, you could choose instead to bring employees back to work progressively by ending furlough for an increasing number of employees each month, while others remain on full furlough.
Or you could consider rotating employees between full-time furlough and work (monthly rotations may be simplest for the reasons explained below).
Can we re-furlough employees who are currently back at work?
Yes, provided they were previously furloughed for a consecutive 3-week period at any time between 1 March and 30 June. Contrary to widely reported concerns, employees do not need to have been on furlough on 30 June in order to continue in the scheme from 1 July.
Can we continue to rotate employees on furlough?
Yes, provided all the employees you wish to rotate on furlough from July have been furloughed for a period of 3 consecutive weeks at some point before 30 June. From 1 July, you have more flexibility and can, for example, rotate employees between work and furlough on a weekly basis.
However, rotating furlough will be treated as a flexible furloughing arrangement from 1 July. This means that you will need to start calculating usual hours, worked hours and furloughed hours in line with the new flexible furloughing scheme. For example, if you have been rotating employees between furlough and work on a 3-weekly basis and making monthly claims under the CJRS then you will still be able to do this after 1 July. However, this will now be treated as a flexible furloughing arrangement, which means that you will need to calculate the employees’ usual hours, worked hours and furloughed hours using the HMRC methodology described below (see “How will flexible furloughing work”)
It will be possible to avoid the flexible furloughing calculations if your rotation pattern matches your claim period. This is because the employees for whom you are claiming (i.e. the ones who are taking their turn on furlough during that claim period) will not have done any work at all in that claim period. This allows you to use a simplified calculation method that does not involve a comparison of usual hours and worked hours.
In our view, the simplest approach to rotation going forward (at least for monthly paid employees) may be to rotate between furlough and work on a calendar monthly basis. A mid-month rotation is also a possibility, although would require you to make two separate claims each month.
What is the minimum furlough and claim period?
Until 1 July, employees must be furloughed for a minimum of 3 consecutive weeks and claims through the portal must be made for a minimum 3 week claim period. Furlough periods which began before 1 July must be for a minimum of 3 weeks even if that minimum period ends after 1 July. For example, suppose you have been rotating employees on furlough on a 3-weekly basis, and one group starts a turn on furlough on 22 June. Those employees must stay on furlough for a consecutive period of 3 weeks.
From 1 July, the new rules are that:
- There is no minimum number of weeks or days that an employee must be on furlough.
- However, any claim through the portal will need to cover a period of at least one week unless you are claiming for the first few days or last few days in a month. (You can only claim for a period of fewer than 7 days if the claim period includes either the first or last day of the calendar month, and you have already claimed for the same employee for the period immediately before it.)
- Claim periods must start and end within the same calendar month.
What is the maximum number of employees we can claim for?
From 1 July, you will not be able to claim for more employees than the maximum number you have claimed for under any previous claim.
For example, suppose you have been rotating 20 employees on furlough, but that you have only ever claimed for 10 employees at a time, whilst the other 10 are at work. You will not be able to make a claim for more than 10 employees at a time from 1 July, because the highest number of employees you have claimed for in previous claims is 10. If you want to be able to claim for all 20 employees at a time from 1 July, then you will need to make sure that you claimed for all 20 employees in June.
There is an exception where you have an employee returning from service as a reservist, maternity leave, or other family leave (See “Furlough and special categories of employee below”.)
What if an employee does not agree to a furlough extension?
If an employee does not agree to a furlough extension then you’ll need to consider your other options - see our Restructuring the workplace post Covid-19 - FAQs for employers for further details.
How will employer contributions and top ups work going forward?
What contribution will we need to make when the scheme changes in August?
The required employer contributions will be as follows:
- From 1 August: employer national insurance and pension contributions
- From 1 September: 10% of employee wages (up to £312.50) plus employer national insurance and pension contributions
- From 1 October: 20% of employee wages (up to £625) plus employer national insurance and pension contributions
We can’t afford to make the minimum contribution required. What are our options?
The employer contributions from August are mandatory if employees are receiving the grant. If you cannot make your contribution then you will need to remove employees from the furlough scheme, and consider your other options such as agreeing new terms and conditions or redundancies - see our Restructuring the workplace post Covid-19 – FAQS for employers.
We agreed to top up salary to 100%. Do we need to continue this arrangement until the end of October?
No, but you may need a new or extended furlough agreement if you want to reduce furlough pay between now and October (depending on how the terms of the existing agreement were framed).
How will flexible furloughing work?
Must we provide part-time work to all furloughed employees from 1 July?
No, flexible furloughing is an option, but if you are not in a position to provide any work then you don’t need to do so. Employees can stay fully furloughed, but you’ll need to start contributing to the costs of this (see above).
It is also possible to rotate employees between full furlough and work, or to bring some employees back permanently while others stay on furlough (see above). Making decisions about who returns to work can be complicated and it is necessary to ensure you do so in a non-discriminatory way.
We want to take up the flexible furlough option. What do we need to do?
You’ll need a new written flexible furloughing arrangement with your employees. The agreement will need to cover the hours they will be working and the hours they will be furloughed.
You’ll also need a system for calculating hours worked and not worked (see below).
Note that employees will only be eligible for flexible furloughing from 1 July if they were previously furloughed for a continuous 3-week period at some point prior to 30 June (unless they are returning from maternity leave or other family leave or a role as a military reservist – see below).
Is there a minimum or maximum number of working hours for employees on flexible furlough?
No, you can agree any working arrangement with an employee on flexible furlough, and this can change from week to week.
What can we claim for an employee on flexible furlough through the scheme?
You will be able to claim the grant for the hours your employees are not working calculated by reference to their “usual” hours worked in a claim period. The grant and cap will be reduced in proportion to the hours not worked. For example, an employee is entitled to 60% of the £2,500 cap if they are furloughed for 60% of their usual hours. The approach to calculating usual hours depends on whether the employee is contracted to work for a fixed number of hours (and whose pay does not vary according to the number of hours they work) or whether the employee works variable hours, with pay varying by time worked. We explain this below.
How do we calculate usual hours for fixed hours employees?
You need to start by calculating usual working hours for the period you are claiming for. For employees whose pay is fixed and does not vary by hours worked, the guidance says that this is based on the hours your employee was contracted for at the end of the last pay period ending on or before 19 March 2020.
HMRC has produced examples of how to do the calculations.
The calculations are complicated and require you to take account of non-working days, which may lead to surprising results (see “How do we calculate the unworked hours that we can claim for under the scheme” below).
Our salaried employees are contracted to work whatever hours are required. How do we work out their usual hours?
You should use the core, basic or notional hours stated in the contract (e.g. 35) even if the reality is that these employees would usually work longer hours. This is likely to be the approach you will have taken when calculating their contracted hours for gender pay gap reporting purposes.
How do we calculate usual hours for employees whose hours and pay varies?
For employees who work variable hours, usual hours is not based on the hours you predict that they would have worked in the claim period if they had not been furloughed. Nor can you simply agree the usual hours with an employee in their flexible furlough agreement.
Instead, you have to calculate usual hours by looking backwards at the usual hours they worked last year. You must therefore calculate usual hours based on the higher of either:
- the average number of hours worked in the tax year 2019 to 2020
- the corresponding calendar period in the tax year 2019 to 2020
HMRC has produced examples of how to do the calculations.
Note that you include any fully-paid leave and overtime, provided the overtime payment was not discretionary (this means that you include voluntary overtime provided the employee is paid an agreed contractual rate for overtime). The guidance points out that you should have been providing itemised payslips to employees from April 2019 recording hours worked.
The calculations are complicated and require you to take account of non-working days, which may lead to surprising results (see “How do we calculate the unworked hours that we can claim for under the scheme” below).
How do we calculate the unworked hours that we can claim for through the scheme?
To calculate the number of not-worked hours (which you can claim for through the furlough scheme), you need to start with the employee’s usual hours in the claim period and subtract the number of hours they actually worked in the claim period (even if this is different to what you agreed).
HMRC has produced examples of how to do the calculations.
The calculations require you to look at usual hours and actual hours worked across every calendar day of the claim period including non-working days.
This is best illustrated by HMRC’s own detailed worked example of an employee who is flexibly furloughed. The employee in this example is asked to return to work half days, so you might think that the employer could claim half of the maximum furlough grant on the basis that he is on half-time furlough. In fact, however, this is not the case. In the example given his actual working hours for July come out at 92, whereas his furloughed hours come out at 86. A separate calculation would need to be done for August, September and October.
Does this mean we have to start monitoring and recording working hours for salaried employees when we’ve not done this before?
In theory, yes, because the flexible furlough scheme is based on unworked hours. However, in practice we think it will be open to you to use a daily system for these employees (although we cannot be certain of this pending further clarification). For example, these employees are likely to have a notional, core or basic day. In practice, it is likely to be easiest to agree a flexible furloughing arrangement which is based on days (e.g. working Mondays and Tuesdays, furloughed on Wednesdays, Thursdays and Fridays). You would then calculate worked and unworked hours based on the notional daily hours. You will need to be careful to avoid anything which could be seen as scheme abuse, for example, expecting employees to work longer days than they would usually work on their non-furloughed days.
Who comes back to work and on what pay?
Who should stay on full furlough?
Shielding has now been “paused” for clinically extremely vulnerable employees, meaning they can return to a Covid-secure workplace in the safest available roles if they are unable to work from home. Nevertheless, these employees may not wish to return to work at the moment, and they can remain on full-time furlough instead if you agree this with them. Other employees may not be happy or able to return to work on a part-time basis or rotation because, for example, they are clinically vulnerable, will not be able to manage their caring responsibilities or because they would need to travel on public transport and don’t feel safe.
We look at this issue in more detail in our FAQs on staffing decisions when reopening workplaces.
We’ve implemented pay cuts for employees who were not furloughed. Can we do the same for furloughed employees before we bring them back to work?
We’ve seen nothing in the materials published so far to suggest that you must necessarily bring furloughed employees back on their pre-furlough pay, but you would of course need to agree pay cuts with those employees.
However, the furlough grant for hours not worked is based on pre-furlough pay.
How do we maintain fair pay differentials between furloughed and non-furloughed staff?
It may be difficult to maintain fair differentials when you have some employees on full-time furlough, some employees on a part-work/part-furlough arrangement and other employees who are not furloughed at all but who are working part-time or full-time hours, possibly from home and/or on reduced pay. If, for example, you have employees with almost identical caring responsibilities in each of these groups then there is the potential for comparisons and a sense of unfairness unless this issue is managed carefully. You may need to make adjustments to pay or top-ups to deal with this.
Bringing furlough to an end
What happens at the end of the furlough scheme in October?
The idea is that employees will be able to come back to work.
However, if trading conditions have not improved sufficiently for you to take all the furloughed employees back when the scheme ends then you will be able to make them redundant. This is significant because other European countries that have similar schemes in place are imposing restrictions on employers making redundancies. No such conditions are being imposed in the UK.
Can we make furloughed employees redundant before the end of October and still claim the grant?
Yes, but is important to remember that the underlying purpose of the Coronavirus Job Retention Scheme is to allow employers to maintain their workforce, so there is some risk that HMRC will question rapid redundancies. The sooner an employer moves to making redundancies after furloughing employees, the greater the likelihood of scrutiny from HMRC later as to whether the employer really intended to make redundancies all along and has just been using the furlough scheme for convenience while carrying out consultation.
Until recently, there was a lack of clarity over whether employers could reclaim notice pay under the scheme. The position was clarified in updated government guidance (published on 17 July) which confirms that you can continue to claim under the scheme for a furloughed employee who is serving statutory or contractual notice.
We look at redundancy during and after furlough in more detail in our Restructuring the workplace post Covid 19 – FAQs for employers.
What can we claim through the scheme?
How much is the subsidy?
Currently, HM Revenue & Customs (HMRC) will reimburse 80% of furloughed workers’ regular wages, up to a cap of £2,500 (gross) per worker per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer contributions on that wage.
From 1 August, the Government will stop covering employer national insurance and pension contributions.
In September, the Government will reduce their contribution to 70% (up to a cap of £2,187.50) and from 1 October, the Government will again reduce their contribution to 60% (up to a cap of £1,875).
The employer is required to contribute the shortfall to ensure the employee continues to receive 80% of their regular wages (capped at £2,500) as well as the employer national insurance and pension contributions.
How do we calculate regular wages?
For salaried employees, you must use the actual salary before tax, as of 19 March 2020. If you have already placed employees on furlough based on their salary as of 28 February 2020, and this differs from their salary on 19 March, you can use the 28 February date instead for the first claim you make. For employees whose pay varies (for example because they work different hours each month), you must use and can claim for the higher of either:
- the same month’s earnings from the previous year
- average monthly earnings from the 2019-20 year
If an employee with variable pay has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
If the employee has worked for less than a month, you should use a pro-rata approach.
Government guidance on calculating how much you can claim through the CJRS has changed for salaried employees from 7 August. This now states that if a salaried employee has worked enough overtime to have a significant effect on the amount you would need to claim, you should use the calculation method for employees whose pay varies for future claims. You do not need to amend any previously submitted claims. Examples of where there may be a “significant effect” on the calculation are where overtime has been worked: in the last pay period ending on or before 19 March 2020; in the corresponding calendar period to the period the employer is claiming for; or a lot, or often, in the tax year 2019 to 2020
An online calculator is available to help employers work out how much can be claimed as wages, national insurance contributions and pension contributions.
The guidance makes clear that no grant will be declined or repayment sought based solely on the choice of pay calculation used by the employer – provided a reasonable choice of approach is taken.
What about salary sacrifice?
The wage calculation must be based on post-salary sacrifice wages as of 19 March 2020. Benefits provided through salary sacrifice schemes (including pension contributions) cannot be claimed for.
HMRC has confirmed that coronavirus can count as a life event that could warrant changes to salary sacrifice arrangements, provided this is reflected as a change in the employment contract.
What about payments which we don’t describe as salary or wages?
The guidance says you can claim for any regular contractual payments, including wages, non-discretionary payments for overtime, fees, commission payments, and piece-rate payments.
The TD clarifies that variable performance-related payments can be claimed for if they arise from a legally enforceable agreement, understanding, scheme or transaction which prescribes the method of calculating the amount payable (whether or not that involves the exercise of discretion by the employer).
Completely discretionary (non-contractual) payments cannot be included, such as tips (including those distributed through troncs) and discretionary bonuses.
The original wording of the TD said that “conditional” payments could not be claimed for, but this wording was subsequently removed.
What about payments to LLP members?
Only payments which are not affected by the overall amount of the LLP’s profits or losses, payments which are fixed, and payments which are variable (but are varied without reference to the overall amount of the profits or losses of the LLP) can be claimed.
What about pension payments?
Until the end of July, you can reclaim the minimum mandatory employer pension contribution. This claim can be made on top of the £2,500 cap. The minimum mandatory employer contribution under the auto-enrolment regulations is 3% of an employee’s income above £520 per month.
Pension contributions over and above this cannot be claimed through the scheme but you will need to maintain them, unless you agree something else with employees (and proposing a reduction in pension contributions could trigger pension consultation obligations).
Pension contributions cannot be reclaimed from 1 August onwards.
What about benefits such as health insurance, gym membership etc?
The scheme does not include the cost of non-cash payments or benefits provided to employees, including taxable benefits in kind. Benefits will need to be maintained, however, unless you agree something different with furloughed employees.
Employers that offer permanent health insurance or death-in-service benefits should check with their scheme provider about what salary would be used in the event of a claim – would it be normal annual salary or pay during furlough?
Sickness and furlough
Can an employee be moved from sick leave to furlough?
There was initially some confusion over whether employees could be moved from sick leave onto furlough. The HMRC guidance and TD initially took seemingly contradictory positions on this issue. However, it now seems reasonably clear that an employee could have been moved from sick leave onto furlough - but it is now too late to move employees from sick leave onto furlough unless they’ve been furloughed previously and you are now re-furloughing them (see below).
What if an employee becomes sick or is told to self-isolate while furloughed?
If an employee becomes sick while on furlough, it is up to the employer to decide whether to move them onto SSP or to keep them on furlough.
If the employee remains on furlough, you can continue to claim their salary through the furlough scheme. There was originally some confusion over whether your claim should be reduced by a notional amount to reflect the SSP that would have been paid but this was resolved by subsequent wording of the TD which now suggests that you can claim the full furlough grant in respect of an employee who is kept on furlough after falling ill.
If the employee is moved onto sick pay, you will have to pay the SSP or company sick pay due and can no longer claim for the employee’s salary through the furlough scheme. However, employers with fewer than 250 employees can use the new Coronavirus Statutory Sick Pay Rebate Scheme which will repay up to two weeks’ SSP starting on or after 13 March 2020 for employees who are unable to work because they have coronavirus or cannot work because they are self-isolating at home.
What about employees on rotating or flexible furlough? What happens if they fall sick or are told to self-isolate?
If an employee working under a flexi-furlough or rotating furlough arrangement falls sick or is told to self-isolate in periods when they are due to be working, usual sick pay arrangements should apply and you should pay the SSP or company sick pay due. For employees whose absence from work is related to Covid-19, new regulations have removed the three-day waiting period for payment of SSP.
The position for the periods when a sick employee is due to go back on furlough is more complicated. An employee cannot be on sick leave and furlough simultaneously. It is not entirely clear from the government guidance if you could move a sick employee onto their expected turn on furlough, or if this would be considered an abuse of the scheme. The guidance says that the furlough scheme is not intended for short-term absence and that short-term illness or self-isolation should not be a consideration in deciding whether to furlough an employee. On the other hand, the guidance also says that, if employers want to furlough employees for business reasons and they are currently off sick, they are eligible to do so, as with other employees.
Our interpretation of the guidance was that you should be able to move a sick employee back onto their due turn on furlough (whether under a rotating furlough or flexible furloughing arrangement) provided they were genuinely due to be on furlough at that time, and you have not moved them to furlough simply because they are sick. However, we have heard recently that HMRC’s furlough helpline has said that their interpretation of the government guidance is that the employee should be on sick leave for the whole period. In the circumstances, the least risky approach would be to keep the employee on sick leave for the entire period. This may also be administratively more convenient. But you would not be able to claim the furlough grant to help pay sick pay.
Where sickness absence is not related to Covid-19 and the three-day waiting period for SSP still applies, we do not think that intervening periods of furlough will mean the employee has to serve out waiting days again on returning from furlough.
One of our furloughed employees was on reduced sick pay in February/March. Will this affect their furlough pay?
If an employee returns from sick leave after 19 March 2020 then their furlough pay should be calculated against their normal salary, not the pay they received while on sick leave. If the employee is on variable pay, this should be calculated using either the same month’s earning from the previous year or average monthly earnings for the 2019-2020 tax year.
Holidays and furlough
Will workers continue to accrue holiday allowance while they are furloughed?
Yes, because they remain employed. This is confirmed in specific government guidance on holiday entitlement and pay during coronavirus. You could agree to reduce any enhanced contractual holiday (beyond the statutory minimum of 5.6 weeks per year) to reflect the fact that an employee has been on furlough, but employees will retain their right to 5.6 weeks’ annual leave under the Working Time Regulations (WTR).
Can people ask or be required to take their holiday allowance while furloughed?
Yes. The holiday guidance confirms that furloughed employees can be on holiday during furlough. This means that, if employees have pre-booked holidays then they will be able to take them, and you do not need to allow rescheduling unless they would ordinarily have a right to reschedule. If you would like to require employees to take holiday during furlough, you would need to give twice as much notice as the length of the holiday you want them to take (e.g. ten days’ notice for five days’ holiday) unless the contract says something else. The holiday guidance does say that employers should consider whether any restrictions such as the need to socially distance or self-isolate would prevent the worker from resting, relaxing and enjoying leisure time, which is the purpose of holiday.
Can we restrict employees taking holiday?
The holiday guidance confirms that employers can cancel an employee’s holiday if they give the required amount of notice under the WTR (by giving notice of the same number of days as the holiday the employee wanted to take, e.g. five days’ notice to prevent or cancel five days of holiday). The new right to carry over holiday of up to four weeks into the next two holiday years may assist disgruntled employees who have not been permitted to take holiday during furlough due to the extra cost to the employer. The holiday guidance says that if the employer is unable to fund the difference due to the impact of coronavirus, it is likely that this would make it not reasonably practicable for the worker to take their holiday and so they would be allowed to carry it forward.
What about bank holidays during furlough?
If employees normally work on bank holidays, they will simply be on furlough leave (not holiday) on the bank holiday unless you require them to take a holiday. If employees have the right to take bank holidays off as holidays, then the holiday guidance says that the employer has two options. You can agree with the employee to take the bank holiday as annual leave, or require them to take it by giving notice in accordance with the WTR, and pay correct holiday pay for that day. Or you can agree that the employee defers the holiday to another date and pay furlough pay only on that day.
What should we pay employees who take holiday during furlough?
The holiday guidance confirms that employees need to be paid their usual holiday pay rate for statutory minimum holiday (5.6 weeks), not reduced furlough pay. Employers will have to fund any top-up to full holiday pay themselves and will not be able to claim this back through the furlough grant.
However, employers are still free to agree a different rate of pay for contractual holiday over and above the statutory minimum holiday entitlement of 5.6 weeks. In addition, many employers have asked employees who are still working (i.e. not furloughed) to take cuts in hours and pay. In our view it could be open to employers in some circumstances to agree similar pay cuts with staff who are furloughed, particularly where colleagues in similar roles who remain at work have agreed to a pay cut, which could also impact on their holiday pay.
How will flexible furloughing from 1 July affect holiday?
Employees will continue to accrue holiday allowance during a period of flexi-furlough and should be paid their usual holiday pay rate for statutory minimum holiday, not reduced furlough pay.
The latest guidance for both employers and employees says that any hours taken as holiday during a flexi-furlough claim period should be counted as furloughed hours rather than working hours. This means that an employee who is due to work part-time during a particular claim period under the flexi-furlough scheme will be treated as being on furlough for all holiday taken during that period – irrespective of whether some or all of the days of holiday fall on days when they were otherwise due to work. The employer will be able to claim the furlough grant for the whole of the holiday period, although it will still have to top-up to full holiday pay.
The guidance also says that employees should not be placed on furlough for a period simply because they are on holiday for that period. We believe this means that an employer cannot deliberately move an employee onto furlough instead of work, or move an employee whose furlough period had finished back into the furlough scheme, because they have booked a holiday. However, if the employee was already due to be working under the a flexi-furlough arrangement, all holiday time during that period should be treated as furlough.
Furlough and special categories of employee
What about new starters?
To qualify for the furlough scheme, employees must have been employed on 19 March 2020 and individually notified to HMRC on a Real Time Information (RTI) submission on or before 19 March 2020. (RTI is the PAYE notification to HMRC.) Employees hired after 19 March 2020 cannot be furloughed or claimed for, unless they were on the payroll on 28 February and were rehired in order to be put on furlough. No new starters after 1 July can be furloughed, because the last date for furloughing someone for the first time was 10 June
What about re-hires?
The scheme allowed employers to re-hire employees and put them on furlough if they were either:
- ·on your payroll and notified to HMRC on an RTI submission on or before 28 February
- employed on 19 March and notified to HMRC on an RTI submission on or before 19 March.
However, the last date for furloughing someone for the first time was 10 June, so it is now too late to re-hire someone in order to put them into the furlough scheme.
If you re-hired an employee to put them on furlough then you will need to consider how to manage them when the scheme ends. We recommend you take advice about the best way of doing this in order to reduce your exposure to risk.
What about TUPE transfers?
You can claim for employees of a previous business who have transferred to you after 28 February, if either the TUPE or PAYE business succession rules apply to the change in ownership. It appears that this means that the scheme only applies where there is a “business transfer” under TUPE and not where there is a “service provision change”.
If the employees transferred to you after 10 June, you can still make a claim provided the employees were furloughed by their old employer for at least 3 consecutive weeks between 1 March 2020 and 30 June, and the old employer made a claim for these employees by 31 July. In these circumstances, the maximum number of employees that you can claim for will be increased by the number of transferring employees that the old employer furloughed, subject to the old employer’s maximum cap.
What about workers who are clinically extremely vulnerable and shielding? Can they be furloughed?
Yes. There was initially some doubt over whether clinically extremely vulnerable employees (who have been advised to shield) could be furloughed once the SSP rules changed and they became entitled to SSP. The position was eventually clarified to confirm that it was possible to agree to end any SSP eligibility and move the shielding worker onto furlough.
It is now too late to put anyone into the furlough scheme for the first time (unless they are returning from family leave). However, employees who are shielding can remain in the scheme until it closes at the end of October. Shielding is paused from 1 August, but may re-start if there is an increase in infection rates.
Can an employee be on maternity leave and furloughed?
The guidance says that employers can claim for enhanced maternity pay through the furlough scheme. This suggests that an employee can be on maternity leave and furloughed simultaneously. However, you cannot reclaim any SMP through the furlough scheme. Instead, you can reclaim SMP in the usual way (currently all employers can reclaim 92% of SMP and those that qualify for small employers’ relief can claim 103%).
One of our employees is due to return from maternity leave soon. Can she be furloughed on her return?
Yes, if she agrees and you have previously furloughed employees. The deadline of 10 June for first-time furloughs does not apply to employees returning from maternity leave after 10 June.
When calculating the maximum number of employees you can claim for, you can add the number of employees you are furloughing for the first time on return from maternity leave. This means the maximum number of employees you can claim for from 1 July is the maximum you claimed for in any one claim before 30 June, plus any employees that you are furloughing for the first time on return from maternity leave.
The guidance clarifies the position on calculating furlough pay if an employee returns from maternity leave. This should be calculated against her normal salary, not the pay she received while on leave. If the employee is on variable pay, this should be calculated using either the same month’s earnings from the previous year or average monthly earnings for the 2019-2020 tax year.
One of our employees wants to come back from maternity leave early in order to move onto furlough. Can she do this?
Potentially, yes, if you agree to furlough her upon her return. However, employees ordinarily need to give you eight weeks’ notice if they want to return early from maternity leave and it may not be possible or advisable to make a claim for an employee until the eight-week notice period is up.
One of our furloughed employees is pregnant and is due to go on maternity leave soon. Will her SMP be reduced because she’s been on furlough pay?
No. From 25 April onwards, statutory maternity pay should be calculated based on the pay the employee would have received had they not been on furlough. This means that employees do not lose out if they are on a lower rate of furlough pay during the period for calculating statutory maternity pay.
What about other types of family leave?
The position for shared parental, adoption, paternity or parental bereavement leave is the same as for maternity leave.
What about employees on unpaid leave, such as a sabbatical?
Employees cannot be on unpaid leave and furloughed simultaneously.
If an employee started unpaid leave before 1 March and the envisaged end date is after 30 June, that employee must remain on unpaid leave and cannot be moved onto furlough. Employees due back before 30 June could have been moved onto furlough but would need to have been put on furlough by 10 June in order to qualify for the scheme.
If an employee started unpaid leave after 1 March then it seems that the employer and employee could agree that the employee should be moved onto furlough, even if this means agreeing an early end to the unpaid leave. However, employers will need to be careful to avoid abusing the scheme. Employees would need to have been put on furlough by 10 June in order to qualify for the scheme.
If an employee returns from unpaid leave and is then moved onto furlough, their furlough pay should be calculated using the amount the employee would have been paid if they were on paid leave.
Are foreign nationals with visas eligible for the furlough scheme?
Yes, the guidance says foreign nationals are eligible. They would presumably have to be paying UK PAYE. There are potential sponsor compliance issues to consider for Tier 2 workers.
Although foreign nationals with limited leave are in most cases not entitled to receive public funds, the guidance confirms that grants under the scheme are not counted as “access to public funds”.
Are self-employed individuals eligible for the furlough scheme?
No. A separate package of government support is available for self-employed individuals affected by coronavirus.
What can employees do and not do while on furlough?
Can employees do the odd bit of work for us while furloughed?
When furloughed, employees cannot do anything that provides services to or makes money for an employer that has furloughed them, or for a linked or associated organisation. If they do any work for you or a linked/associated organisation, you may have to repay the grant.
We recommend drawing this to the attention of any furloughed employee who could otherwise be doing some work from home. It is important that they don’t do anything that could jeopardise your ability to claim the grant.
From 1 July, employers have the option of placing staff who have been furloughed on or before 10 June on flexible furlough. (See flexible furlough section). These employees must not do any work during the hours you record them as on furlough.
Can directors perform statutory duties and pay employees?
The guidance says that directors and owner-managers can be furloughed if on PAYE and will still be allowed to perform statutory duties in these roles, so long as this no more work than reasonably necessary for that purpose. They must not generate commercial revenue or provide services to or on behalf of their company. Importantly, the TD says only a limited range of duties are allowed – work done to fulfil a duty or obligation arising from an Act of Parliament, relating to the filing of company's accounts or provision of other information relating to the administration of the director's company.
The TD (as amended) has clarified that directors can also pay salaries to employees of their company and submit claims for furloughed employees to receive the government grant without this counting as work.
Can we ask employees to do training while furloughed?
Yes. A furloughed employee can do training in certain circumstances. In fact, the guidance says that furloughed employees should be encouraged to undertake training.
Training will not count as work where the purpose of the training is to improve an employee’s effectiveness or the performance of the employer’s business.
Training could jeopardise the grant if it provides services to the employer or the employer’s business activities and if it contributes to the employer’s business activities or generates revenue.
In addition, the training should not contribute (to a significant degree) to the production of any goods the employer intends to supply (as part of the provision of goods or services) or to the supply of any services for which consideration is received.
Employees must be paid at least the National Living Wage/National Minimum Wage/Apprenticeship Minimum Wage (as increased on 1 April 2020) for 100% of the time spent training, even if this is more than the subsidy.
Can an employee carry out their duties as manager or trustee of an occupational pension scheme while on furlough?
Yes, provided the sole purpose of the employee’s work is to fulfil their duties as a (legally recognised) trustee or manager of an occupational pension scheme.
The TD clarifies that this exception will not apply where the employee is fulfilling their duties as an independent trustee and their employer’s business activities include providing the services of trustees/managers or undertaking duties as an independent trustee.
Can someone in the furlough scheme do work for other employers?
Yes, if this is allowed under their contract with you.
This includes agency workers, but they must not do any work for, through or on behalf of the agency that has furloughed them while they are furloughed, including through or on behalf of the agency for the agency’s clients.
You should be able to impose restrictions on employees working elsewhere, but you should think carefully about whether you want to do so. You will obviously want to stop furloughed employees from working for a competitor, and there will be no need to say this explicitly because the employee’s underlying contract of employment will stay in place throughout the furlough. You might want to allow furloughed employees to take on extra work in, for example, the health and social care sector or essential services. However, the employee guidance helpfully points out that the employee needs to be able to return to work for you if you decide to recall them and must be able to undertake any training you require of them.
Can furloughed employees do volunteer work?
Yes, this is allowed (so long as it does not provide services to or generate revenue for the employer or a linked or associated organisation).
What records do we need to keep?
Do we have to show that employees agreed to being furloughed?
Yes – you will need to show that furlough was agreed or confirmed in writing. If employees are on rotating or part-time furlough, this should also be agreed or confirmed in writing. A collective agreement reached between an employer and trade union is acceptable for this purpose. The TD also says that the agreement must specify the main terms and conditions upon which the employee will cease all work in relation to their employment.
What records should we keep?
The guidance says that you must keep records of :
- the amount claimed and claim period for each employee
- the claim reference number for your records
- your calculations in case HMRC need more information about your claim
- for employees you flexibly furloughed, usual hours worked including any calculations that were required
- for employees you flexibly furloughed, actual hours worked
You will also need a record of the furlough agreement (see above). We recommend ensuring that you also have records to support any key decisions which could be questioned by HMRC. This may include, for example, records that an employee is clinically vulnerable and has therefore been kept on the furlough scheme when colleagues have returned to work.
For how long should we keep records?
There is some inconsistency in various documents on how long records need to be kept, but the latest guidance says that all records should be kept for 6 years.
How do we claim the subsidy?
What is the process for claiming the payment?
You need to submit information to HMRC about workers who have been furloughed and their earnings, via the online portal . The required information is set out in the step-by-step guidance for employers. To access the system, you will need a government Gateway ID and password and an active PAYE enrolment.
You should receive payment under the scheme six working days after making the claim. If you need short-term cash flow support in the meantime, the government has said you may be eligible for a Coronavirus Business Interruption Loan.
How do we calculate the claim period?
From 1 July, claim periods will no longer be able to overlap calendar months, and must generally be a minimum of one week (unless claiming for the very beginning or end of the calendar month), although you can still claim for longer periods.
You need to include all of the employees you want to furlough for each claim period, because you will not be able to make another claim for the same period or one that overlaps with it.
Is there a deadline for claims?
Claims for the period to 30 June must be submitted by 31 July. The deadline for making claims for 1 July to 31 October has not yet been confirmed.
Is it a grant or a loan?
It will be a grant, not a loan, so it will not need to be repaid. Payments received by a business under the scheme must, however, be included as income in its calculation of taxable profits for Income Tax and Corporation Tax purposes - although businesses can continue to deduct employment costs as normal.
How does backdating work?
Claims can be backdated to 1 March 2020 where employees have already been furloughed.
Backdating could therefore apply to employees who were laid-off or sent home due to workplace closures prior to the announcement of the furlough scheme. The TD says an employee is furloughed if they “have been instructed by the employer to cease all work in relation to their employment”, and this is due to circumstances arising from coronavirus. This indicates that the grant may be payable for employees who were sent home with no work to do before the scheme was announced.
All claims for the period to 30 June need to have been made by 31 July, so it is now too late to make a backdated claim covering this period.
Can we keep some of the grant?
The guidance makes clear that the entirety of the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money and that no part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme. The government will require all employers to agree to return any grants back to HMRC immediately should they become unable or unwilling to use it to pay the employee’s salary and employer national insurance contributions and pension contributions.
Are there any other conditions on using the furlough scheme?
Should we only be using the scheme if redundancy was the alternative?
The government initially indicated that the CJRS was an alternative to redundancy, lay-off or unemployment. Although the guidance for employees refers to furlough as applying when the employer is unable to operate or has no work for the employee to do, the guidance for employers says that the scheme is “designed to help employers whose operations have been severely affected by coronavirus” and that employers that cannot maintain their current workforce because of this can make use of the scheme. The TD says that the scheme applies to employees who are furloughed, “by reason of circumstances arising as a result of coronavirus or coronavirus disease or measures taken to prevent or limit its further transmission” but that no claim may be made if it is “abusive” or “otherwise contrary to the exceptional purpose” of the scheme.
Ultimately, it seems that employers may be allowed some discretion, but they should not be abusing the scheme. In practice, for example, we think this means that you will be able to keep vulnerable employees or those with caring responsibilities on furlough even if you might otherwise have had work for them to do.
Can we still use the scheme if we are now proposing redundancies?
We look at this question above in the “Bringing furlough to an end” section, see “Can we make furloughed employees redundant before the end of October and still claim the grant?”).
Which employers is the scheme open to?
The scheme is available to all UK employers, including businesses, charities, recruitment agencies and public authorities, of any size and in any sector. To be eligible, employers must have created and started a PAYE payroll scheme on or before 19 March 2020, enrolled for PAYE online, and have a UK bank account.
Staffing decisions when reopening workplaces - flowchart23 September 2020
We have updated our flowchart to help employers decide which employees should attend their workplace during the Covid-19 pandemic following the government's announcement of new measures on 22 September 2020
Covid 19 - Coronavirus
Our advice on responding to the coronavirus outbreak.
Employer & employee relations
Our advice on the impact of the coronavirus outbreak and our guidance on how employers should respond in the UK and internationally.