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Furloughing employees - FAQs for employers on the coronavirus job retention scheme

14 January 2021

Key latest developments

  • The Coronavirus Job Retention Scheme (CJRS) has been extended until 30 April 2021.
  • Under the extended scheme, employers can claim 80% of employees’ salaries, up to £2,500. Employers will still have to pay employers’ National Insurance and pension contributions. The government has confirmed that the 80% government contribution will be maintained until the scheme closes in April 2021.
  • Employers can claim under the scheme even if they have never used the CJRS before or have not furloughed the employees before, and there is no limit on the number of employees who can be furloughed.
  • To be eligible, employees must have been on the PAYE payroll on 30 October 2020. That means that a Real Time Information (RTI) submission notifying payment for that employee to HMRC must have been made between 20 March 2020 and 30 October 2020.
  • Employers will need employees’ agreement to either extend furlough or put new employees on furlough.
  • Employees who were on the payroll on 23 September 2020 who have since been made redundant or stopped working for the employer can be re-employed and put onto the furlough scheme. Employees on fixed-term contracts that have expired since 23 September can also be re-employed and claimed for.
  • Flexible furlough is still an option, meaning employees can work part-time and receive a furlough grant for their unworked hours.
  • Claims for any calendar month must be  being submitted by day 14 or 15 of the following month.
  • For claim periods starting on or after 1 December 2020, employers cannot claim for any days during which a furloughed employee is serving a contractual or statutory notice period.
  • From February 2021, HMRC will publish the names of companies and LLPs who have made claims starting on or after 1 December 2020, together with an indication of the value of the claim (within a banded range). From February 2021, HMRC will also be sharing with furloughed employees the full details of claims made for them starting on or after 1 December 2020. This will be done via the employee’s Personal Tax Account on Gov.uk.
  • The Job Retention Bonus, due to be paid out for employees retained after furlough until the end of January, has been withdrawn and won’t be paid in February 2021 as planned. Instead, the government says a retention incentive will be “deployed at the appropriate time” because the policy intention behind the Job Retention Bonus has fallen away.
  • The Job Support Scheme which the government had intended to replace the furlough scheme with has been postponed.

Key documents and guidance

  • The government has published a policy paper which applies for CJRS claims for the period starting on or after 1 November 2020 to 31 January 2021.
  • A new Treasury Direction (TD) under the Coronavirus Act 2020, which extends the scheme until 31 March 2021 and sets out the legal framework for the scheme from 1 November 2020 to 31 January 2021. A new Treasury Direction will need to be issued to deal with the legal framework from 1 February 2021.

What are the main conditions on using the furlough scheme?

Can we only use the scheme if it would avoid redundancies?

The government initially indicated that the CJRS was an alternative to redundancy, lay-off or unemployment. The TD for the original scheme says that it 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.

The latest employer guidance states that employees can be furloughed if you “cannot maintain your workforce because your operations have been affected by coronavirus”. The latest employee guidance refers to employers using the furlough scheme if “they are unable to operate or have no work for you to do because of coronavirus”. It goes on to state that the scheme is designed to help employers whose operations have been severely affected by coronavirus to retain their employees and protect the UK economy, although all employers are eligible to claim under the scheme and the government recognises that different businesses will face different impacts from coronavirus.

Ultimately, it seems that employers may be allowed some discretion, but they should not be abusing the scheme.

The ongoing question on the underlying purpose of the scheme and the extent to which that is to support the long-term viability of jobs and keep employees attached to the workforce or whether it can be used to support individuals whose jobs only exist within the furlough scheme is still not resolved. This is a real issue for many employers in the context of live redundancy exercises where employees (and their trade union representatives) insist that furlough should be considered as an alternative to redundancy. The TD confirms that for claim periods after 1 December 2020, employers cannot claim for any contractual or statutory notice periods (see below “Bringing furlough to an end”). This may indicate an expectation from the government that employers should only be using the scheme for jobs which the employer expects to be viable.

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. All employers with a UK bank account and UK PAYE schemes can claim the grant. 

Do we need to have used the furlough scheme before 1 November?

No – the CJRS is open to all eligible employers, and there is no need to have used the scheme previously.

Can we still use the scheme if we are now proposing redundancies?

We look at this question below in the “Bringing furlough to an end” section, see “Can we make furloughed employees redundant and still claim the grant?”.

How will the extension of the scheme until the end of April 2021 affect us?

Who is eligible for furlough?

To be eligible for the scheme, employees must have been on the PAYE payroll on 30 October 2020. That means a Real Time Information (RTI) submission notifying payment for that employee to HMRC must have been made between 20 March 2020 and 30 October 2020.

Employers can claim under the scheme even if they have never used the CJRS before or have not furloughed the employees in question before.

When the furlough scheme was last extended, a cap was imposed which meant employers could not claim for more people than they had furloughed previously.  This cap does not apply for claims under from 1 November onwards – there is no maximum number of employees who can be claimed for under the extended scheme. 

We have employees currently on furlough – what are our options from 1 November?

Employees can remain on full-time furlough until the scheme closes at the end of March – 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, 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. 

Can we re-furlough employees who are currently back at work?

Yes, there is no limit on re-furloughing employees under the extended scheme. 

What is the minimum furlough and claim period?

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 until 31 October, you were not able to claim for more employees than the maximum number you have claimed for under any previous claim (with an exception where you have an employee returning from service as a reservist, maternity leave, or other family leave).

From 1 November onwards there is no maximum on the number of employees you can claim for under the scheme.

What about re-hires?

Employees who were on the payroll on 23 September 2020 who have since been made redundant or stopped working for the employer can be re-employed and put onto the furlough scheme. A PAYE RTI submission must have been made for that employee between 20 March and 30 October 2020. Employees on fixed-term contracts that have expired since 23 September can also be re-employed and claimed for (provided there is a PAYE RTI submission to HMRC between 20 March and 30 October 2020).

If former employees who have been made redundant ask to be re-hired, there is no legal obligation on the employer to do so - but employers may feel a considerable degree of moral pressure, particularly if there is a real possibility that circumstances may change so that the employee will be able resume active employment in April or May 2021. Employers will need to weigh this against the additional cost of employer NICs and pension contributions, and consider the vexed question of what to do about any redundancy payments already made. If you re-hire 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 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 much can we claim and how do the calculations work?

What can we claim under the extended scheme?

Employers can claim 80% of employees’ usual wages, up to £2,500. Employers will still have to pay employers’ National Insurance and pension contributions. This essentially takes the CJRS back to the level it was at in August before greater employer contributions were required in September and October.

How do we calculate usual wages for a fixed wage employee?

This depends on whether the employee was eligible for furlough under the original scheme.

  • For employees who were eligible for furlough under the original scheme (whether or not they were actually placed on furlough), the calculation is based on the wages payable to your employee in their last pay period on or before 19 March 2020.
  • For employees who are only eligible for furlough under the new scheme (e.g. new joiners after the previous cut-off date of 19 March 2020), the calculation is based on the wages payable in the last pay period ending on or before 30 October 2020.

How do we calculate usual wages for employees whose pay varies?

This depends on whether the employee was eligible for furlough under the original scheme.

  • For employees who were eligible for furlough under the original scheme (whether or not they were actually placed on furlough), you must base the calculation on the higher of the wages earned in the corresponding calendar period in the tax year 2019 to 2020, or the average wages payable in the tax year 2019 to 2020.
  • For employees who are only eligible for furlough under the new scheme (e.g. new joiners after the previous cut-off date of 19 March 2020), you must base the calculation on the average payable between the start date of their employment or 6 April 2020 (whichever is later) and the day before their CJRS extension furlough periods begins. (These dates are inclusive).

How will employer contributions and top ups work?

What contribution will we need to make under the extended scheme?

Employers will only be required to contribute employers’ National insurance and pension contributions.

We can’t afford to make the minimum contribution required. What are our options?

The employer contributions 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?

No, but you may need a new or extended furlough agreement if you want to reduce furlough pay (depending on how the terms of the existing agreement were framed).

How does flexible furloughing work?

Is flexible furlough still possible?

Flexible furlough continues to be an option, meaning employees can work part-time and receive a furlough grant for their unworked hours. Unlike under the original scheme, there is no need for an employee to have been furloughed before in order to be put onto flexible furlough.

Must we provide part-time work to all furloughed employees?

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.

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).

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 usual hours your employee was contracted for at the end of the last relevant pay period.

  • For employees who were eligible for furlough under the original scheme (whether or not they were actually placed on furlough), usual hours are calculated based on the pay period ending on or before 19 March 2020.
  • For employees who are only eligible for furlough under the new scheme (e.g. new joiners after the previous cut-off date of 19 March 2020), usual hours are calculated based on the contracted hours worked in the last pay period ending on or before 30 October 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 during an earlier period.

For employees who were eligible for furlough under the original scheme (whether or not they were actually placed on furlough), you must calculate usual hours based on the higher of either:

  • the average number of hours worked in the tax year 2019 to 2020; or
  • the corresponding calendar period in the tax year 2019 to 2020

For employees who are only eligible for furlough under the new scheme (e.g. new joiners after the previous cut-off date of 19 March 2020), the usual hours will be the average hours worked between:

  • the start date of the 2020 to 2021 tax year, (for example, 6 April 2020)
  • the day before their CJRS extension furlough periods begins

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?

The clinically extremely vulnerable are advised not to attend work under the new national lockdown from 4 January 2021. If they cannot work from home, these employees should not attend work and will be eligible for SSP – but they could also potentially remain on (or move into) the furlough scheme.

Other employees may not be happy or able to return to work 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. All clinically vulnerable people who cannot work from home can currently return to work but must take extra care with social distancing. Either remaining on furlough, working from home or taking unpaid leave is currently the cautious approach for vulnerable employees if they are unhappy about returning to work.

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 April 2021?

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 April 2021 and still claim the grant?

Yes, but is important to remember that the underlying purpose of the CJRS 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. 

The TD confirms that employers cannot claim for any day when an employee is serving statutory or contractual notice between 1 December 2020 and 31 January 2021 (this includes employees serving notice of retirement or resignation). This is a departure from the current position and employers considering dismissals should be aware that the costs of notice pay after 1 December will no longer be covered by the scheme. Also, note that the grant cannot be used for redundancy payments.

We look at redundancy during and after furlough in more detail in our Restructuring the workplace post Covid 19 – FAQs for employers.

Sickness and furlough

Can an employee be moved from sick leave to furlough?

The guidance confirms that an employee can be moved from sick leave onto furlough. The CJRS is not intended to be used for short-term sickness absence, but if an employee is currently off sick they can still be furloughed.

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.

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 flexible 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 during the pay period used for calculating usual wages. Will this affect their furlough pay?

If an employee returns from sick leave after being on reduced pay during the pay period for calculating usual wages, 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 based on the tax year 2019/20 or average pay over a certain period, as explained above.

Holidays and furlough

Will workers continue to accrue holiday allowance while they are furloughed?

Yes, because they remain employed.  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. 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.

Can we restrict employees taking holiday?

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.  Holiday guidance published on the original furlough scheme which has not (yet) been updated, 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 old 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 the bank holiday.

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 does flexible furloughing affect holiday?

Employees will continue to accrue holiday allowance during a period of flexible furlough and should be paid their usual holiday pay rate for statutory minimum holiday, not reduced furlough pay. 

The guidance for both employers and employees says that any hours taken as holiday during a flexible 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 flexible 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 a flexible 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 30 October 2020 and individually notified to HMRC on a Real Time Information (RTI) submission between 20 March 2020 and 30 October 2020. (RTI is the PAYE notification to HMRC.) Employees hired after 30 October 2020 cannot be furloughed or claimed for, unless they were on the payroll on 23 September and were rehired in order to be put on furlough (we look at the position for these employees above, “What about re-hires”).

What about TUPE transfers?

HMRC guidance and the TD say that employers can claim for employees of a previous business who have transferred to you, if either the TUPE or PAYE business succession rules apply to the change in ownership. Eligible employees should have transferred from their old employer to their new employer after 31 August 2020 and been employed by either their old employer or new employer before  31 October 2020. There must also have been a PAYE Real Time Information (RTI) submission to HMRC (by either their new or old employer) after 19 March 2020 and before 31 October 2020 notifying a payment of earnings for the employee in question.

Under the old scheme, it appeared that the TUPE exception only applied where there was a “business transfer” under TUPE and not where there was a “service provision change”.  The wording in the latest TD is the same, and so it appears that employees who transfer as a result of a service provision change are not covered. 

What about workers who are clinically extremely vulnerable and shielding? Can they be furloughed?

Yes. Clinically extremely vulnerable employees who have been advised to shield are entitled to SSP, but it is possible to agree to end any SSP eligibility and move the shielding worker onto furlough. The clinically extremely vulnerable have been advised to take new shielding measures under the new national lockdown in effect from 4 January 2021.

What about workers with child care or other caring commitments? Can they be furloughed?

Yes, if this results from coronavirus and means they are unable to work. Many employees will be facing new child care issues as schools are shut under the new national lockdown from 4 January 2021. The latest version of the guidance on which employees can be furloughed says that the furlough scheme can be used for employees who are unable to work because they have caring responsibilities resulting from coronavirus, such as caring for children who are at home as a result of school and childcare facilities closing, or caring for a vulnerable individual in their household.

Although employees in this situation can be placed on furlough, there is no right to be furloughed – it is still up to the employer whether they wish to do so. Alternative options include temporary flexible working, use of holiday entitlement (which may include holiday carried over from last year), and unpaid parental leave or other unpaid leave. If an employer is able to be flexible about working options from home, it is also arguable that the employee is no longer “unable” to work and so may not be eligible for furlough.

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. There is no requirement that employees being furloughed from 1 November were furloughed previously. (In any event, the deadline of 10 June for first-time furloughs in respect of employees furloughed previously did not apply to employees returning from maternity leave.)

There is no maximum number of employees you can claim for when claiming for employees furloughed from 1 November, so all maternity returners can be included.

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 returning early need to give you at least eight weeks’ notice of their return to work and they are not eligible for furlough until the end of the eight weeks.

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.  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.

The current guidance does not explain the circumstances in which employees on unpaid leave can be moved onto furlough, but this may be clarified in the expected updated TD.  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.

Employees who are on flexible furlough 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 we ask employees to take part in appraisals while furloughed?

There is a risk that this would fall within the definition of work and so jeopardise the grant. This is not covered in the guidance, but in our view it is safest to delay appraisals until the employee is back at work (either full time or on flexible furlough).

Asking an employee to complete an appraisal form and/or attend an appraisal meeting may well involve discussions about work that could be seen as providing services to the employer. It would be less risky to simply give an employee an appraisal rating if needed, without holding a meeting - e.g. if this is required for payment of an annual bonus.

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. For claim periods starting on or after 1 November 2020, you will be able to claim from 11 November 2020.

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?

Claim periods must start and end within the same calendar month.  They must generally be a minimum of seven days (unless the period you are claiming for includes either the first or last day of the calendar month and you have already claimed for the period ending immediately before it).  You can l 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?

The deadline for claims up to and including 31 October was 30 November 2020.

Claims relating to November 2020 needed to have been made by 14 December 2020. Claims relating to December 2020 should be submitted by 14 January 2021, and claims relating to January 2021 should be submitted by 15 February 2021.  For employers with a significant number of employees on furlough, this means they will need to plan ahead and be organised in order to avoid paying employees but missing the deadline to reclaim the government contribution.

The TD says HMRC may accept late claims if there is a “reasonable excuse” for the failure to make the claim in time.  The TD also says that HMRC may accept requests to amend a claim if it is made by the amendment deadline day for the relevant month (29 December for November, 28 January for December, and 1 March for February), and may accept later amendments if there is a reasonable excuse for the failure to make the amendment in time. However, there is no guarantee that late claims or amendments will be accepted, so it is important to meet the deadline if possible.

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 November 2020 where employees have already been furloughed, but only if a retrospective agreement was put in place by the end of Friday 13 November 2020.

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.

 

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