In March 2020, the UK Government launched the Coronavirus Job Retention Scheme. The Coronavirus Job Retention Scheme covers a multitude of different methods of supporting UK business and charities throughout this tough period. This scheme introduced a new concept into UK Employment law, furloughing. We look at the key issues to think about when furloughing your staff. Please note that this is an evolving picture and there are some questions that have not been answered completely. This guidance should be taken as our interpretation of the Chancellor’s announcement. Please refer to Government advice for the latest information. 

Unexpectedly, the furlough scheme was extended with effect from 1st November 2020 to 31st March 2021. We continuously update the information contained on this support hub as the situation develops and the effects of the outbreak become clearer.

General info

Most frequent questions and answers

Until Friday 20th March, the term ‘furlough’ was not a part of UK employment law. Taken from an American concept, the word originates in the Dutch ‘verlof’ which means a leave of absence. The term has probably been introduced to distinguish it from a ‘lay off’ which is the term used for a temporary redundancy with no pay in the UK.

If you have no work for all or some of your employees to do, then you can temporarily furlough them. The Government will cover up to 80% of wages to a maximum of £2,500 per month. You pay them through payroll and the Government reimburse you. The employee has to be on payroll on the 19th March 2020 to be eligible (note this was the 28th February but was changed on 15th April).

The last date an employee can be furloughed for the first time under the original scheme is 10th June 2020. Employees must have been furloughed for 3 consecutive weeks before 1st July 2020.

From August 2020 the scheme becomes contributory but the employee will still receive 80%.

From November 2020, the scheme is eligible for employees who were on the RTI submission on 30th October 2020. No previous period of furlough was required.

If employees can either work from home or if their work means it is essential for them to travel to work, then they remain employed as usual. The furlough scheme can not be used in this case. This also includes working for an associated or linked company (eg another subsidiary of the same group of companies). From 1st July 2020, this will change and employees can work part time whilst still remaining furloughed. The employer will pay for the hours the employee works with the taxpayer making up the balance.

If you are shielding, there is an exception to this. Contact us for more information.

The furlough scheme covers 1st March 2020 to 31st July 2020. From August to October, the scheme will be open but part of the cost will be borne by the employer. 

From November 2020 to March 2021, the scheme becomes non-contributory again with the exception of pension and national insurance contributions (eg the same payment scheme as August 2020). Rishi Sunak has stated that the scheme will be reviewed again in January 2021.

Yes. if your employee genuinely stopped work on or after 1st March then you can backdate the period of furlough to that date.

Any employees you place on furlough must be furloughed for a minimum period of 3 consecutive weeks. When they return to work, they must be taken off furlough. Employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.

This is done with your RTI submission. You will need to provide information on your furloughed employees via that portal. This will include a reclaim of Employer’s National Insurance and minimum pensions automatic enrolment payments.

The first repayment was made in late April and we expect the same to follow each month after the RTI submission is made.

Unless you have a contractual right to to put someone on short time working or lay them off then you will need to get the employee’s agreement in order to place them on furlough. We recommend that you get the employee’s consent in writing to satisfy any auditing that HMRC may do after the event (which you should then retain for a period of 5 years) . If the employee agrees to the change then they will be converted to furlough status. If they don’t then you can place them at risk of redundancy.

Yes they can but caution should be applied when volunteering for the same organisation as you can not provide services for or generate revenue on behalf of the organisation. So for instance if an employee is paid for their role in a church or charity, then they can not work free of charge for the same church or charity. There is still considerable confusion in this area and as such we are awaiting further guidance. We therefore recommend you do not allow volunteering of this nature until the Government expressly says this is possible. However, they can volunteer in their communities.

Salaries and related questions

In this section we talk about the salaries that are due when you furlough your staff. This includes how to calculate the salary and what to do when the employee is paid an amount that differs from month to month.

Salary and related questions

For employees who are paid a regular monthly salary, the February 2020 salary will be used to calculate the furlough payment.

You will need to calculate 80% of the gross salary – HMRC will not calculate it for you.

If the employee has been employed for 12 months or more, you can claim the highest of either the:

  • same month’s earning from the previous year
  • average monthly earnings for the 2019-2020 tax year

If the employee has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work.

If the employee only started in February 2020, work out a pro-rata for their earnings so far, and claim for 80%.

Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW)/ Apprentices Minimum Wage (AMW) for the hours they are working or treated as working under minimum wage rules.

This means that furloughed workers who are not working can be paid the lower of 80% of their salary or £2,500 even if, based on their usual working hours, this would be below their appropriate minimum wage. However, time spent training is treated as working time for the purposes of the minimum wage calculations and must be paid at the appropriate minimum wage, taking into account the increase in minimum wage rates from 1 April 2020. As such, employers will need to ensure that the furlough payment provides sufficient monies to cover these training hours. Where the furlough payment is less than the appropriate minimum wage entitlement for the training hours, the employer will need to pay the additional wages to ensure at least the appropriate minimum wage is paid for 100% of the training time.

Where a furloughed worker is paid close to minimum wage levels and asked to complete training courses for a substantial majority of their usual working time we would advise you to top the salary up to NMW for those hours.

The first payments were made in late April and we anticipate they will follow a similar timeline each month i.e.after the RTI submission.

No, there is no obligation to do so but if you do, it should be for all, not just some employees as this could lead to claims for discrimination.

Furloughing and contractual status.

In this section we look at different types of contracts (zero hours, fixed term etc) and how furloughing works in these cases.

Contractual status

Yes. Where someone works on a zero hours contract, they can still be furloughed even though there’s no guarantee of work. In this case, you should calculate their furlough payment using the ‘irregular earnings’ guidance in the salaries and benefits section.

Yes. The same rules apply to a fixed term contractor as they do for a permanent employee. You can also renew or extend a fixed term contract during the period of furlough if you so wish.

As long as the employee was on payroll on 28th February 2020, you can re-engage and immediately furlough someone who has left your organisation. If an ex-employee requests you do this, you are not obliged to agree but you can if you so wish.

We are waiting to see if this is still possible with the November 2020 scheme.

It is possible for an employee to be furloughed from one role and still be working for another employer.

If you are coming off statutory leave (maternity, shared parental etc) and being immediately furloughed you should use either the same month’s pay from the previous year or the average salary from the 2019/20 tax year to calculate the monthly payments.

The Government announced on 9th June that employees coming off statutory leave after 1st July can still be immediately furloughed. So they will not be impacted by the flexible furloughing deadline of 10th June.

As employees have to be on payroll on 28th February, March new starters can not be added to the furlough scheme. The options open are to either maintain employment, place the employee on lay off (unpaid) or reduced hours. This will be subject to consultation.

The employee can go back to their previous employer and ask to be re-engaged and furloughed by them.

The Government have indicated that this will be possible subject to contract. If your contract prohibits second jobs then that will be the default position.

As you will have previously written to employees stating that furlough was running till the end of May, you will need to notify them that it is being extended. This should be done in writing so you have an audit trail.

Employees that were employed and on the payroll on 23 September 2020 who were made redundant or stopped working for their employer afterwards can be re-employed and claimed for. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC from 20 March 2020 to 23 September 2020, notifying a payment of earnings for those employees.

Similarly, an employee who was on a fixed term contract, on payroll on 23 September, and that contract expired after 23 September can be re-employed and claimed for, provided that the other eligibility criteria are met

Holidays and benefits

In this section we look at the treatment of holidays and benefits during a period of furlough leave.

Holidays and benefits

Yes. Employment status is maintained for furloughed employees and therefore holidays will continue to accrue.

Yes. Workers who are on furlough are unlikely to need to carry forward statutory annual leave, as they will be able to take it during the furlough period

The employee retains full employment status throughout the period of furlough so holidays will still accrue and the employee will receive all contractual benefits. If the employee wants to take a pension payment holiday then this should be possible. Your payroll provider should be able to advise.payment you made in February 2020 to calculate your furlough payment. If your salary payment is irregular, we believe you will use an average (as described in the Salary & Benefits section above). However, the guidance is unclear about this at present. 

The employee retains full employment status throughout the period of furlough so holidays will still accrue and the employee will receive all contractual benefits. If the employee wants to take a pension payment holiday then this should be possible. Your payroll provider should be able to advise.payment you made in February 2020 to calculate your furlough payment. If your salary payment is irregular, we believe you will use an average (as described in the Salary & Benefits section above). However, the guidance is unclear about this at present. 

Whilst the guidance is vague on this point, we believe you can ask employees to take annual leave during a period of furlough. You should, however, pay the employee their normal salary when they are on annual leave.

Where it has not been possible for employees to take holiday due to Covid-19, they can carry statutory leave over to the following leave year. This does not include employees who have not got round to taking leave. In the latter case it is the usual ‘use it or lose it’ rules that apply.

Directors of small businesses

What can directors of small businesses do within the confines of the furlough scheme?

Directors of small businesses

Yes you can. However you can only complete your statutory duties. This means you must not be completing any tasks that may generate revenue for or provide services to your business,

The decision to furlough a director should be recorded in the company records.

No, dividends are excluded. Your furlough payment would just be based on your PAYE salary. 

Statutory leave

In this section we look at what you should do when your employee is on maternity or another form of statutory leave.

Statutory leave

If you are on statutory leave then you should remain on it. However, employees who are enhanced maternity, adoption, paternity or shared parental leave can have their payments reclaimed through the furlough scheme.

If you’re on sick leave or self-isolating because of coronavirus (COVID-19), speak to your employer about whether you’re eligible to be furloughed – you should get Statutory Sick Pay (SSP) as a minimum while you are on sick leave or self isolating. Your employer can furlough you at any time- if they do, you will no longer receive sick pay, but should be treated as any other furloughed employee.However this will only become an issue if you are called back to work. If not, your status is likely to remain unchanged.

If you are shielding in line with public health guidance or required to stay home due to an individual in your household shielding and are unable to work from home, then you should speak to your employer about whether they plan to place staff on furlough.

If you are unable to work, including from home, due to caring responsibilities arising from coronarivus (COVID-19), 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 your household, then you should speak to your employer about whether they plan to place staff on furlough. The grant will start on the day you were placed on furlough and this can be backdated to 1 March 2020.

This may become an issue again in the November scheme if schools close or your child needs to self isolate. However, we will advise when we know more.

Ending the period of furlough

In this section we look at the steps you should take when ending a period of furlough.

Ending the period of furlough

If there is genuine need to make someone redundant at the end of the period of furlough, then you can do so subject to normal consultation requirements. They would then be due a redundancy payment, accrued and untaken holiday and any notice pay.

This should be a relatively simple process. As the employee is to be available for work throughout the period of furlough, you can bring them back at short notice. We recommend you send them a short letter confirming the end of the period of furlough and that they revert to normal terms and conditions from that date.

Possibly. The guidance asks you to keep all paperwork relating to furlough for 5 years which indicates that auditing is likely. Given the fact that a considerable amount of money has been invested in the scheme it is realistic to expect that some auditing will take place after the outbreak has finished.