Who is eligible to claim?

All UK employers that had created and started a PAYE scheme by 19 March are eligible. They must have a UK bank account and have enrolled for PAYE online. This includes businesses, charities, recruitment agencies and public authorities, though the Government expects that the use of the scheme by the public sector will be limited. It remains the case that employers should only continue to furlough staff if their activities have been adversely affected by the coronavirus or the measures taken to limit its transmission.

Which employees can be furloughed?

Both full-time and part-time employees can be included in the scheme, regardless of the type of contract, as long as they are paid via PAYE, and were on the payroll on 19 March 2020. The Scheme also extends to non-employee workers paid via PAYE, apprentices and certain office-holders, including directors. No new staff can be furloughed after the end of June. Given that the minimum furlough period prior to July was three weeks, if follows that the final date for furloughing new staff was 10 June. There are exceptions for people returning from maternity leave and other similar statutory leave, provided they would otherwise have been eligible. There are also exceptions for armed forces reservists. Employees who had been transferred in via a TUPE transfer after 28 February could also be furloughed, and there is also an exception from this cut-off date where PAYE business succession rules apply or where there had been a payroll consolidation. A separate scheme was announced on 26 March for self-employed individuals.

How is the Government’s contribution calculated?

The Government frant originally covered the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and an amount equal to the minimum automatic enrolment employer pension contributions on that subsidised wage. Compulsory commission can be included, but discretionary commission and bonuses must be excluded. The Scheme does not provide finance for pension contributions over and above the legal minimum under the automatic enrolment regime, or cover the cost of benefits in kind. The Guidance explains what can be claimed for employees whose wages vary. In most cases this will be the higher of the same month’s earnings from the previous year or the average monthly earnings for the 2019-20 tax year. An employer can choose to top up the employee’s wages beyond this contribution, but is not be obliged to do so. The Government grant is being progressively reduced from 1 August and the employer will need to make up the difference – see below for more details.

How does flexible furloughing work?

Since 1 July it has no longer been a requirement that furloughed staff do no work at all for their employer. Instead, provided that they have previously been furloughed, they can return to work part time on a flexible basis. Such staff must be paid their contractual wages for the hours they work, and employers can make a claim for the balance of their normal wages under the Scheme for the additional hours they would normally have worked. The maximum amount of the grant will be reduced proportionately, according to the relationship between the hours worked and the remaining normal hours spent on furlough. Subject to some exceptions, an employer will not be able to make a claim after 1 July for a greater number of employees than the highest number it included in any one claim made prior to 1 July.

What records do I need to keep?

The Guidance stipulated that employers must have confirmed to their employees in writing that they had been furloughed. A record of this communication must be kept for five years. Employers must also keep records of how each claim is calculated. For claims under the new flexible arrangements, this will need to include details of the hours actually worked, the normal working hours for the relevant claim period, and written confirmation of the agreement reached on the new working arrangements.

Must employees agree to be furloughed?

In most cases, employees’ agreement was required before they were first furloughed, since the arrangements would have normally amount to a variation of their employment contracts, for which their consent was required. It was also prudent to obtain their agreement to ensure compliance with the rules of the original Scheme Under the terms of the revised Scheme which apply from 1 July, employees’ agreement is required where they are returning to work on reduced hours, and remaining on furlough for the remainder of their normal working hours, though this can achieved via a collective agreement. In most cases, this will in any event be required as a matter of contract. It is important to realise that no features of the Scheme override the normal principles of employment law, or the requirements of the collective consultation regime.

Is there a minimum period of furlough?

The minimum period for which an employee could be furloughed under the original Scheme was three weeks. It was permissible to furlough employees multiple times, making it possible to rotate periods of furlough among different groups of staff. After 1 July, under the new more flexible arrangements, there is no longer a minimum period and rotating furlough arrangements will remain permissible. However, the minimum period for which a claim can be made is a week.

What about employees on sick leave?

The guidance says that employees should not be placed on furlough merely because they are on short-term sick leave, or self-isolating. But they can be furloughed if there are business reasons for doing so. However, employers cannot claim both the two week coronavirus Statutory Sick Pay rebate and the furlough grant in respect of the same period of absence. If an employee becomes ill while on furlough, the guidance says that “it is up to employers to decide whether to move these employees onto Statutory Sick Pay or to keep them on furlough, at their furloughed rate.”

What are the issues employers need to consider before implementing flexible furloughing?

As it is normally no longer possible to furlough staff for the first time, employers are now turning their attention to whether any of them should be asked to return to work part time, and if so what the appropriate arrangements will be. Factors to consider include: The needs of the business in the light of current Government return to work guidance The personal circumstances of both furloughed staff and those who have not been furloughed The need for fairness and transparency around how staff are selected to return to work and their new working arrangements, bearing in mind Equality Act requirements The need to secure agreement if any changes to normal working hours are to be implemented How any agreed arrangements will be reviewed in light of changing circumstances

What do we know about the Jobs Retention Bonus?

On 8 July the Chancellor’s announced in the House of Commons that employers who bring staff back from furlough and continuously employ them until January will qualify for a £1000 bonus per employee. However each employee must be paid an average of at least £520 each month from November to January. More details of the eligibility rules were announced on 31 July. This confirmed the above details, and also explained that the bonus will not be payable for employees serving a contractual or statutory notice period starting before 1 February 2021. Full guidance is expected in September and employers will be able to make claim the bonus from February next year.

Can staff be made redundant while on furlough?

Provided that the employee continues to be eligible for the Scheme, there is no reason in principle why a redundancy process cannot be carried out while they are on furlough. That is a consequence of the general rule that the Scheme does not over-ride any feature of employment law, including the rules governing redundancies. The guidance was amended on 17 July to clarify that the grant can continue to be claimed for periods of contractual well as statutory notice. However employers must bear the full cost of redundancy payments. With effect from 31 July, the rules on calculating a week’s pay were amended to make it clear that if furloughed employees are made redundant, their statutory redundancy payments must be based on their pre-furlough wages.

What are the penalties for over-claiming?

Employers are encouraged to identify and pay back any over-payments as soon as possible. Under powers conferred on HMRC under the 2020 Finance Act, a penalty of up to 100% of the overpayment may be levied if the employer has not notified or repaid the amount over-claimed within 90 days of its receipt, or 20 October if later.

Coronavirus Job Retention Scheme: frequently asked questions

Published on 3 August 2020

1 min read

Significant changes to the Scheme to make it more flexible took effect on 1 July. From 1 August, employers have started contributing to furloughed employees’ wages costs. The Scheme closes on 31 October.

What is the current position?

The first announcement of the Scheme on Friday 20 March explained that the Government would guarantee 80% of the wage costs of any employees “furloughed” as a result of the coronavirus pandemic, subject to a cap of £2,500 per month. This payment would apply to any employees furloughed from 1 March onwards. The scheme, which in its original form had a provisional cut-off date of 31 May, has since been extended to the end of October.

A new, more flexible, version of the Scheme launched in July, and employers have been required to make contributions towards the wages costs of furloughed staff since the beginning of August. Employees will continue to receive 80% of their normal wages (subject the cap) for the time they spend furloughed until the Scheme ends.

Government guidance on the scheme was first published on 26 March and has been revised and expanded on numerous occasions since. This is underpinned by a series of Treasury Directions. The latest, which sets out the new rules for the Scheme applying from July onwards, was published on 26 June

Our FAQs

Who is eligible to claim?

All UK employers that had created and started a PAYE scheme by 19 March are eligible. They must have a UK bank account and have enrolled for PAYE online. This includes businesses, charities, recruitment agencies and public authorities, though the Government expects that the use of the scheme by the public sector will be limited.

It remains the case that employers should only continue to furlough staff if their activities have been adversely affected by the coronavirus or the measures taken to limit its transmission.
Which employees can be furloughed?

Both full-time and part-time employees can be included in the scheme, regardless of the type of contract, as long as they are paid via PAYE, and were on the payroll on 19 March 2020. The Scheme also extends to non-employee workers paid via PAYE, apprentices and certain office-holders, including directors.

No new staff can be furloughed after the end of June. Given that the minimum furlough period prior to July was three weeks, if follows that the final date for furloughing new staff was 10 June. There are exceptions for people returning from maternity leave and other similar statutory leave, provided they would otherwise have been eligible. There are also exceptions for armed forces reservists.

Employees who had been transferred in via a TUPE transfer after 28 February could also be furloughed, and there is also an exception from this cut-off date where PAYE business succession rules apply or where there had been a payroll consolidation.

A separate scheme was announced on 26 March for self-employed individuals.
How is the Government’s contribution calculated?

The Government frant originally covered the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and an amount equal to the minimum automatic enrolment employer pension contributions on that subsidised wage. Compulsory commission can be included, but discretionary commission and bonuses must be excluded. The Scheme does not provide finance for pension contributions over and above the legal minimum under the automatic enrolment regime, or cover the cost of benefits in kind.

The Guidance explains what can be claimed for employees whose wages vary. In most cases this will be the higher of the same month’s earnings from the previous year or the average monthly earnings for the 2019-20 tax year.

An employer can choose to top up the employee’s wages beyond this contribution, but is not be obliged to do so.

The Government grant is being progressively reduced from 1 August and the employer will need to make up the difference – see below for more details.

What do employers have to contribute from 1 August?

The table below sets out the progressive rise in the minimum employers’ contributions required. Furloughed employees’ entitlement will remain at 80% of their normal wages (up to a cap of £2,500 per month) throughout the final three months of the scheme, for their normal hours when they are not working.

Month	Government contribution	Employer contribution
August	80% of wages only (no grant for employer national insurance and minimum pension contributions)	Employer NI and pension contributions only
September	70% of wages (capped at £2187.50)	10% of wage costs (capped at £312.50) plus NI and pension contributions
October	60% of wages (capped at (£1875)	20% of wage costs (capped at £625) plus NI and pension contributions

How does flexible furloughing work?

Since 1 July it has no longer been a requirement that furloughed staff do no work at all for their employer. Instead, provided that they have previously been furloughed, they can return to work part time on a flexible basis.

Such staff must be paid their contractual wages for the hours they work, and employers can make a claim for the balance of their normal wages under the Scheme for the additional hours they would normally have worked. The maximum amount of the grant will be reduced proportionately, according to the relationship between the hours worked and the remaining normal hours spent on furlough.

Subject to some exceptions, an employer will not be able to make a claim after 1 July for a greater number of employees than the highest number it included in any one claim made prior to 1 July.
What records do I need to keep?

The Guidance stipulated that employers must have confirmed to their employees in writing that they had been furloughed. A record of this communication must be kept for five years. Employers must also keep records of how each claim is calculated.

For claims under the new flexible arrangements, this will need to include details of the hours actually worked, the normal working hours for the relevant claim period, and written confirmation of the agreement reached on the new working arrangements.
Must employees agree to be furloughed?

In most cases, employees’ agreement was required before they were first furloughed, since the arrangements would have normally amount to a variation of their employment contracts, for which their consent was required. It was also prudent to obtain their agreement to ensure compliance with the rules of the original Scheme

Under the terms of the revised Scheme which apply from 1 July, employees’ agreement is required where they are returning to work on reduced hours, and remaining on furlough for the remainder of their normal working hours, though this can achieved via a collective agreement. In most cases, this will in any event be required as a matter of contract.

It is important to realise that no features of the Scheme override the normal principles of employment law, or the requirements of the collective consultation regime.
Is there a minimum period of furlough?

The minimum period for which an employee could be furloughed under the original Scheme was three weeks. It was permissible to furlough employees multiple times, making it possible to rotate periods of furlough among different groups of staff.

After 1 July, under the new more flexible arrangements, there is no longer a minimum period and rotating furlough arrangements will remain permissible. However, the minimum period for which a claim can be made is a week.
What about employees on sick leave?

The guidance says that employees should not be placed on furlough merely because they are on short-term sick leave, or self-isolating. But they can be furloughed if there are business reasons for doing so. However, employers cannot claim both the two week coronavirus Statutory Sick Pay rebate and the furlough grant in respect of the same period of absence.

If an employee becomes ill while on furlough, the guidance says that “it is up to employers to decide whether to move these employees onto Statutory Sick Pay or to keep them on furlough, at their furloughed rate.”
What are the issues employers need to consider before implementing flexible furloughing?
As it is normally no longer possible to furlough staff for the first time, employers are now turning their attention to whether any of them should be asked to return to work part time, and if so what the appropriate arrangements will be.

Factors to consider include:
- The needs of the business in the light of current Government return to work guidance
- The personal circumstances of both furloughed staff and those who have not been furloughed
- The need for fairness and transparency around how staff are selected to return to work and their new working arrangements, bearing in mind Equality Act requirements
- The need to secure agreement if any changes to normal working hours are to be implemented
- How any agreed arrangements will be reviewed in light of changing circumstances
What do we know about the Jobs Retention Bonus?

On 8 July the Chancellor’s announced in the House of Commons that employers who bring staff back from furlough and continuously employ them until January will qualify for a £1000 bonus per employee. However each employee must be paid an average of at least £520 each month from November to January.

More details of the eligibility rules were announced on 31 July. This confirmed the above details, and also explained that the bonus will not be payable for employees serving a contractual or statutory notice period starting before 1 February 2021.

Full guidance is expected in September and employers will be able to make claim the bonus from February next year.
Can staff be made redundant while on furlough?

Provided that the employee continues to be eligible for the Scheme, there is no reason in principle why a redundancy process cannot be carried out while they are on furlough. That is a consequence of the general rule that the Scheme does not over-ride any feature of employment law, including the rules governing redundancies.

The guidance was amended on 17 July to clarify that the grant can continue to be claimed for periods of contractual well as statutory notice. However employers must bear the full cost of redundancy payments. With effect from 31 July, the rules on calculating a week’s pay were amended to make it clear that if furloughed employees are made redundant, their statutory redundancy payments must be based on their pre-furlough wages.
What are the penalties for over-claiming?

Employers are encouraged to identify and pay back any over-payments as soon as possible. Under powers conferred on HMRC under the 2020 Finance Act, a penalty of up to 100% of the overpayment may be levied if the employer has not notified or repaid the amount over-claimed within 90 days of its receipt, or 20 October if later.

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Coronavirus Job Retention Scheme: frequently asked questions

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