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Furlough under the extension to the Coronavirus Job Retention Scheme ('the Extended CJRS')

Last updated: 20/11/2020

1. What is the Coronavirus Job Retention Scheme and how is it being extended from November 2020 to March 2021? (Last updated 11/11/2020)

The concept of furlough was first introduced by the Government via the Coronavirus Job Retention Scheme (the ‘CJRS’) in March 2020 as part of a package of “temporary, timely and targeted measures to support public services, people and businesses through this period of disruption caused by Covid-19”. Employees furloughed under the CJRS remained employed but could not perform any work for their employer. They were entitled to receive 80% of their regular pay, up to a cap of £2,500 per month, which employers could claim from the Government together with employer National Insurance Contributions and the minimum level of employer automatic enrolment pension contributions on the furlough pay. Employers could choose to fund the difference (or some of the difference) between the 80% / £2,500 payment and an employee’s full salary, but there was no requirement to do so.

The original CJRS was designed to support employers who could not maintain their current workforce because their operations had been severely affected by coronavirus (Covid-19). In the absence of any detailed explanation as to the meaning of ‘severely affected’, it was not always straightforward for companies to determine whether they were eligible to access the CJRS. 

The CJRS was originally intended to run for at least 3 months from 1 March, but was later extended to the end of October. For the period from 1 July to the end of October, the CJRS was subject to various rules that differed from those that applied between 1 March and 30 June. The key changes were as follows:

  • The CJRS was closed to new entrants (i.e. employees who had not been furloughed for at least a three week period before 30 June), although there were exceptions for employees returning from a period of family leave, those who had transferred under TUPE and those returning from a period of active duty as a military reservist.
  • The maximum number of employees an employer could claim for in any claim period from 1 July could not exceed the maximum they had claimed for in any previous claim in the period 1 March to 30 June. Again, there were exceptions for employees returning from a period of family leave, those who had transferred under TUPE and those returning from a period of active duty as a military reservist.
  • The requirement for a period of furlough to last at least three consecutive weeks was removed. While the minimum claim period was set as seven days, an employee did not have to be on furlough for the whole of a claim period. 
  • Employees could be placed on ‘flexible’ furlough. This allowed them to work on a part-time basis, receiving normal pay for the hours that they worked and furlough pay for the proportion of their usual hours that they did not work (their furloughed hours).
  • While employees remained entitled to 80% of their pay for furloughed hours (subject to the applicable cap), the level of support provided by the Government to employers was gradually reduced, with employers having to fund employer NICs and pension contributions from August and the Government contribution to employees’ pay tapering down to 70% in September and 60% in October.

The CJRS was due to end on 31 October 2020. It was to be replaced with the Job Support Scheme – which had different iterations for businesses that remain open (the JSS Open) and those that are required to close (the JSS Closed) – from 1 November. However, on 31 October, the Government announced that the CJRS would be extended for a month to coincide with the introduction of a second lockdown in England.

On 5 November, the Government announced a further extension of the CJRS to 31 March 2021, which we refer to as ‘the ‘Extended CJRS’. The Extended CJRS is applicable UK wide and the Government states that its purpose is to enable support to be in place for long enough to help businesses recover and get back on their feet – as well as giving them the certainty they need in coming months. 

With regard to the timing of claims under the Extended CJRS, the Government has acknowledged that there will be a short period when the legal terms of the scheme and system are updated and businesses will need to claim in arrears for this period. There will be no gap in eligibility for support between the previously announced end-date of the CJRS on 31 October 2020 and the Extended CJRS starting 1 November 2020.

The Extended CJRS will remain open until 31 March 2020, although the Government will review the terms of the scheme in January 2021.

2. What official guidance is there on the Extended CJRS? (Last updated 20/11/2020)

On 5 November, the Government published an announcement and a policy paper on the extension of the CJRS.

More detailed guidance was published on 10 November. The guidance is split across multiple webpages, all of which are accessible via a central hub page

The Government guidance tends to be updated on a piecemeal but frequent basis. While we endeavour to keep these FAQs up to date, we do encourage employers to check the Government guidance for the very latest information.

Technical details of the furlough scheme have been set out in a series of Treasury Directions and a new Treasury Direction (dated 12 November) to underpin the Extended CJRS has now been published. In these FAQs, we refer to this as the ‘November Treasury Direction’. It applies to the Extended CJRS in the period 1 November 2020 to 31 January 2021. A further Treasury Direction to cover the period from 1 February to 31 March 2021 will be made in due course. 

Treasury Directions are not legislation, but are an exercise of ministerial authority conferred by an Act of Parliament and are legislative in nature. Accordingly, in the event of any inconsistencies between the Government guidance and a Treasury Direction, from a legal perspective, we would expect that the Treasury Direction would be accorded more weight. That said, it has sometimes been the case in the past that updates to the Government guidance have appeared to conflict with an existing Treasury Direction and we have taken this to suggest that, where there are inconsistencies, HMRC may not have been intending strictly to enforce the requirements of the Treasury Direction. Should future Government guidance on the Extended CJRS appear to contradict the November Treasury Direction, it is possible that this may indicate a similar intention on the part of HMRC.

3. What key differences are there between the CJRS as it applied in the period from 1 July to 31 October and the Extended CJRS? (Last updated 20/11/2020)

The rules of the Extended CJRS are largely the same as those that applied to the CJRS in the period between 1 July and 31 October 2020, but there are some important differences.

Level of Government support

Under the Extended CJRS, the Government has committed to funding the full 80% of employees’ pay (up to the applicable cap) for furloughed hours, with employers having to cover only the employer National Insurance and employer pension contributions. This is more generous for employers than the support that was available under the CJRS in September and October; effectively, it is a return to the level of support that employers received under the CJRS in August. The Extended CJRS will be reviewed in January 2021 to examine whether the economic circumstances are improving enough for employers to be asked to increase their contributions.

Broader eligibility criteria and no maximum claim numbers

Another key difference between the Extended CJRS and the CJRS as it applied from July to October 2020 is that the Extended CJRS is open to employers that have not previously used the CJRS and to employees who have not previously been furloughed, provided they meet the other eligibility criteria. – see questions 4 and 5, below. By contrast, an employee was only eligible to be furloughed under the CJRS as it applied between 1 July and 31 October 2020 if they had previously been furloughed for at least three consecutive weeks in the period from 1 March to 30 June 2020. In addition, the limit on the number of employees an employer could claim for in the period between 1 July and 31 October (namely, the maximum number of employees it had claimed for in any single claim before 30 June) no longer applies. There is now no maximum number of employees an employer can claim for from 1 November 2020.
Curtailing employer’s ability to claim during notice periods (in respect of both redundancy and other terminations)

The Government guidance for employees states that an employer can make an employee redundant while they are on furlough or afterwards. However, whereas previously the guidance on the CJRS made clear that employers could continue to claim for a furloughed employee who was serving their notice, the guidance on the Extended CJRS (as amended at 13 November) states that this will no longer be permitted for claim periods starting on or after 1 December 2020. This is also stated in the November Treasury Direction, which provides that a claim under the Extended CJRS must not be made in respect of a day on which an employee is on notice of termination of employment, if that day falls within the period 1 December 2020 to 31 January 2021. 

This change of approach is not entirely unexpected, given that the Job Support Scheme which was previously due to replace furlough would not have permitted employers to make claims during the notice period where employees had been dismissed as redundant. Since one of the Government’s aims in extending furlough was to protect jobs, it is perhaps unsurprising that it would seek to prevent employers using the scheme to subsidise the cost of notice pay where jobs are being lost. 

Based on the wording of the updated guidance and the November Treasury Direction, it is only during an employee’s notice period that employers cannot claim under the Extended CJRS. Accordingly, our current view is that employers can continue to claim for affected employees during a redundancy consultation process, before redundancy is confirmed. 

Note also that the updated guidance and November Treasury Direction do not just prevent claims during statutory or contractual notice where an employee has been dismissed for redundancy; they provide that claims are prohibited in all circumstances where an employee is in their statutory or contractual notice period – whether relating to dismissal, resignation, or retirement.

See question 31, below, for further information on how to deal with notice periods when a furloughed employee’s employment is to terminate.

Publication of names of companies that use the Extended CJRS

In the period before the Extended CJRS was announced, there were media reports of companies that have done better than anticipated during the pandemic taking the decision not to claim support under the furlough scheme, or to hand back grant payments they have already received. HMRC has also commented publicly on its concerns about the level of fraudulent claims that have been made, e.g. by employers that have required their employees to work while on full furlough.

The Government guidance states that, as part of HMRC’s commitment to transparency and to deter fraudulent claims, HMRC will publish the names of employers who have made claims under the furlough scheme from the month of December 2020 onwards. HMRC will also publish an indication of the value of the claim in each case and the registered company number for companies and Limited Liability Partnerships. The November Treasury Direction makes clear that it is a condition of making a claim under the Extended CJRS for claim periods covering December 2020 and January 2021 that the employer accepts that HMRC will publish this information online. The relevant information will remain available online for up to one year from the date that it is published. 

Note that the Government guidance and the November Treasury Direction provide that HMRC will not publish details of employers claiming through the scheme if they can show that publicising these would result in a serious risk of violence or intimidation to certain individuals, or any individual living with them. Relevant individuals may include any employee, director or officer of the company, partner in a partnership, member of a limited liability partnership, or trustee, settlor or beneficiary of a trust. It will be for the employer to submit a request to HMRC to refrain from publishing their details and to provide evidence of the risk of violence or intimidation. The guidance indicates that further details on how to make such a request will be provided soon.

The guidance also states that HMRC will be including details of claims made for furloughed employees in their Personal Tax Account online, for claim periods starting on or after 1 December 2020, in order to improve the information available to them.
 
In the FAQs that follow, we explain the rules of the Extended CJRS based on the November Treasury Direction and the current Government guidance. 

4. Which employers can use the Extended CJRS? (Last updated 20/11/2020)

The Extended CJRS is stated to be available to employers who cannot maintain their workforce because their operations have been affected by Covid-19. There is no explanation given in the Government guidance as to what this means in practice. This ambiguity as to whether employers’ eligibility to access the furlough scheme is limited in some way by reference to how well or badly they have been faring during the pandemic is an ongoing theme. When furlough was first introduced at the beginning of the pandemic, the guidance stated that employers had to have been ‘severely affected’ by Coronavirus in order to use the scheme. However, there was a lack of clarity on exactly what this meant and subsequent iterations of the guidance appeared to tone down this requirement, referring to the fact that different businesses will be affected in different ways. The November Treasury Direction does not shed any further light on this issue, but it does provide that “[n]o CJRS claim may be made in respect of an employee if it is abusive or is otherwise contrary to the exceptional purpose of CJRS”.  Accordingly, eligibility seems to remain a matter of judgment for the employer based on whether it thinks it meets the criteria set out in the guidance at the relevant time. 

Employers across all areas of the UK can claim, whether their businesses are open or closed and regardless of the lockdown status or Covid-19 alert level in their area. 

Significantly, the Extended CJRS is open to employers that have not previously used the CJRS. 

In order to claim, employers must have a UK bank account, have established a UK PAYE scheme on or before 30 October 2020 and have enrolled for PAYE online.

Employers whose staff costs are publicly funded should not use the Extended CJRS, but should use their public funds to continue paying their employees.

Where a company goes into administration, the administrator can furlough and claim for employees. However, administrators should only use the Extended CJRS if there is a reasonable likelihood of retaining the employees, e.g. if the business will be sold.

5. Which employees are eligible to be furloughed under the Extended CJRS? (Last updated 17/11/2020)

In order to be furloughed under the Extended CJRS, employees must have been on the employer’s PAYE payroll on or before 23.59 on 30 October 2020 and have been notified to HMRC on an RTI submission between 20 March 2020 and 30 October 2020 (although see below for information on employees who have recently left employment).

Employees on any type of employment contract are eligible. This includes:

  • full-time employees;
  • part-time employees;
  • employees on flexible or zero-hour contracts;
  • apprentices (who can continue to train while on furlough – see question 11 below); and
  • employees on fixed term contracts (and such contracts can be extended or renewed while the employee is on furlough).

In addition, the following categories of individuals are also eligible if they are paid by PAYE and were on payroll on or before 30 October 2020:

  • Office holders (including company directors).
  • Agency workers, whether or not they are employees of the agency, including those employed by umbrella companies. 
  • Limb (b) workers (sometimes known as dependant contractors, where the individual carries out work or services for another party who is not their client or customer).
  • Salaried members of Limited Liability Partnerships.

Can foreign nationals be furloughed?

Yes. Foreign nationals are eligible to be furloughed. Grants under the scheme are not counted as ‘access to public funds’, and employers can furlough employees on all categories of visa.

What about former employees?

Employees who were employed on 23 September 2020 (the date that the now postponed Job Support Scheme was announced), and in respect of whom an RTI submission had been made between 20 March 2020 and 30 October 2020, but who have since been made redundant or otherwise left employment, can be rehired and furloughed under the Extended CJRS.

Similarly, employers can rehire and claim for an employee who was on a fixed term contract on 23 September and in respect of whom an RTI submission had been made between 20 March and 30 October, whose contract expired after 23 September, provided that the other eligibility criteria are met.

Note that while employers can rehire former employees in order for them to be furloughed, they are under no obligation to do so. If you do decide to rehire a former employee, you will need to consider what approach you wish to take to any termination payments (e.g. statutory redundancy pay) that they may have received when their employment ended. You will also have to think about how you will end the employment relationship in the future if that is still necessary. We suggest that you seek advice on your particular circumstances if this is something you are considering.

What about employees who transfer under TUPE?

In employment law, the effect of TUPE is that post-transfer it is as if the transferred employee had always been employed by the new employer. 

The Government guidance specifies that the new employer will be allowed to claim under the Extended CJRS in respect of the employees of a previous business who transfer to it if either the TUPE or PAYE business succession rules apply to the change in ownership. 

The transferring employees must have been:

  • transferred from their old employer to their new employer on or after 1 September 2020;
  • employed by their old employer or their new employer on 30 October 2020; and
  • on a PAYE RTI submission notifying a payment of earnings to HMRC, submitted by either their old or new employer, between 20 March 2020 and 30 October 2020 

Can employees who have caring responsibilities be furloughed?

The guidance specifies that employees who have caring responsibilities resulting from Covid-19, including those who need to look after children, can be furloughed. We think that employers must also be satisfied that they meet the general eligibility criteria for the scheme – see question 4, above.

Can the ‘clinically extremely vulnerable’ and those who live with them be furloughed?

The guidance makes clear that employees can be furloughed where they are unable to work because they are ’clinically extremely vulnerable’ (or, in Scotland, ‘at the highest risk of severe illness from coronavirus’) and following public health guidance. 

In this regard, it is worth noting that in England, during the current lockdown, individuals who are considered clinically extremely vulnerable to Covid-19 (whom we refer to as ‘shielders’) are not required to shield in quite such an extreme way as they were during the first lockdown. However, they are advised to work from home and, if they cannot work from home, they are advised that they should not go to work. The shielding guidance published on 4 November indicates that if a shielder was on their employer’s payroll before 30 October 2020, then they can potentially be furloughed. In our view, if these employees cannot work from home, you can furlough them even if you would otherwise have work for them to do (certainly during the current period of lockdown in England and potentially for as long public health guidance suggests they should work from home where possible), provided that you are satisfied you meet the eligibility criteria for the scheme – see question 4, above.

The shielding guidance states that individuals who live with a shielder can continue to go to work if they cannot work from home. However, such individuals may feel unable to attend work because of the risk of bringing the virus home to the shielder. The policy paper that was published when the Extended CJRS was first announced stated that employees who need to stay at home with someone who is shielding can be furloughed. However, this statement does not appear in the detailed Government guidance on which employees can be furloughed. It is not clear whether the Government has changed its view on this since the publication of the policy paper, or whether it thinks that employees who need to stay at home with someone who is shielding would count as having caring responsibilities resulting from Covid-19 and be eligible that way. We hope that the Government will clarify this point when it next updates the guidance.

While the guidance does not go into this level of detail, we think it is likely that where a shielder can perform some, but not all, of their role from home so that their employer could provide them with work for some of their hours, they could be flexibly furloughed for the remaining hours.

Can vulnerable employees or those otherwise reluctant to attend work for a Covid-19 related reason be furloughed where you would otherwise have work for them to do?

The Government guidance does not expressly address whether an employer can furlough employees who are considered ‘vulnerable’ as opposed to ‘clinically extremely vulnerable’ to Covid-19, those living with a vulnerable person, or those who are simply nervous about attending work in the circumstances of the pandemic, where they would otherwise have work for those employees to do. 

In our view, whether or not you can furlough these employees where you would otherwise have work for them to do would depend on the interpretation of references in the Government guidance to the purpose of the Extended CJRS and the circumstances in which employers can access it. When furlough was first introduced at the beginning of the pandemic, the guidance stated that employers had to have been ‘severely affected’ by Coronavirus in order to use the scheme. However, there was a lack of clarity on exactly what this meant and subsequent iterations of the guidance appeared to tone down this requirement, referring to the fact that different businesses will be affected in different ways. As noted at question 4, above, the current guidance provides that the Extended CJRS is available to employers who cannot maintain their workforce because their operations have been affected by Covid-19. 

Employers wishing to furlough employees who are vulnerable or otherwise reluctant to attend work for a Covid-19 related reason where they would otherwise have work for them to do would therefore need to make a judgment call based on whether they could say that they meet the criteria of being unable to maintain their workforce because their operations have been affected by Covid-19. If a business is satisfied that its operations have been affected, the fact that it still has work for these employees to do and even needs to backfill for them should not, of itself, mean that it would not be able to furlough them under the Extended CJRS.

Can employees who are currently off sick, or who become ill, be furloughed?

The Extended CJRS is not intended to cover short-term sickness absences and short-term illness/self-isolation should not be a consideration in deciding whether to furlough an employee. If, however, employers want to furlough employees for business reasons and they are currently off sick, they are able to do so. In such a case, the employee should no longer receive sick pay and would be classed as a furloughed employee.

As noted above, employers can furlough employees who are clinically extremely vulnerable. They can also furlough those who are off on long-term sick leave. The guidance makes clear that it is up to employers to decide whether to furlough these employees.
Furloughed employees retain their statutory rights, including the right to SSP. Accordingly, furloughed employees who become ill, due to Covid-19 or any other cause, must be paid at least Statutory Sick Pay (SSP). This also applies to those who have to self-isolate if they or someone in their household has symptoms of or tests positive for Covid-19, they are informed that they must self-isolate under the NHS test and trace programme, or they are advised to self-isolate by a medical practitioner prior to an operation. As under the CJRS previously, it is up to employers to decide whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate.

If you keep the sick furloughed employee on the furloughed rate, the Government guidance states that you can still access the Extended CJRS. It may well be more advantageous for the employer to keep the employee on furlough, as furlough pay can be reclaimed from the Government, whilst an employer must pay SSP themselves (although for SMEs with less than 250 employees, up to 14 days’ of Covid-19 related SSP per employee can be reclaimed from HMRC under the SSP Rebate Scheme – see the Government guidance on that scheme for details). Most employees will also be better off staying on furlough, as furlough pay will be higher than SSP.

If a furloughed employee who becomes sick is moved onto SSP, their employer can no longer claim for them under the Extended CJRS while they are on SSP. 

Employers can claim back from both the Extended CJRS and the SSP Rebate Scheme for the same employee but not for the same period of time. When an employee is on furlough, the employer can only reclaim expenditure through the Extended CJRS, and not the SSP Rebate Scheme.

Given the above, employers may be unlikely to move employees off furlough leave and furlough pay onto SSP. 

Where a company operates a company sick pay scheme, we would recommend confirming to employees that any company sick pay payable in respect of sickness during furlough will be based on their adjusted rate of furlough pay. (Note that the practical effect of this may be to discourage employees who are on full rather than flexible furlough from telling the employer that they are sick, so that they do not use up their company sick pay entitlement.)

6. How will furlough affect those on maternity/other statutory family leave or due to go on such leave? (Last updated 17/11/2020)

The Government guidance states that the normal rules for maternity and other forms of statutory family leave and pay continue to apply.

Since maternity leave is triggered automatically on the birth of a baby, if not commenced earlier, an employee who gives birth while on furlough would begin her maternity leave and the normal rules around eligibility for Statutory Maternity Pay (SMP) or Maternity Allowance (MA) would apply. 

If an employee’s earnings have reduced because she has been on furlough leave, this may affect her SMP or MA. However, regulations in force from 25 April 2020 provide that, where an employee starts her maternity leave on or after 25 April 2020, her normal weekly earnings for the purpose of determining her entitlement to, or the amount of, SMP or MA are to be calculated as if she had not been furloughed. The Government has produced guidance to explain this altered calculation method.

Employees on maternity leave must take at least 2 weeks off work following the birth (4 weeks if they work in a factory or workshop). The Government guidance indicates that an employee can be on furlough and maternity leave at the same time. However, employers can only claim under the Extended CJRS for the enhanced contractual element of maternity pay and not for SMP. Accordingly, for an employee who is only entitled to SMP, there would be no practical benefit to remaining on furlough during her maternity leave.

Note that the ability for employers to claim back the enhanced contractual element of maternity pay under the Extended CJRS appears to apply a different rule about what furlough pay employees on maternity leave would receive when compared to other furloughed employees (as it is not based on their pay in a specified previous pay period/average previous earnings, but on their contractual maternity pay entitlement). As noted above, employers cannot claim under the Extended CJRS for the cost of SMP. Since contractual maternity pay will include an employee’s SMP, employers claiming for the cost of such contractual maternity pay will need to adjust the amount that they are claiming to exclude the SMP element.

Given that the applicable rate of SMP after the first six weeks of maternity leave is just £151.20 per week, employees who are on maternity leave and whose employer does not provide enhanced company maternity pay may well prefer to return from maternity leave early and be furloughed by their employer instead. 

The Government guidance makes clear that the normal rule – that an employee must give eight weeks’ notice of an early return from maternity leave – applies where an employee wishes to return early in order to be furloughed under the Extended CJRS. However, it does acknowledge that employees may be able to agree an early return with their employer on shorter notice in certain circumstances (although without identifying what those circumstances are). In such cases, the employee’s furlough can begin from the date that it was agreed the employee could return to work.

(The same principles apply where an employee qualifies for contractual adoption, paternity, or shared parental pay.)

7. What process should you follow to place an employee on furlough under the Extended CJRS? (Last updated 17/11/2020)

Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding to whom they should offer furlough, equality and discrimination laws will apply in the usual way.

To be eligible for the grant, employers must have confirmed to the employee (or reached collective agreement with a trade union) in writing that they have been furloughed or flexibly furloughed. The guidance indicates that the employee does not have to provide a written response. In practice, however, we would still recommend that employers try to obtain employees’ written agreement to be furloughed where possible. 

Employers that recognise a trade union for collective bargaining with a defined bargaining unit and have a standard incorporation clause in individual contracts of employment should seek to engage with the trade union. In our view, if your collective bargaining arrangements cover changes to pay and hours, then they should also cover full or flexible furlough and, as noted above, the guidance specifically recognises that furlough can be agreed via a collective agreement with a trade union. If the union agrees, we would suggest that you also communicate/send letters to employees individually, to confirm the change to terms that has been agreed by the union and that it is incorporated into their contracts temporarily.

The November Treasury Direction specifies that furlough agreements must be made before the beginning of the period for which the employer wishes to claim in respect of the employee – i.e. they cannot be retrospective (subject to the below). However, it does allow for furlough agreements to be varied during a period for which the employer is claiming for the employee, to reflect any agreed variation to the terms of furlough. That could, for example, permit a variation in the number of hours that an employee working part-time on flexible furlough is required to work. 

Given the last-minute nature of the announcement regarding the Extended CJRS, the November Treasury Direction and the Government guidance permitted retrospective furlough agreements to cover the period from 1 November to 13 November, provided they were consistent with employment law and were made on or before 13 November in accordance with the conditions set out in the guidance.

The November Treasury Direction also states that a furlough agreement must specify the main terms and conditions on which the employee will be (fully or flexibly) furloughed. In this regard, we assume that it is sufficient to cover the extent to which the employee’s normal terms and conditions (e.g. as to hours of work, pay and benefits) are varied during furlough and any provisions relating to the possibility that the employee may be required to undertake training during furlough, as well as the extent to which they are permitted to work for another employer, or to volunteer. 

Any furlough agreement must also be consistent with employment, equality and discrimination laws and the employer must:

  • keep a written record of the agreement for 5 years; and 
  • for flexible furlough arrangements, keep records of how many hours their employees work and the number of hours they are furloughed (i.e. not working), for 6 years.

Make UK have produced template letters that employers can use to agree with employees that they will be placed on full or flexible furlough and that cover the above points.

While the Government guidance indicates that if sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes, in our view, it should not be necessary for an employer to initiate collective consultation when first proposing to place employees on full or flexible furlough, unless the employer anticipates that 20 or more employees are likely to refuse – and the consequence for those employees who refuse would be that they are dismissed.

If employees do not agree to go onto full or flexible furlough, the first step for an employer would be to engage with employees if possible, explaining the need for the proposed arrangements, the benefits to employees and the alternatives. Given the ongoing impact of the pandemic, it is likely that many employees will ultimately agree to the employer’s proposals. If they do not, the appropriate course of action will depend on the particular circumstances. We suggest that you seek specific legal advice if you find yourself in this situation.

8. What happens to an employee’s terms and conditions of employment and statutory employment rights during furlough?

The Government guidance makes clear that employees on furlough will retain their rights at work, including:

  • SSP;
  • annual leave;
  • maternity and other parental rights; 
  • rights against unfair dismissal;
  • redundancy payments; and 
  • to be paid at least statutory National Minimum Wage for hours worked.

As to contractual terms, the starting point is that any terms that are not expressly varied by the furlough agreement would remain in force during a period of furlough. Employers may wish to agree changes to contractual benefits that would apply during the period of furlough when seeking employees’ agreement to furlough leave, for example changes to bonus schemes, or the suspension of other benefits. In addition, since the guidance indicates that it is for the employer to decide whether to move furloughed employees who fall ill or need to self-isolate onto SSP, or keep them on furlough leave and furlough pay, we suggest that employers that operate a company sick pay scheme confirm to employees that company sick pay during furlough will be payable at the furlough rate of pay.

In theory, an employer could agree any changes it wishes with the employees it places on furlough. In practice, however, the more severely the employer tries to remove or restrict benefits during furlough, the more likely it is that employees might refuse to agree to the proposed changes. On the other hand, employees may be more likely to agree to otherwise unpalatable changes where the employer is in difficult financial circumstances and can clearly explain to employees the need for particular changes in order to help the company continue as a viable business. In all cases, it is of course important for the employer to communicate with its employees so that they understand the changes the employer wishes to make and why it needs to make them.

Employers cannot place employees on furlough without their agreement, so would have to weigh up the importance of additional contractual changes against the likelihood of employees refusing to agree – and the potential complications that would cause. 

(Note that we do not think it would be appropriate for an employer seeking employees’ agreement to go on furlough to seek to make permanent changes to employees’ contractual terms that will continue to apply after furlough ends as part of that process.)

9. Is there a minimum period for which furlough must last? Can you furlough employees multiple times? (Last updated 17/11/2020)

There is no minimum furlough period. Furlough agreements can last any amount of time and it is possible to furlough employees multiple times. 

One possible alternative to bringing employees on and off furlough and entering into a new furlough agreement each time could be to use a ‘rotational’ furlough system. Under this sort of arrangement, employees can agree in advance that they will be furloughed for a specified period, then return to work for a specified period, before returning to furlough again, and so on. Such rotational furlough arrangements can also be a way to ‘share the pain’ of reduced volumes of work by ensuring that all employees rotate between working normally and receiving full pay and being furloughed and receiving furlough pay. Our template full furlough letter includes optional wording to provide for rotational furlough.

(Note that the minimum claim period is usually 7 consecutive calendar days, but employees do not have to be on furlough for the whole of a claim period – see question 21, below). 

10. Can employees work for you, or elsewhere, during furlough? (Last updated 17/11/2020)

Fully furloughed employees cannot carry out any work that makes money or provides services for you or any organisation linked or associated with you during their period on furlough. 

Flexibly furloughed employees cannot carry out any work that makes money or provides services for you or any organisation linked or associated with you during their non-working, i.e. ‘furloughed’ hours. 

During furloughed hours, employees can, however: 

  • take part in training;
  • volunteer for another employer or organisation; and 
  • work for another employer (if permitted under their employment contract).

The Government guidance makes clear that an employee undertaking paid work for another organisation or on their own account during furlough leave (where this is allowed under their employment contract) will not affect your entitlement to claim in respect of them under the Extended CJRS. However, the guidance for employees notes that the employee needs to be able to return to work for you if you decide to stop furloughing them, or start flexibly furloughing them, and must be able to undertake any training you require them to do while on furlough.

An employee who has more than one job can continue to work for and be paid by their second employer. They can be fully or flexibly furloughed for each job; each job is separate, and the furlough pay cap applies to each employer individually.

Where the furloughed employee is a company director, note that the November Treasury Direction makes clear that they are permitted to undertake certain work while they are fully furloughed / during their furloughed hours on flexible furlough. The work that is permitted is work that directly relates to: 

  • fulfilling a statutory duty relating to the filing of company accounts or provision of other information relating to the administration of the company; 
  • making a furlough claim in respect of company employees; or 
  • making payments of wages to company employees.

11. Can employees and apprentices undertake training while on furlough? (Last updated 17/11/2020)

Yes. The Government guidance provides that fully or flexibly furloughed employees can undertake training during furlough so long as this does not involve providing services to or generating revenue for or on behalf of the employer or a linked or associated employer. The November Treasury Direction specifies that study or training will be permitted if its purpose is to improve the employee’s effectiveness in the employer’s business or the performance of the employer’s business, so long as the study or training does not provide a service to the employer, contribute to business activities, generate income or profit, or significantly contribute to the production of goods or services for sale.

It is worth noting that the Government guidance states that furloughed employees should be encouraged to undertake training. However, if employees undertake training at your request during the hours which you record them as being furloughed, for instance, if they are required to complete online training courses, then they must be paid at least the NLW/NMW for the time spent training. 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 rate. As noted in the Government guidance, employers will need to ensure that the furlough payment provides sufficient monies to cover these training hours. In most cases, the furlough payment of 80% of an employee’s regular wage, up to the value of £2,500 (pro-rated where the employee is on flexible furlough) will provide sufficient monies to cover these training hours. However, 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.

Note that apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed. However, as with other employees, you must pay your apprentices at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) as appropriate for all the time they spend training. Government guidance on changes in apprenticeship learning arrangements due to Covid-19 is available online for England, Scotland, Wales and Northern Ireland.

12. Can employees undertake voluntary work while on furlough? (Last updated 11/11/2020)

Yes. Fully or flexibly furloughed employees can undertake voluntary work while they are on furlough, provided that this:

  • does not involve providing services to or generating revenue for or on behalf of your organisation or a linked or associated organisation;
  • does not involve volunteering for you in an alternative role; and
  • is in accordance with applicable public health guidance (e.g. on social distancing and self-isolation).

13. Do employees continue to accrue holiday while on furlough? (Last updated 11/11/2020)

The Government guidance specifies that furloughed employees continue to accrue holiday in accordance with their employment contract and that they cannot be deprived of their minimum statutory entitlement to 5.6 weeks’ annual leave per year. This point is also reflected in the specific guidance on holiday entitlement and pay during coronavirus. (Note that this specific guidance has not been updated since it was first published on 13 May 2020.) 

The Government guidance also acknowledges that employers could potentially agree with employees a variation to any additional contractual holiday entitlement. One way to do this might be to provide that the number of days of additional contractual holiday the employee accrues over the year will be reduced in proportion to the amount of time they spend on furlough. However, it is worth noting that the more severely an employer tries to remove or restrict benefits during furlough, the more likely it is that employees might refuse to agree to the proposed changes – see questions 7 and 8, above, for further information. In addition, if employees are working part-time on flexible furlough, it would seem unfair to suspend their accrual of contractual holiday and in any event the calculation of days accrued could be administratively burdensome. 

14. Can employees be on annual leave and furlough at the same time? And what is the position on holiday pay? (Last updated 11/11/2020)

In common with the ACAS guidance on Covid-19 and holidays, the Government guidance confirms that an employee can take holiday while on furlough and that, if they do, the employer should pay their usual holiday pay in accordance with the Working Time Regulations (the WTR) – i.e. holiday pay must be paid at the employee’s normal rate of pay or, where the employee has variable pay, must be calculated on the basis of the employee’s average pay over the previous 52 week reference period (12 weeks in Northern Ireland). This point is also reflected in the specific guidance on holiday entitlement and pay during coronavirus.

Obviously, the impact of having been on furlough will, moving forwards, affect the calculation of holiday pay for those with variable pay, which may potentially be inconsistent with the Working Time Directive and lead to challenges from employees. (Note that the Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 (discussed further at question 33 below), which are intended to ensure that an employee does not lose out as a result of having been on furlough where payments to which they are entitled are calculated on the basis of the ERA week’s pay provisions, do not apply to the calculation of holiday pay.) 

The Government guidance warns that employees “should not be placed on furlough for a period simply because they are on holiday for that period”. This is presumably intended to prevent employers from using the Extended CJRS where they do not otherwise need it, simply to subsidise the cost of employees’ holiday pay. This might be particularly relevant where the employer has a planned shutdown at Christmas – see question 17, below.

With regard to flexibly furloughed employees, the Government guidance notes that any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours. This means that the employer can claim under the Extended CJRS (up to the relevant cap) in respect of holiday taken, whether the holiday is taken on a day that would otherwise be a work day, or a day that would otherwise be a furlough day. However, this does not seem consistent with the general warning that employees should not be furloughed simply to cover holiday.

15. What is the position on bank holidays that fall while employees are on furlough? (Last updated 11/11/2020)

The Government guidance indicates that if a furloughed employee usually works on bank holidays, “the employer can agree that this is included in the grant payment”. The guidance on holiday entitlement and pay during coronavirus specifies that where a bank holiday falls during an employee’s period of furlough and the employee would have usually worked the bank holiday, their furlough will be unaffected by the bank holiday. Accordingly, a furloughed employee who usually works on a bank holiday will simply remain on furlough and in receipt of furlough pay for the bank holiday, as if it were any other normal working day.

If an employee usually takes the bank holiday as leave, the Government guidance provides that the employer will either have to top up their furlough pay to provide a day’s holiday pay, or give the employee a day of holiday in lieu. On this point, the guidance on holiday entitlement and pay during coronavirus permits either of these options. However, it slightly complicates matters by suggesting that in order for the bank holiday to be taken as leave while the employee is on furlough (with topped up pay), the parties must agree to this or the employer must give notice for the employee to take it as holiday under the WTR. In most cases where employees usually have bank holidays as leave, this is provided for in their contract of employment. The guidance could potentially be read as requiring a specific agreement that a bank holiday is to be taken as holiday while the employee is on furlough. However, if employers have provided in their furlough letter that, other than any changes in respect of pay, etc., the employee’s other contract terms will continue to apply, we assume that the existing provision in the employee’s contract would suffice as agreement for the bank holiday to be taken as leave even while the employee is on furlough.

16. Can we require furloughed employees to use their holiday entitlement while they are on furlough? (Last updated 11/11/2020)

The guidance on holiday entitlement and pay during coronavirus makes clear that employers can require furloughed employees to take specified days as annual leave while they are on furlough, provided they give notice in the usual way in accordance with the WTR and pay holiday pay at the appropriate rate, which may require them to top up the employee’s furlough pay. However, it advises that employers should engage with their workforce and explain reasons for wanting them to take leave before requiring them to do so. It also cautions that if an employer requires an employee to take holiday while on furlough, the employer should consider whether any restrictions the employee is under, such as the need to socially distance or self-isolate, would prevent the worker from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday. This recommendation hints at the view (based on case law establishing that employees cannot be required to take annual leave while off sick, or on maternity leave) that being required to take annual leave while on furlough may in some cases be incompatible with the purpose of annual leave. Employers may therefore feel that it would be inappropriate to require employees to use much holiday during any period of full lockdown (such as the lockdown that is currently applicable in England until 2 December), or when severe restrictions are imposed at a local level. 

It is helpful to have the express clarification that employers can require furloughed employees to take holiday by giving the requisite notice under the WTR. In addition, the guidance on holiday entitlement and pay during coronavirus notes that, in most cases, employees who are on furlough will be able to take their holiday during their furlough so are unlikely to need to make use of the regulations that permit the carry forward of up to four weeks’ annual leave into the next two leave years where it has not been reasonably practicable for employees to take that leave due to Coronavirus (on which see further question 18, below). Together, these two aspects of the guidance would seem to support the view that employers can effectively require employees on furlough to use up at least a proportionate amount of their annual leave as it accrues.

That said, while it is unlikely to be problematic for employers to require most furloughed employees to take holiday over scheduled Christmas shutdowns (which they would have been required to take in any event had they not been furloughed), in view of the recommendation to consider the impact of social distancing / self-isolation requirements on employees’ ability to rest, relax and enjoy leisure time, they should still consider employees’ individual circumstances where relevant. 

Note that we do not think the warning in the Government guidance that employees “should not be placed on furlough for a period simply because they are on holiday for that period” is intended to prevent employers from continuing to claim under the Extended CJRS during the period of a planned annual shutdown in respect of employees who remain fully furloughed both before and after the shutdown due to a lack of work caused by the pandemic, as in this situation the employer is not using furlough “simply” because employees are on holiday for the period of the shutdown. This is different from the situation where employees are working normally, or are flexibly furloughed, and the employer wishes to place them on full furlough to cover an annual shutdown period – on which see question 17, below. 

As a matter of good practice, we recommend that employers take a reasonable approach and avoid requiring employees to take a disproportionate amount of annual leave while on furlough. 

Employers should also take note that the ACAS guidance encourages employers and employees, as a matter of best practice, to be as flexible as they can about holiday during the coronavirus pandemic. In particular, the guidance recommends: talking about plans to use or cancel holiday as soon as possible; discussing the reasons why holiday might need to be taken or cancelled; listening to each other’s concerns and welcoming ideas for alternatives; considering everyone’s physical and mental wellbeing; and being aware that it’s a difficult time for both employers and staff. 

17. Our employees are currently working (normally or on flexible furlough). Can we move them onto full furlough when they take holiday, or during our planned annual shutdown? What if we need to implement a longer shutdown than usual due to coronavirus? (Last updated 11/11/2020)

As noted at question 14, above, the Government guidance includes a warning that employees “should not be placed on furlough for a period simply because they are on holiday for that period”. We assume that this is intended to prevent employers from using the Extended CJRS where they do not otherwise need it, simply to subsidise the cost of employees’ holiday pay. However, as noted at question 14, above, the guidance does still anticipate that employees may take holiday while on furlough.

In our view, it is likely to be considered an abuse of the Extended CJRS for an employer whose employees are currently working normally to place them on full furlough when they take holiday and/or during a planned annual shutdown (for which employees would be required to take holiday in any event). We think there is at least a possibility that HMRC might say that the employer was never planning to have work available during a shutdown period and therefore to place employees on full furlough during that period would “simply” be because they are on holiday for that period. Note, we think the situation is different where employees are not working but remain fully furloughed both before and after the shutdown due to a lack of work caused by the pandemic – see question 14, above.

What if employees are not working normally, but are working part-time on flexible furlough? Could the employer then treat them as if they are fully furloughed during its planned annual shutdown? As noted at question 14, above, the Government guidance indicates that for employees on flexible furlough any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours. This means that the employer can claim under the Extended CJRS (up to the relevant cap) in respect of holiday taken, whether the holiday is taken on a day that would otherwise be a work day, or a day that would otherwise be a furlough day. However, this does not seem consistent with the general warning message that employees should not be furloughed simply to cover holiday. Our tentative view is that whilst the employer should be able to continue to claim for the regular furloughed days/hours during its planned annual shutdown, it might not be appropriate to claim for the additional days of the shutdown when the employees would have been working under their flexible furlough arrangements. We may receive further details on this in due course.

What if the employer decides to implement a longer shutdown than usual because of say reduced demand or supply chain disruption caused by the pandemic? In these circumstances, provided the company can demonstrate that the longer shutdown is due to Covid-19, we think that they could fully furlough the employees (or treat all working hours as furloughed hours for employees on flexible furlough) during the extension of the shutdown period since the Extended CJRS is intended to support employers who cannot maintain their workforce because their operations have been affected by Coronavirus. 

Remember, too, the relationship between holiday and furlough. It is standard practice for employees to be required to take holiday during a planned annual shutdown. An employer that is implementing a longer shutdown than usual and furloughing employees for the extension to the shutdown will need to consider whether it will also require employees to take holiday during the extension. If it does so, it will of course have to ensure that it pays employees in full for the extended shutdown period in order to comply with the law on holiday pay. However, requiring employees to use their holiday entitlement during an extended shutdown is likely to give rise to practical and employee relations issues. For example, some employees may not have enough holiday left to cover an extension to the planned annual shutdown over the Christmas period, particularly if the employer’s holiday year runs from January to December. It may therefore be simpler to fully furlough the employees for the extension to the shutdown without requiring them also to take holiday for that period (although if any employee wished to take holiday during the extension to the shutdown in order to have their furlough pay topped up to full pay, the employer could allow that).

18. What if we can’t afford for furloughed employees to take holiday? (Last updated 11/11/2020)

The Government guidance expressly refers to the employer’s right to restrict when annual leave can be taken if there is a business need, including while employees are on furlough, provided the correct notice is given under the WTR. This is helpful for employers whose business has been so severely affected by the pandemic that they are unable to afford to top up furlough pay to meet the WTR holiday pay requirements, and may therefore need to specify that employees cannot take holiday while they are on furlough.

In this regard, it is worth noting the existence of special regulations which provide that up to four weeks’ paid holiday can be carried over into the next two holiday years if it cannot be taken due to coronavirus. The ACAS guidance gives the following examples of why an employee may be unable to take their holiday:

  • the employee was self-isolating or too sick to take holiday before the end of the leave year;
  • the employee had to continue working and could not take paid holiday; or
  • the employee was furloughed and could not ‘reasonably’ use their holiday in the leave year.

The guidance on holiday entitlement and pay during coronavirus expands on this, listing various factors that an employer should take into account when deciding whether an employee could reasonably take their annual leave in the current leave year. On the issue of furlough, it states that employees 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 (in most cases at least). However, to do so they must be paid the correct holiday pay which is likely to be higher than the rate of pay that will be covered by the grant under the Extended CJRS, with the employer making up the difference. The guidance notes that if, due to the impact of Covid-19 on operations, the employer is unable to fund the difference, it is likely that this would make it not reasonably practicable for the employee to take their leave, enabling the employee to carry their annual leave forwards. In this situation, the employee must still be given the opportunity to take their annual leave, at the correct rate of holiday pay, before the carried forward annual leave is lost at the end of the next 2 leave years.

For further discussion of an employer’s ability to prevent employees from taking holiday on specified dates and the regulations that permit the carry forward of leave that an employee has been unable to take due to coronavirus, see our FAQs on ‘Managing employees during the pandemic’. Members can also access guidance on how to handle holiday that has been carried forward in the HR & Legal Resources section of our website.

19. Can employees participate in disciplinary and grievance proceedings while on furlough? (Last updated 11/11/2020)

As noted above, one of the conditions for full furlough is that an employee cannot do any work for their employer during the furlough period, and for flexible furlough that an employee cannot do any work for their employer during the hours they are recorded as being on furlough. Work is defined to include generating revenue for or providing services to the employer or an associated organisation. Accordingly, we do not think it would be possible for an HR manager or line manager to run a grievance or disciplinary process while on full furlough/during their furloughed hours on flexible furlough.  

For the aggrieved employee, or the employee who is the subject of disciplinary proceedings, we think that participating in a grievance or disciplinary hearing is unlikely to amount to ‘work’, and that such participation should therefore be possible while the employee is on full furlough/during their furloughed hours on flexible furlough. Note that, in practice, a fully furloughed employee might simply refuse to engage in the process at all. In these circumstances, the employer will need to consider whether it is possible to conduct a fair process in the employee’s absence or whether the process needs to be suspended to give the employee a chance to change their mind about participating.

As for the employee’s companion at relevant disciplinary or grievance meetings, the Government guidance confirms that employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees, so long as they do not thereby provide services to or generate revenue for or on behalf of the employer or a linked organisation. 

Given the above, provided that the relevant HR and line managers are not on full furlough, it should in most cases be possible to continue with disciplinary and grievance processes while the employees concerned are on full or flexible furlough. That said, it is also important to bear in mind the practicalities of conducting such processes remotely if your workplace remains closed and/or any of the employees involved is unable to attend the workplace for face-to-face meetings and the difficulties this may cause in relation to ensuring a full investigation and fair hearing – see the FAQs on ‘Managing employees during the pandemic’ for more information. In some cases, it may be necessary to suspend the relevant process until circumstances have changed. We recommend seeking advice on your particular situation.

20. What can you claim under the Extended CJRS and how do you do it? (Last updated 17/11/2020)

For claims in the period between 1 November 2020 and 31 January 2021, employers will be able to claim a grant for the full 80% of furloughed employees’ usual pay up to a maximum of £2,500 per month (their furlough pay), per employee for the time the employee spends on furlough. Where employees are on flexible furlough, the £2,500 cap is reduced on a pro-rata basis depending on the proportion of usual working hours that the employee is furloughed for (and employers must pay their employees in accordance with their employment contract for any time worked and in accordance with the Government grant for the time not worked).

As noted at question 3, above, the Extended CJRS will be reviewed in January to examine whether the economic circumstances are improving enough for employers to be asked to increase their contributions to employees’ pay (see below for employers’ current contributions).

Employers can choose to top up employees’ furlough pay above the maximum pay threshold covered by the Government grant at their own expense, although there is no obligation to do so.

Employers must operate PAYE on behalf of their employees and pay employer National Insurance contributions (NICs) and employer pension contributions for their employees on the full amount that they pay the employee, including any pay covered by the Government grant. Employers will not be able to claim under the Extended CJRS for employer NICs or pension contributions.

Agents who are authorised to do PAYE online for employers will be able to claim on their behalf.

The Extended CJRS will operate as the previous scheme did, with businesses being able to claim either shortly before, during or after running payroll. Claims can be made from 8am Wednesday 11 November. Claims made for November must be submitted to HMRC by no later than 14 December. Claims relating to each subsequent month should be submitted by day 14 of the following month, to ensure prompt claims following the end of the month which is the subject of the claim. The Government anticipates that employers will receive their grant payments 6 working days after they make their first claims.

In order to claim, employers must: 

  • determine the length of their claim period;
  • work out which elements of pay they must include; 
  • for employees who are on flexible furlough, work out the employee’s usual hours and furloughed hours; and
  • work out the amount they can claim as a grant under the Extended CJRS

in accordance with the Government guidance on how to do the calculations. We have summarised key points in the questions below. However, the applicable formulae are set out in full in the November Treasury Direction and there is a lot more detailed information in the various pieces of Government guidance, including in-depth worked examples, and you will need to read and digest this before you make your claim. The complexity of the calculations, particularly in relation to flexible furlough, means that HR will need help from payroll to ensure that any claims are correctly calculated.

21. What claim period should you use? (Last updated 17/11/2020)

A claim period is made up of the days for which the employer is claiming a grant and the start date of the employer’s first claim period is the date their first employee was furloughed. 

Employers must report and claim for a minimum claim period of 7 consecutive calendar days and the claim period must start and end within the same calendar month. This means that if an employee’s pay period includes days in more than one month, you will need to submit separate claims covering the days that fall into each of the months.

You can only claim for a period of fewer than seven days if 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. The November Treasury Direction refers to these shorter periods at the start or end of a month as ‘orphan’ periods. It specifies that an employee can only be included in a claim for an orphan period if they were included in a claim for the claim period immediately before that orphan period.  

The Government guidance suggests matching your claim period to the dates you process your payroll, if you can. However, you can only make one claim for any claim period, so you must include all your employees who are furloughed (whether flexibly or fully) in one claim, even if you pay them at different times. 

If you make more than one claim, your subsequent claim cannot overlap with any other claim that you have made. This may cause difficulties for employers who have furloughed some employees and have put in a claim for them, but then find that they need to furlough a further group of employees in an overlapping period. 

Where employees have been furloughed continuously (whether on full or flexible furlough, or a combination of the two), the claim periods must follow on from each other with no gaps between the dates.

Note that, when claiming for employees who are flexibly furloughed, you can only claim for furloughed hours (i.e. the number of their usual hours for which the employee does not work during the claim period). In order to avoid any errors, the Government guidance therefore recommends that you do not claim until you are sure of the exact number of hours they will have worked during the claim period. If you claim in advance and your employee works for more hours than you have told HMRC about, then you will have to pay some of the grant back. There is specific guidance on how to repay a grant if you have claimed too much. See also question 26, below. 

As noted at question 9, above, there is no minimum furlough period. The Government guidance makes clear that an employee does not need to be on furlough for the whole of a claim period. It provides diagrammatic examples, which include both employees who were put on furlough part way through a claim period and also others who return to work before the end of the claim period.

22. Which elements of pay should you include? (Last updated 17/11/2020)

The Government guidance provides that the amount you should use when calculating 80% of your employees’ wages for hours not worked should be based on “regular payments you are obliged to make”. This includes regular wages, non-discretionary payments for hours worked (including overtime), non-discretionary fees, non-discretionary commission payments and piece rate payments.

As to what is meant by ‘non-discretionary’, the Government guidance explains that payments should be included where the employer has a contractual obligation to pay them and the employee has an enforceable right to receive them. ‘Variable’ payments that are identified in a contract and are always made may thereby become non-discretionary. 

The guidance refers to payments for overtime worked being non-discretionary when you are contractually obliged to pay the employee at a set and defined rate for the overtime that they have worked. This reflects the position in the November Treasury Direction, which acknowledges that variable payments such as overtime and payments made in recognition of employees undertaking additional duties, or undertaking duties at particular times or in particular circumstances, are non-discretionary if the method of calculating their amount is set out in a legally enforceable agreement, understanding, scheme, transaction or series of transactions. It is also consistent with our view that, whatever the position regarding overtime in an employee’s contract before it is worked (e.g. whether it is compulsory, guaranteed, or voluntary), the reference salary calculation (i.e. the pay on which an employee’s 80% furlough pay is based) is based on past pay for past work. Once the employee has worked the overtime, there is nothing discretionary about the employer’s obligation to pay them for that time.

This effectively means that overtime, commission, shift premium payments and allowances such as dirty work allowance, working at height allowance, etc. should all be included in the calculation of furlough pay, so long as the method of calculating those payments is prescribed by contract.

The Government guidance also expressly states that payments made at your discretion, or that of a client, where there is no contractual obligation to pay (such as tips (including those distributed through troncs), discretionary bonus, or discretionary commission) should be excluded, as should non-cash payments and non-monetary benefits/benefits in kind (such as a company car), as well as salary sacrifice scheme benefits (such as pension contributions) that reduce an employee’s taxable pay.

When the furlough scheme was first introduced, there was quite a lot of uncertainty as to which elements of pay should and should not be included when calculating furlough pay, but most of these questions were settled following the publication of the second Treasury Direction in May 2020.  The November Treasury Direction on the Extended CJRS takes the same approach to the elements of pay that should be included in furlough pay calculations. Accordingly, while there may still be some scope for dispute as to the correct interpretation of the rules in this area, it is likely that any remaining ambiguities will be left for the courts to determine at a much later date. We therefore suggest that, in all cases, employers keep a detailed record of how they have calculated their claims and retain this for at least 6 years.

When deciding what to include in a claim, employers also need to be aware that they may not be able to claim for all payments that they have promised to employees; depending on what has been agreed, employers may need to pay employees more than they are able to recover under the Extended CJRS.

It is also worth pointing out that some of these difficult decisions as to what elements of pay should be claimed for are not questions for HR; decisions need to be made by an employer’s finance department with support from their accountants and payroll provider.

As noted above, reference salary should not include the cost of benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay. Accordingly, the salary used to calculate furlough pay is the post-salary-sacrifice amount. Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC has confirmed that Covid-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the employment contract is updated accordingly, but note that their reference salary for claiming furlough pay is based on the employee’s past pay. Employers thinking of agreeing a change to salary sacrifice arrangements with employees should also be aware that proposing a reduction in pension contributions could trigger pension consultation obligations.

Where you provide benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Extended CJRS.

23. How should you work out usual hours and furloughed hours for an employee on flexible furlough? (Last updated 20/11/2020)

You do not need to work out usual and furloughed hours for employees who are fully furloughed, because the basis of their full furlough is that they do no work at all.

If your employee is flexibly furloughed, you will need to work out their usual working hours and record the actual hours they work as well as their ‘furloughed hours’ (i.e. the number of their usual hours that were not worked in a given claim period and in respect of which you can therefore claim under the Extended CJRS). The November Treasury Direction includes detailed formulae setting out how to do this.

You can calculate the usual hours for the entire claim period or for each pay period, or part of a pay period, that falls within that claim period. The guidance assumes that you will calculate on a pay period basis but either method is acceptable. If you calculate the usual hours for the entire claim period and the result is not a whole number, you should round it up to the next whole number. If you calculate the usual hours on a pay period basis, you should round the result up or down to the nearest whole number.

How you work out your employee’s usual hours will depend on whether the employee works fixed or variable hours.

According to the Government guidance, you should follow the instructions for working out usual hours for employees who work variable hours, if either:

  • your employee is not contracted for a fixed number of hours; or
  • your employee’s pay depends on the number of hours they work.

If neither of these apply, you should follow the instructions for working out usual hours for employees who are contracted for a fixed number of hours. Helpfully, the guidance notes that HMRC will not decline or seek repayment of any grant based solely on the particular choice between fixed or variable approach to calculating usual hours, as long as the choice you made was reasonable.

Usual hours for employees with fixed hours whose pay does not vary based on hours worked

For these employees, usual hours are determined by reference to contracted hours at the end of the relevant reference period.

For employees who were on your payroll on 19 March 2020 and in respect of whom you had made an RTI submission on or before that date, or whom you had previously furloughed at any time on or before 31 October 2020, the reference period is the employee’s last pay period ending on or before 19 March 2020.

For all other employees, the reference period is the employee’s last pay period ending on or before 30 October 2020.

To calculate the number of usual hours in a pay period (or partial pay period):

  • start with the hours the employee was contracted for at the end of their reference period;
  • divide by the number of calendar days in their repeating working pattern, including non-working days; 
  • multiply by the number of calendar days in the pay period (or partial pay period) you are claiming for; and
  • round up or down if the result is not a whole number.

If an employee with fixed hours was on annual leave, off work sick, or on statutory family leave at any time during the last reference period, the usual hours should be calculated as if the employee had not taken that leave.

Usual hours for employees with variable hours (i.e. who are not contracted for a fixed number of hours, or whose pay varies based on hours worked)

Where an employee’s pay varies depending on the hours they work, the employee’s payslips should show the number of hours they have worked in a given period. These pay records can be used to identify the hours worked in the relevant period for the purposes of working out the employee’s usual hours. Time sheets, rotas and work diaries can also be used. 

For employees who were on your payroll on 19 March 2020 and in respect of whom you had made an RTI submission on or before that date, or whom you had previously furloughed at any time on or before 31 October 2020, usual hours are calculated based on the higher of either the average number of hours the employee worked in the tax year 2019 – 20, or the number of hours worked in the corresponding calendar period in the tax year 2019 – 20. 

For all other employees with variable hours, usual hours are calculated based on the average number of hours worked between 6 April 2020 and the employee’s first day on furlough on or after 1 November 2020.

The Government guidance sets out step by step instructions to calculate usual hours in each case. 

When calculating usual hours, note that you should include any hours of leave for which the employee was paid their full contractual rate (e.g. annual leave) and any hours worked as overtime for which pay was not discretionary.

Working out the furloughed hours

Once you have worked out the employee’s usual hours for a claim period (or for the part of a claim period for which the employee is flexibly furloughed), you will need to identify how many hours in that period are furloughed hours (and in respect of which you can therefore claim the grant for furlough pay under the Extended CJRS).

You are likely to have agreed how many hours you intend an employee on flexible furlough to work in any given claim period (see question 7, above). The employee will be furloughed and eligible for furlough pay under the Extended CJRS for the rest of their usual hours.

However, note that the instructions given in the Government guidance indicate that to calculate the number of furloughed hours, you should subtract from the employee’s usual hours the number of hours they actually worked in the claim period – even if this is different from what you had agreed.

If you claim in advance based on the number of hours you had agreed that the employee would work, and your employee in fact works for more hours than this, then you will have to pay some of the grant back to HMRC. The Government guidance therefore advises against claiming until you have certainty about the number of hours your employees are working during the claim period. There is specific guidance on how to repay a grant if you have claimed too much.

The Government guidance acknowledges that some employees may only be fully or flexibly furloughed for part of a claim period. In these circumstances, the guidance specifies that, when calculating the number of furloughed hours you can claim for, you must:

  • only calculate the employee’s usual hours for the days covered by the furlough agreement; and
  • not include any working hours on days not covered by a furlough agreement.

This applies even if your claim period includes days before or after the period covered by the employee’s furlough agreement (for example, because you’re claiming for multiple employees and some of them are furloughed for a different period).

24. How should you work out how much furlough pay a fully or flexibly furloughed employee is entitled to under the Extended CJRS? (Last updated 20/11/2020)

As explained above, furlough pay is 80% of an employee’s usual wages for the time that they are furloughed, subject to the applicable cap. 

The way you should work out 80% of an employee’s usual wages differs depending on the way they are paid – i.e. whether they receive a fixed salary (referred to as ‘salaried/fixed-rate’ employees) or variable pay (referred to as ‘variable pay’ employees). Note that if a salaried/fixed-rate employee has worked enough overtime for this to have a significant effect on the amount you need to claim, you should calculate 80% of their pay using the method for variable pay employees. The Government guidance indicates that HMRC will not decline or seek repayment of any grant based solely on the particular choice of pay calculation, as long as your approach is reasonable.

Where a claim covers multiple pay periods, this calculation should be done for each period and then added together.

Salaried/fixed-rate employees

For employees who were on your payroll on 19 March 2020 and in respect of whom you had made an RTI submission on or before that date, or whom you had previously furloughed at any time on or before 31 October 2020, the reference period is the employee’s last pay period ending on or before 19 March 2020.

For all other employees, the reference period is the employee’s last pay period ending on or before 30 October 2020.

To work out 80% of your employee’s pay, the guidance explains that you should:

  • Start with the wages payable to the employee in the relevant reference period (if you’re claiming for a full pay period, skip to the fourth step).
  • Divide by the total number of days in the pay period.
  • Multiply by the number of furlough days in the pay period.
  • Multiply by 80%. 

There are different instructions included in the guidance for situations where the relevant reference period is not a full pay period, or the frequency with which the employee is paid has changed between the reference period and the pay period for which you are calculating the employee’s furlough pay.

Variable pay employees

For employees who were on your payroll on 19 March 2020 and in respect of whom you had made an RTI submission on or before that date, or whom you had previously furloughed at any time on or before 31 October 2020, their usual wages for the purposes of calculating furlough pay are based on the higher of either the wages earned in the corresponding period in the tax year 2019 – 20 or the average wages payable in the tax year 2019 – 20. 

For all other variable pay employees, usual wages are calculated based on the average wages payable between 6 April 2020 and the day before the employee’s first day on furlough on or after 1 November 2020.

The Government guidance notes that, for a flexibly furloughed employee, you will have completed a similar comparison to work out the employee’s usual hours (see question 23, above), but the outcome may be different.

It describes the method of calculation based on the same calendar period’s wages from the previous year as follows:

  • Start with the amount they earned in the same period last year
  • Divide by the total number of days in this pay period, including non-working days
  • Multiply by the number of furlough days in this pay period
  • Multiply by 80%

The calculation based on average monthly/other pay period amount for the last tax year is described as:

  • Start with the amount they earned in the tax year up to the day before they were furloughed
  • Divide it by the number of days from the start of the tax year, including non-working days (up to the day before they were furloughed, or 5 April 2020 – whichever is earlier)
  • Multiply by the number of furlough days in this pay period
  • Multiply by 80%

The guidance flags that if an employee started working for you on or after 6 April 2019, you should not include the days before their employment started in your calculation.

Finally, the calculation for where average wages are based on the period between 6 April 2020 and the day before the employee’s first day on furlough on or after 1 November 2020 is described as follows:

  • Start with the amount of wages that were payable to the employee from 6 April 2020 up to (and including) the day before the employee’s first day spent on furlough on or after 1 November 2020.
  • Divide it by the number of days the employee has been employed since the start of the tax year, including non-working days, until the day before they were furloughed.
  • Multiply by the number of furlough days in the pay period (or partial pay period) you are claiming for.
  • Multiply by 80%.

Calculating minimum furlough pay and identifying how much you can claim

The minimum furlough pay to which a fully furloughed employee is entitled is the lower of either:

  • 80% of their usual wage; or
  • the maximum wage amount you can claim for.

If an employee is flexibly furloughed, their minimum furlough pay entitlement depends on their working and furloughed hours. To work out their minimum furlough pay entitlement, you should start with the lower of 80% of their usual wages and the maximum wage amount you can claim for. Multiply this by the employee’s furloughed hours and divide the resulting figure by the employee’s usual hours. This is the minimum amount you must pay your employee for the time they are recorded as being on furlough. 

The Government guidance indicates that employers can choose to pay more than the minimum furlough pay entitlement, but do not have to.

If an employee takes any furlough hours as paid holiday/annual leave, you need to top up the pay for these hours to the employee’s full contractual rate.

It is important to remember that the amount you can claim for any employee will always be subject to the specified maximum of £2,500 per month, or £576.92 per week, for fully furloughed employees. This cap is pro-rated for flexibly furloughed employees, depending on the proportion of usual hours worked.

The Government guidance also sets out daily maximum wage amounts that you can use to work out the maximum you can claim for an employee where the length of time you’re claiming for is not one or more weeks or one month. To work out the maximum allowable claim amount, you will need to multiply the daily maximum amount by the number of days the employee is furloughed. The daily maximum amount differs depending on the number of days in the month:

  • November 2020 - £83.34 per day
  • December 2020 - £80.65 per day
  • January 2021 - £80.65 per day

Employees who receive a statutory payment in the claim period

The Government guidance notes that if an employee receives a ‘statutory payment’ (i.e. a payment of statutory maternity pay, statutory adoption pay, statutory paternity pay, statutory shared parental pay, or statutory parental bereavement pay) during the claim period, you cannot claim in respect of such a payment under the Extended CJRS, so you will need to subtract it from the amount you are claiming. 

This will be relevant, for example, where an employee who is on furlough goes on maternity leave and receives enhanced company maternity pay during that period. As noted at question 6, above, you can claim under the Extended CJRS in respect of the enhanced element of maternity pay, but not for statutory maternity pay.

Employees returning from statutory leave, or from unpaid sabbatical/unpaid leave

Where a salaried/fixed-rate employee is furloughed after returning from a period of statutory leave (i.e. sick leave, or family-related statutory leave such as maternity, paternity, shared parental, adoption, or parental bereavement leave, or unpaid parental leave), the Government guidance specifies that their furlough pay should be calculated based on 80% of their salary, before tax, not the pay they received while on statutory leave. 

The November Treasury Direction introduces some potential confusion in this regard, as it appears to indicate that rather than their salary, before tax, as stated in the Government guidance, furlough pay for salaried/fixed-rate employees returning from a period of statutory leave should be determined based on what the employee would have received had they been on paid annual leave under the Working Time Regulations rather than statutory leave at the relevant time. It may be that the confusion is linguistic only, however, since in practice a salaried/fixed-rate employee on annual leave will typically receive their normal salary – i.e. what the Government guidance says their furlough pay should be based on.

The Government guidance is currently silent on the position for variable pay employees who are furloughed after returning from a period of statutory family-related leave. However, it states that variable pay employees returning to work after time off sick should have their furlough pay calculated using the normal rules. The November Treasury Direction does not make specific provision for either scenario. However, the definitions used in the November Treasury Direction count both sickness absence and statutory family-related leave as ‘statutory leave’ and treat both in the same way. Accordingly, based on the position taken in the Government guidance in respect of furlough pay for variable pay employees returning from a period of sick leave, we assume the Government intends that furlough pay for variable pay employees returning from statutory family-related leave is also calculated based on the normal rules. However, the consequence of this would be that the furlough pay for a variable pay employee who was on maternity leave and in receipt of SMP for the better part of the relevant reference period could be impacted by their period of statutory leave – i.e. they could be at a disadvantage compared to salaried/fixed-rate employees who are furloughed on return from statutory leave, for whom the guidance and November Treasury Direction provide a more generous calculation method. It is not clear whether this difference is deliberate or an oversight on the part of the Government and we hope that the Government will address this when it next updates the guidance. 

When calculating 80% of wages for employees (both salaried/fixed-rate and variable pay) who are furloughed after returning from an unpaid sabbatical or other unpaid leave, the Government guidance states that “you’ll need to use the amount they would have been paid if they were on paid leave”. The November Treasury Direction reflects this for salaried/fixed-rate employees, but makes no specific provision for variable pay employees. Again, it is not clear whether this is deliberate or an oversight on the part of the Government.

25. What will you need to make a claim and when must you do it? (Last updated 20/11/2020)

Claims should be made via the online portal. You will need to log in using the Government Gateway user ID and password you use to access PAYE online. You should try to have all necessary information to hand before you begin so that you can complete your application in a single session. If you do not finish your claim in one session, you can save a draft, but you must complete your claim within 7 days of starting it.

The Government guidance on making a claim states that you will need:

  • to be registered for PAYE online 
  • your UK, Channel Islands or Isle of Man bank account number and sort code (only provide bank account details where a BACS payment can be accepted)
  • the billing address on your bank account (this is the address on your bank statements)
  • your employer PAYE scheme reference number
  • the number of employees being furloughed
  • the name and NI number for each employee being furloughed (if you do not have it, you will need to search for it online – and if one or more of your employees has a temporary NI number or has never had a NI number at all, you should contact HMRC)  
  • the payroll/employee number of each employee being furloughed (optional)
  • the start date and end date of the claim
  • the full amount you’re claiming for
  • your phone number and contact name
  • your Self Assessment unique taxpayer reference, or your Corporation Tax unique taxpayer reference, or your company registration number

If you’re claiming for employees who are on flexible furlough, you will need to provide the following additional information for the claim period:

  • the number of usual hours the flexibly furloughed employee would work in the claim period; 
  • the number of hours the flexibly furloughed employee has worked or will work in the claim period; and
  • the number of hours the flexibly furloughed employee has been furloughed in the claim period (i.e. their usual hours minus the hours worked), which you will have to keep a record of.

If you have 100 or more furloughed staff, you will be asked to upload a file (.xls, .xlsx, .csv, or .ods) containing specified information. When putting this information together, note that you will need to:

  • provide only the information requested – if you provide more or less information than required, you may risk delaying your payment and/or be asked to provide the information again;
  • submit one line per employee for the whole period;
  • avoid breaking up the calculation into multiple periods within the claim; and
  • avoid splitting data by contract type (for example, those paid weekly and monthly should be claimed for together).

HMRC has created file upload templates to assist with this, available in .xls, .xlsx, .csv and .ods formats. The Government guidance recommends using these templates to help ensure that your claim is processed quickly and successfully and flags that your claim may be rejected if you do not give the information in the right format.

The guidance flags that you must keep a copy of all records for six years, including: 

  • the amount claimed and claim period for each employee;
  • your claim reference number for your records; 
  • your calculations in case HMRC need any more information about your claim;
  • for employees on flexible furlough, usual hours worked (including your calculations) and actual hours worked. 

It also specifies that you should tell your employees you have made a claim and that they do not need to take any action, and pay your employees their wages if you have not done so already. 

When must claims be made?

Claims from 1 November 2020 must be submitted by 11.59pm 14 calendar days after the month in respect of which you are claiming. If this time falls on the weekend or bank holiday, then claims should be submitted on the next working day. The guidance indicates that HMRC may accept a claim made after the relevant deadline if an employer can show that it had a reasonable excuse for failing to make a claim in time, despite taking reasonable care to do so, and then claimed without delay after the excuse no longer applied. However, it is important to note that HMRC will not consider reasonable excuses in advance of a claim deadline, so employers cannot plan in advance to submit their claims late. The guidance gives various examples of circumstances that might be considered to amount to a reasonable excuse, including: computer or software failures while preparing a claim; postal delays that could not have been predicted; issues with HMRC’s online service; and the employer suffering a serious illness or having to self-isolate and nobody else being able to make the claim for them. 

Note also that the guidance specifies that you cannot submit your claim more than 14 days before your claim period end date, but you do not need to wait until the end date of the previous claim period before making your next claim and you can make your claim more than 14 days in advance of your employees’ pay date (e.g. if you pay your employees in arrears).

26. What if you realise you have claimed too little, or too much? (Last updated 20/11/2020)

Employers who realise that they have claimed too little will still have to make sure they pay their employees the correct amount. They will only be able to increase the amount of their claim if they amend the claim within 28 calendar days after the month to which the claim relates (or the next working day if the relevant date falls on a weekend or bank holiday). For example, if you wish to amend a claim for November 2020, you would need to do so by 11.59pm on 29 December 2020.

Employers who realise that they have claimed too much, or who would like to make a voluntary repayment because they do not want or need the grant, can either:

  • correct it in their next claim (the new claim will be reduced and the employer will need to keep a record of the adjustment for 6 years); or
  • get a payment reference number and pay HMRC back within 30 days (only if the employer is not making another claim).

Note that HMRC has the power to recover overclaimed grant amounts through the tax system where employers have not repaid them. Under these provisions, if you have overclaimed a grant and have not repaid it, you must notify HMRC of the overclaim by the latest of:

  • 90 days after the date you received the grant you were not entitled to; or
  • 90 days after the date you ceased to be entitled to retain the amount you were paid, e.g. because of a change in your circumstances.

If you fail to notify HMRC within the applicable timeframe, in addition to repaying the overclaimed amount via the tax system, you may have to pay a penalty. When determining the amount of any penalty, HMRC will take account of whether you knew you were not entitled to the grant when you received it, or you knew when it became repayable or chargeable to tax because your circumstances changed. If you knew you were not entitled to your grant when you received it or knew when you had stopped being entitled to it because of a change of circumstances and didn’t tell HMRC in the notification period, then your failure to notify will be treated as deliberate and concealed. This means that you could be charged a penalty of up to 100% on the amount of the grant that you were not entitled to receive or keep and had not repaid by the last day of the notification period. The Government has produced further guidance on penalties, which includes information on how HMRC decides on the amount of a penalty, when a penalty may be payable and how to appeal against a penalty. 

The guidance on penalties highlights that HMRC will not charge a penalty if: 

  • an employer has a reasonable excuse for its failure to notify HMRC of the overpayment;
  • the failure to notify was not deliberate; and 
  • the employer notified HMRC without unreasonable delay after the reasonable excuse ended. 

A reasonable excuse in this context is something that stopped the employer from meeting a tax obligation even though the employer took reasonable care to make sure that it did so – for example, due to circumstances outside the employer’s control or a combination of events. Whether HMRC will consider an excuse to be reasonable will depend on the particular circumstances in which the failure to notify occurred and the employer’s own particular circumstances and abilities.

It is also worth noting that HMRC may reduce the amount of a penalty depending on the extent to which an employer cooperates with and assists HMRC in its investigation of the overpayment. Further detail on how such reductions work is included in the guidance on penalties.

As we have highlighted elsewhere in these FAQs, there are areas of ambiguity in the Government guidance on what you can claim for. Some employers may therefore be concerned that they might innocently have overclaimed based on an erroneous but good faith interpretation of the guidance. It is thus reassuring to note that HMRC has indicated that its priority is to address deliberate non-compliance and criminal attacks, and that it will use its powers to assess overpayments accordingly, but will not actively be looking for innocent errors as part of its compliance approach. 

27. What will be deducted from the furlough payment before it is paid to the employee? (Last updated 11/11/2020)

While on furlough, the employee’s pay will be subject to usual tax and other deductions. Employers must therefore deduct and pay to HMRC Income Tax and employee NICs on the full amount that they pay the employee, including any pay covered by the Government grant. Employers that do not do this may be required to repay the grant to HMRC.

Employees will also continue to pay any employee automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.

Note that the Government guidance specifies that employers cannot enter into any transaction with employees which reduces their wages below the amount the employer has claimed for them under the Extended CJRS. This includes any administration charge, fees or other costs in connection with the employment. Where an employee had authorised their employer to make deductions from their salary, these deductions can continue while the employee is furloughed, provided that these deductions are not administration charges, fees or other costs in connection with the employment.

What about employer NICs and employer pension contributions? The employer remains liable for these costs. It cannot deduct them from the employee’s pay and will not receive any subsidy for them from the Government under the Extended CJRS.  

28. What is the position with the apprenticeship levy and student loans? (Last updated 11/11/2020)

Both the apprenticeship levy and student loans should continue to be paid as usual. Grants from the scheme do not cover these.

29. What is the interplay between furlough leave and the National Living Wage / National Minimum Wage? (Last updated 11/11/2020)  

The Government guidance confirms that furloughed workers must be paid the lower of 80% of their salary or £2,500 even if, based on their usual working hours, this would be below National Living Wage (NLW)/National Minimum Wage (NMW). This is because employees are only entitled to the NLW/ NMW for the hours they are working.

However, if workers (including apprentices) are required to or undertake training, whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training (see question 11, above).

30. What happens at the end of furlough? (Last updated 17/11/2020)

Furlough may end for a number of reasons, e.g. because the Extended CJRS has ended, because you have enough work for the employee to do to fill their usual working hours and so ask them to return to work (whether or not at home), or because the employee’s employment terminates (whether due to resignation or dismissal for any reason). The Government guidance does not specify the amount of notice required to end furlough, but we suggest employers give as much notice as they can. In the case of dismissal, employers must give notice in accordance with the employee’s contract (or statutory minimum notice, if greater), or make a payment in lieu of notice, unless the employer is dismissing summarily for gross misconduct. (Note that, from 1 December, employers cannot claim under the Extended CJRS in respect of an employee who is in a statutory or contractual notice period. This may affect how you decide to deal with notice for furloughed employees whose employment is terminating – see question 31, below).

Since terms and conditions other than those relating to pay and hours of work subsist during furlough, employees will be entitled to return to the same job on the same terms and conditions as before they started furlough – unless the Government provides any guidance to the contrary or unless the employee agreed to changes to terms and conditions at the same time as agreeing to furlough. (However, as noted at question 7, above, we do not think it would be appropriate for an employer seeking employees’ agreement to go on furlough to seek to make permanent changes to employees’ contractual terms that will continue to apply after furlough ends as part of that process.)

If you are bringing employees’ furlough arrangements to an end because you now have enough work for them to do to return to their usual working hours, e.g. if you had closed your business but are now reopening, or if you remained open with a skeleton staff but have now seen an increase in demand, you will need to consider what approach you wish to take to an employee who says that they are unable to return. This could be for a variety of reasons, e.g. they are clinically extremely vulnerable and cannot work from home, they have issues with childcare, or they are not willing to return due to concerns about the safety of the workplace. All of these issues are discussed in the FAQs on 'Employees unable or unwilling to attend work’.

31. What is the position in relation to notice periods from 1 December if a furloughed employee’s employment is terminating? (Last updated 17/11/2020)

If an employer wishes to dismiss an employee who is currently on furlough (full or flexible), in circumstances other than summary dismissal for gross misconduct, the employee remains entitled to notice of termination (in accordance with their contract, or statutory minimum notice, if greater). Similarly, an employee who resigns when they are on furlough will have to give notice of resignation as required by their contract, unless they are resigning in response to a repudiatory breach of contract by the employer. 

For notice periods prior to 1 December, employers remain able to claim under the Extended CJRS – for information on pay during the notice period for furloughed employees until 30 November, you can refer to questions 29, 29(a) and 29(b) of our FAQs on Furlough under the Revised Coronavirus Job Retention Scheme. However, from 1 December, employers cannot claim under the Extended CJRS in respect of an employee who is in a statutory or contractual notice period. This applies to terminations by dismissal (for any reason), resignation and retirement. This is likely to change how employers deal with notice periods and notice payments. We consider the position below with regard to both payments in lieu of notice (PILONs) and also notice periods that are served. Whereas previously it would have been advantageous for the employer to keep the employee on furlough during notice in order to recover some of the notice pay under the furlough scheme, this benefit no longer applies. Therefore, where an employee has been on furlough (full or flexible) up to the point that notice of termination of employment is given and the employer does not need them to carry out any work during the notice period, the most straightforward approach is likely to be to make a PILON rather than have the employee serve out their notice period. (However, bear in mind that if you pay in lieu of notice where there is no PILON clause in the employment contract, you will not be able to enforce post-termination restrictive covenants that are contained in that contract.) In our view, PILONs will be based on pre-furlough rates of pay – see below for further details.

Where the employee is serving out their notice, in most circumstances, employers will have to pay full notice pay – either: 

  • because the furlough arrangement has ended (i.e. if the furlough agreement operates automatically to bring the arrangement to an end where the employer can no longer claim under the Extended CJRS) and the employee has returned to their underlying terms and conditions of employment; or 
  • because, even though the furlough arrangement (i.e. contractual changes to working hours and pay) remains in place notwithstanding that the employer can no longer claim under the Extended CJRS, the special notice pay provisions in the Employment Rights Act (ERA) entitle the employee to full pay during notice even though they are not working. (Note, even where those provisions do not apply, employers may decide to pay full pay during notice in any event as a matter of good practice.)

The background to this advice regarding notice periods and PILONSs, including the relevant statutory provisions on notice pay, is complex. We have set out below an explanation of the law behind the above summary, which will be particularly relevant if you want to explore whether you can pay less than full pay during the notice period/as a PILON. (Note, this will only be worth exploring if the wording of your furlough agreement does not operate automatically to bring furlough to an end for the notice period (i.e. because you can no longer claim for the employee during notice) and the employee’s contractual notice period is at least a week more than the statutory minimum.)

Explanation of legal position where notice is being served

The first thing to consider is whether the giving of notice operates to bring the employee’s furlough arrangements to an end. This will be the case if the furlough agreement provided for furlough arrangements automatically to come to an end in the event that the employer is no longer claiming under the Extended CJRS in respect of the employee. In other cases, we think it is possible that the furlough arrangements (i.e. contractual variation to working hours and pay) could continue notwithstanding the fact that the employer is no longer claiming under the Extended CJRS. 

If the furlough arrangements come to an end, the employee would return to their underlying terms and conditions of employment. The employee would therefore expect to be paid during notice at their full rate of pay, even if the employer was not providing them with any work. If the employee had been on flexible furlough before notice was given and the employer wanted them to continue to work part-time during the notice period, this would need to be agreed with the employee – although they may be unlikely to agree to any arrangement that did not provide them with full pay.

If the furlough arrangements do not come to an end, then the employee would be entitled to be paid at the rate specified in their furlough agreement (with normal pay for hours worked and furlough pay for non-worked hours in the case of flexible furlough). However, if the employee’s contractual notice period is not at least one week more than the statutory minimum notice period, they will benefit from special provisions in the ERA entitling them to full pay during the notice period for any time they are not working, so long as they are otherwise ready and willing to work. (Most employees who have been given notice of termination while furloughed would be considered ready and willing to work.)

For the purposes of the ERA notice pay provisions, notice pay is calculated based on a week’s pay. A week’s pay is determined in accordance with the ERA and the Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 (the Coronavirus Week’s Pay Regulations). These Regulations are intended to ensure that the employee does not lose out as a result of having been on furlough where payments to which they are entitled are calculated on the basis of the ERA week’s pay provisions. Their effect is that any reduction in pay the employee has been subject to as a result of being furloughed is ignored when conducting the relevant calculations, so the amount of notice pay the employee is entitled to will not be affected by them having been on full or flexible furlough. We discuss their operation in detail in relation to the calculation of statutory redundancy pay at question 33, below, but the principles would be essentially the same for the calculation of notice pay.

If the employee’s contractual notice period is at least a week more than the statutory minimum, then the ERA notice pay provisions would not apply. In theory, therefore, an employer could seek to continue to pay notice pay at the 80% furloughed rate where the employee remains on full furlough during notice. However, it appeared from the press release announcing the Coronavirus Week’s Pay Regulations that the Government had intended for all furloughed employees to be entitled to full pay during their notice period and we are aware that HMRC representatives have been advising that this should be the case. Accordingly, although it is not required on the face of the legislation, we would recommend that employers pay these employee full pay during the notice period if they can afford to do so.

Explanation of legal position on PILON 

As noted above, where an employee has been on full furlough up to the point that notice of termination of employment is given, the employer is unlikely to need them to carry out any work during the notice period and paying a PILON is likely to be the most straightforward approach to termination. An employer may also choose to pay a PILON to an employee who has been on flexible furlough up to the point that notice of termination of employment is given, if they do not need the employee to continue to work part-time during the notice period. 

Where there is a clause in the employment contract permitting the employer to make a PILON (a PILON clause), the amount of notice pay will be governed by that clause. For example, it is relatively common for PILON clauses to limit payment to the basic pay the employee would have been entitled to had they been at work as normal throughout their notice period.  

If there is no PILON clause, then paying in lieu of notice is technically a breach of contract and the employer would have to pay the employee in respect of all pay and benefits to which they would have been entitled had they been at work throughout their notice period. If the giving of notice would have brought the employee’s furlough arrangements to an end as explained above, then the pay the employee would have been entitled to during notice would be their normal (pre-furlough) rate of pay. If the giving of notice would not have had that effect and the furlough arrangements could have continued had the employee served out their notice, then in theory the employee would only have been entitled to be paid at the furlough rate had they served out their notice. However, the ERA notice pay provisions and the Coronavirus Week’s Pay Regulations would have entitled the employee to full pay if their contractual notice period was not at least one week more than the statutory minimum. Accordingly, to compensate the employee for its breach of contract, the employer would have to pay the PILON at the employee’s normal (pre-furlough) rate of pay. 

For employees without a PILON clause, whose contractual notice period is at least a week more than the statutory minimum, and whose furlough arrangements would not have been brought to an end by the giving of notice, it may be possible for the employer to argue that the PILON need only be paid at the employee’s furlough rate of pay. However, we expect that employment tribunals would find this technical argument very unattractive and we would not recommend it.

32. What if we need to make furloughed employees redundant? (Last updated 17/11/2020)

Although the Extended CJRS is intended to support employers to maintain jobs during the pandemic, it may become clear to an employer that has accessed the scheme (and even before the scheme ceases to be available) that its business will continue to experience reduced work and/or that closure of the workplace is necessary. If the Government decides to require employees to contribute more towards employees’ furlough pay when it reviews the Extended CJRS in January 2021, it is also possible that some employers will then no longer be able to afford to keep employees on furlough. 

In such circumstances, the redundancy option will be open to employers, or will continue to be open to them, if they have already started a redundancy process. Indeed, the Government guidance specifies that employers can make employees redundant during furlough or afterwards. However, as noted at questions 3, 30 and 31, above, for claim periods starting on or after 1 December 2020, employers can no longer claim in respect of employees who are serving a statutory or contractual notice period (whether due to dismissal for redundancy or any other reason, or resignation or retirement). 

Our view is that you can consult with employees about redundancy whilst employees are on furlough. We do not think that engaging in a consultation process will count as ‘work’ and the Government guidance confirms that union and employee representatives may undertake duties and activities for the purpose of individual or collective representation of employees, so long as they do not provide services to or generate revenue for or on behalf of the employer or a linked organisation. That said, managers and HR who are running the consultation process will be working and so cannot be on full furlough. In addition, employers must bear in mind that consulting remotely clearly poses practical difficulties and they will have to ensure that the process they adopt for such remote consultation is thorough and fair. While, as set out above, the Government has now prohibited (from 1 December) claiming for an employee who is working out a notice period, based on the wording of the guidance and the November Treasury Direction, our view is that employers can continue to claim for affected employees during a redundancy consultation process before redundancy is confirmed.

Note that if you are proposing to dismiss 20 or more employees at a single establishment within a 90 day period, you will need to carry out collective, as well as individual, consultation. The minimum statutory collective consultation periods are 30 days where 20 to 99 redundancies are proposed, or 45 days where 100 or more redundancies are proposed. Employers can shorten the timeframe of their statutory collective consultation if the “special circumstances” defence applies, i.e. where it is not reasonably practicable to comply with the collective consultation requirements in full and that the circumstances behind this are “special”. It is possible that an employment tribunal would agree that the impact of the Covid-19 crisis on a business amounted to “special circumstances” and that it was not reasonably practicable to comply with collective consultation requirements, but this is certainly not guaranteed. It is also important to be aware that the special circumstances defence does not remove the requirement to consult entirely – you will still be expected to complete as much consultation as is practicable in your circumstances and you could be liable for protective awards if you fail to do so. We suggest you consult your Make UK adviser if you are considering relying on the special circumstances defence to reduce the amount of collective consultation you carry out.

Note that employees whom you dismiss as redundant during or after furlough will, if they have at least two years’ service, have the right to bring a claim for unfair dismissal. The fairness of the dismissal would be determined by the employment tribunal in accordance with the normal principles that apply under the ERA. In the event that an employee succeeds in such a claim, their basic award would be calculated in accordance with the Coronavirus Week’s Pay Regulations. As noted at question 31, above, these Regulations are intended to ensure that the employee does not lose out as a result of having been on furlough where payments to which they are entitled are calculated on the basis of the ERA week’s pay provisions – the basic award in an unfair dismissal claim is one such payment.

33. How do you calculate statutory redundancy pay for employees who are made redundant during (or shortly after) a period of furlough? (Last updated 17/11/2020)

Statutory redundancy payments for employees who are made redundant during or shortly after a period of furlough will be calculated in accordance with the Coronavirus Week’s Pay Regulations. The intention is that any reduction in pay the employee has been subject to as a result of being furloughed is ignored when conducting the relevant calculations, so the amount of redundancy pay the employee is entitled to will not be affected by them having been on full or flexible furlough. The Coronavirus Week’s Pay Regulations specify a different method of calculation for ‘a week’s pay’ (on which the statutory redundancy pay calculation is based) depending on whether or not the employee has normal working hours and whether or not their pay varies, as explained below. 

Employees who have normal working hours and whose pay does not vary with the amount of work done or the time of work (salaried employees)

A week’s pay is the employee’s basic pay for their normal working hours. Arguably, an employee’s normal working hours have not changed just because they are on furlough (and we think this would remain the case even if an employee has been working for the employer part-time on flexible furlough); a week’s pay for the purposes of the statutory redundancy pay calculation would be their normal week’s pay rate and not their temporary furlough pay rate. 

The Coronavirus Week’s Pay Regulations reinforced this by deeming normal working hours to include any furloughed hours and providing that the amount payable should be calculated disregarding any reduction in pay as a result of the employee being fully or flexibly furloughed. The Coronavirus Week’s Pay Regulations provided that they would apply to salaried employees wherever the calculation date was on or before 31 October 2020 (i.e. when the CJRS was due to end), but they have now been amended to reflect the Extended CJRS end date and will apply to salaried employees if the calculation date is on or before 31 March 2021. 

Employees who have normal working hours but whose pay varies with the time of work (shift workers)

A week’s pay is based on the employee’s pay over the 12 week reference period prior to the calculation date, divided by hours worked during that period and multiplied by an average week’s hours. However, whole weeks of no work are excluded from the calculation, even where the employee received some pay. Accordingly, whole weeks of full furlough are not counted and a week’s pay is in any event based on the relevant reference period before the employee went on furlough. The amount of the employee’s redundancy pay therefore wouldn’t have been affected by full furlough (or any impact would have been very minor, e.g. if the employee had been furloughed for part of one of the weeks that was included in the 12 week reference period) even in the absence of the Coronavirus Week’s Pay Regulations. However, if an employee had been working for the employer part-time on flexible furlough, those weeks would have been counted, so the amount of redundancy pay the employee was entitled to may have been impacted by them having been on flexible furlough, unless the employer had been topping up furlough pay to full pay.

Under the Coronavirus Week’s Pay Regulations, however, if the employee was furloughed during any part of the reference period, normal working hours are deemed to include furloughed hours and the hourly rate of remuneration for that part of the reference period is the amount payable under the employee’s contract, disregarding any reduction in pay as a result of the employee being furloughed. Effectively, this means that the amount of redundancy pay the employee is entitled to will not be affected by them having been on full or flexible furlough.

Employees who have no normal working hours

A week’s pay is based on all pay received over the 12 week reference period prior to the calculation date, divided by all hours worked over that period. Weeks of no work are still counted, provided that the employee received some remuneration during those weeks. Assuming that furlough pay counts as ‘remuneration’ for these purposes, then weeks spent on full furlough would be counted. This means that, prior to the introduction of the Coronavirus Week’s Pay Regulations, statutory redundancy pay for employees with no normal working hours may have been reduced as a result of the time spent on furlough, unless the employer had been topping up furlough pay to full pay. Note that the reduction may have been lower where an employee had been working for the employer part-time on flexible furlough, since they would have been paid their normal rate for the working hours plus furlough pay for the non-working hours. 

Under the Coronavirus Week’s Pay Regulations, however, if the employee was furloughed during any part of the reference period, their weekly pay attributable to being furloughed is the amount they would have been paid under the Extended CJRS if calculated in accordance with their reference salary (see question 24, above), but using their full reference salary (i.e. not the 80% they get under the Extended CJRS) and not applying the cap. Effectively, this means that the amount of redundancy pay the employee is entitled to will not be affected by them having been on full or flexible furlough.

What about enhanced redundancy payments?

The Coronavirus Week’s Pay Regulations do not directly address the issue of enhanced redundancy payments and they are unlikely to impact many enhanced redundancy schemes.

However, if the calculation of your enhanced redundancy pay is based on the statutory calculation of a week’s pay or the amount of an employee’s statutory redundancy payment, then whether or not the Coronavirus Week’s Pay Regulations will affect your enhanced redundancy pay calculations will be a question of contractual interpretation. Accordingly, if you have an enhanced redundancy pay scheme under which redundancy pay is calculated based on the statutory payments, we suggest that you seek advice on how the Coronavirus Week’s Pay Regulations may affect you.