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    Employee furlough: Everything you need to know about the Government’s Coronavirus Job Retention Scheme

    In response to the COVID-19 pandemic, the UK Government launched the ‘Coronavirus Job Retention Scheme’, which supports businesses by covering 80% of the salaries of retained workers who would otherwise be laid off due to the crisis, up to the value of £2,500 per month.

    The scheme allows businesses to provide a temporary leave of absence to employees whilst still keeping them employed and on the payroll, a situation otherwise known as ‘furlough’. As furloughed employees remain on the payroll, this is different to being laid off without pay or being made redundant. During their leave of absence, furloughed employees must not work for the employer, but usually return to their job as normal once the furlough period ends.

    The Government’s scheme has been designed to support employers during this challenging time, providing contingency plans to ease cashflow problems for businesses (cutting overheads and meeting reduced demand) and protect employees from losing their jobs. As COVID-19 is expected to be temporary, the scheme enables businesses to pause working for certain employees whilst still retaining them – a factor which will be vital in ensuring organisations are able to pick up where they left off when normal working resumes.

    The scheme covers the cost of wages from 1 March 2020 and is now available for businesses to claim until the end of October (as per a recent update, please see here). It’s worth noting that all UK employers are eligible to access the scheme (including businesses, charities, recruitment agencies with PAYE agency workers and public authorities) and there is no limit on the funding available – the Government will pay to support as many jobs as needed.

    On 26 March, the Government issued detailed guidance on the new scheme, providing clarity for employers and answering many questions arising from the scheme’s initial details. The Government’s new guidance can be accessed here.

    On 15 April, the Government revised the scheme to extend eligibility to employees who were on the payroll and for whom a payment was notified to HMRC via an RTI submission on or before 19 March (rather than originally announced date of 28 February) – see the Government’s details here. This move is expected to support thousands more employees although may not cover all employees who started new jobs in early March, as their employer may not have made an RTI payment submission including them by 19 March, depending on the timing of their payroll runs.

    On 30 April, further updates were announced to the CJRS confirming the following:

    – Whilst furloughed from a company, employees who are union representatives are still able to perform duties relating to that union, provided that they aren’t working or generating income on behalf of their employer

    – Company directors with an annual pay period are officially covered by the scheme, however, please be aware that this is a complex area and many don’t qualify, depending on the timing of their RTI submission

    – New employers are able to make claims regarding employees of a previous employer who TUPE transferred on or after 28 February 2020

    – Furlough periods can be extended by agreement between the employer and employee



    On 12 May, Chancellor Rishi Sunak confirmed an extension to the scheme, allowing employers to claim towards the wages of furloughed employers until the end of October 2020.

    To support this and ensure the scheme can continue running until October, the Chancellor confirmed that the Government will require companies to share the cost of the scheme from August – with employers being asked to pay a percentage towards the salaries of furloughed staff.

    On 29 May, it was confirmed that employees will still receive 80% of pay with the scheme’s future set out as follows:

    – June – scheme to remain fully funded by Government

    – July – scheme to remain fully funded by Government

    – August – the full 80% of pay will be funded by Government, but employers must fund NIC and auto-enrolment contributions

    – September – 70% of the salary will be funded by Government whilst employers must pay the remaining 10% plus NIC and auto-enrolment contributions

    – October – 60% of the salary will be funded by Government whilst employers must pay the remaining 20% plus NIC and auto-enrolment contributions

    The Government also announced that from 1 July, the scheme will become flexible to allow employers to bring employees back on a part-time basis (for example, 2 days of work on normal pay plus 3 days on furlough each week).

    Employers must be aware that the current scheme closes on 30 June, which means that 10 June was the last date to put employees on furlough within it and achieve the minimum 3 weeks’ furlough by 30 June. It’s essential for employers to understand that in order to qualify for the ‘new scheme’ (which begins on 1 July and runs until October), employers must have utilised the original scheme (see ICAEW’s article for more).

    The Government has confirmed that employers will be eligible to furlough parents returning to work following maternity or paternity leave, even after the 10 June cut-off date.

    This will only apply to those employers who have previously furloughed other employees (the Government’s full release can be viewed here).

    Further guidance on the changes can be found in the Government’s useful helpsheet.

    HMRC’s detailed guidance on the operation of the flexible scheme from 1 July is scheduled to be issued on 12 June.



    1. Which employees can be furloughed?

    All employees on the payroll on or before 19 March and for whom a payment was notified to HMRC via an RTI submission on or before 19 March who would otherwise be laid off due to the crisis, including:

    – Full-time workers

    – Part-time workers

    – Agency contract workers (who are not working, not those who are still working on reduced hours)

    – Those on a zero-hour contract or flexible working arrangement


    Please note:

    – Employees eligible for furlough include all skill-sets, including apprentices

    – Employees on sick leave or self-isolating are entitled to Statutory Sick Pay but can be furloughed after this

    – Employees who are shielding in line with the Government’s health guidance can also be placed on furlough

    – Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.  If they started the leave before 28 February, you cannot furlough them until the date it was agreed they would return from unpaid leave.

    – Employees with more than one employer can be furloughed for each company

    – Employees can conduct volunteer work or training for you whilst on furlough, as long as it meets the Government’s guidelines

    – There are various measures in place for employees on Maternity Leave – please review the Government’s guidance on this

    – The 80% wage guarantee will cover zero-hour contracts and casual workers, providing they work on the PAYE system

    – The self-employed are not covered in this scheme however they could be eligible for the self-employed income support scheme (see our recent blog)


    In a further update, HMRC released additional guidance (14 April 2020) for employees on TUPE, long-term sick leave and those returning from parental leave, this can be found here.


    1. Can I be furloughed as a director of the business?

    Yes, a director has two roles within a company – director duties and employee duties.

    A director can continue to ‘run’ the business, completing only their statutory director duties and administrative tasks such as submitting VAT returns, providing they are not taking steps to make revenue or providing a service over the period where they are furloughed.

    As with the requirements to furlough any individual, directors must have been on the payroll and included in a RTI payment submission by 19 March and any furlough pay can only be in relation to salary, not dividends.


    1. I see that people cannot work on furlough, so it looks like an all or nothing measure – is that correct?

    As part of the original scheme, yes, it’s an all or nothing measure. Therefore, as part of the scheme up to 30 June, employees must not undertake any work for their employers whilst furloughed.

    The new ‘flexible furlough’ scheme, which begins on 1 July, allows employers to bring employees back on a part-time basis and submit a furlough claim for any hours not worked (see our latest blog for more on this).

    Employees should know that they will remain officially employed while furloughed. As an employer, you could choose to fund the difference between the Government’s 80% payment and the remaining salary, but you are not obliged to.


    1. How do contracts affect this?

    Employees must be consulted and agree to being furloughed, however as an employer, if you have a clause in the contract which allows you to either introduce lay off, or short time working, then you are permitted to issue furlough without written consent.

    If you have no lay off clause in the contract, technically consent will be needed. However, if an employee refuses to consent to be sent home on furlough, then they risk being made redundant. The employer could make an employee redundant if they refuse provided they have been selected for it fairly.


    1. When is the cut off to be eligible for the scheme?

    The employee must have been on the payroll on or before 19 March and included in a payment submission to HMRC under RTI by that date.

    Regarding employees that were employed as of 28 February and on the payroll (i.e. notified to HMRC via an RTI submission on or before 28 February) and were made redundant or stopped working after that date, but prior to 19 March – these employees can also qualify for the scheme if the employer re-employs them and assigns them as furloughed (see the Government’s listing).


    1. How long will the scheme run for, and is it indefinite?

    The Government recently confirmed an extension to the scheme, with employers now able to claim until the end of October. As coronavirus is expected to be a temporary challenge, the scheme is not expected to be indefinite.



    Employers will receive the grant through the online system which became available on 20 April. The claim form can be accessed by choosing the green ‘claim now’ button on the Government’s listing, found here.

    Further details of how to claim can and the information required be found in the Government’s new guide, accessed here.



    The maximum grant will be calculated by employers to cover the cost of wages for furloughed employees, equal to the lower of:

    – 80% of ‘an employee’s regular wage’; or
    – £2,500 per month

    As outlined earlier in this blog, these amounts will start to reduce from August 2020. See the section above titled: THE FUTURE OF THE SCHEME

    Please note that the 80% applies for employees on a fixed salary.  For those on variable pay, if they have been employed for a full 12 months prior to the claim, you can claim for the higher of:

    – The same month’s earnings from the previous year; or

    – Average monthly earnings from the 2019-20 tax year

    If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.

    HMRC have confirmed that employers can also claim to cover the associated Employers’ National Insurance contributions (NIC) and the minimum 3% auto-enrolment pension contributions on behalf of furloughed employees, as employers remain liable for the payment of these (unless the employee has opted out or has ceased saving into a workplace pension scheme).

    No discretionary elements such as tips, fees, commission and bonuses will be included in the earnings on which the grant is calculated, but you can include regular payments that you are obliged to pay to the employees. This includes wages, past overtime, fees and compulsory commission payments. Non cash benefits in kind must be excluded.

    Please note, if the employee has entered into a salary sacrifice (for example for pension contributions), it is only the net salary after the salary sacrifice which can be used in the furlough calculations.

    As outlined earlier in this blog, employers can also choose to top up the additional 20% to provide the employee with their full salary, but are not obliged to under this scheme. Employers’ NIC and auto-enrolment pension contributions on any additional salary top-up will not be funded through this scheme, nor will any voluntary auto-enrolment contributions above the minimum mandatory employer contribution of 3% of income (above the lower limit of qualifying earnings – £512 per month until 5 April and £520 per month from 6 April onwards).

    Wages of furloughed employees will be subject to income tax and National Insurance as normal. Employees will also continue to pay auto-enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.

    Please read the Government’s listing for further guidance.

    To help employers work out their claim amount, the Government recently launched a calculator, which can be accessed here.



    The ICAEW have outlined some useful working examples of how this scheme would look in practice. Please follow this link to visit the ICAEW’s website and read their examples.



    To prepare and claim, employers need to:

    – Fairly select employees and assign those affected as ‘furloughed workers,’ and notify them of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.

    – Submit information to HMRC about the furloughed employees that have been identified and their earnings through HMRC’s new claim form (accessed by clicking on the ‘claim now’ button at this link).


    Employers should also:

    – Decide whether to pay 80% salary to those affected (as per the Government grant) or supplement the additional 20% on top of this.

    – Gain the employees’ written consent unless contracts already include potential lay off provisions.

    – Stop the employees from working altogether (whether they are working from home or still in the workplace). This may have to include pausing the study of any apprentices selected for furlough.


    To submit a claim, employers will need:

    – your ePAYE reference number

    – the number of employees being furloughed

    – the claim period (start and end date)

    – amount claimed for each employee for the claim period

    – your bank account number and sort code

    – your contact name

    – your phone number

    – the names, NI numbers and employee payroll reference numbers of all furloughed employees

    Employers can currently only submit one claim per 3 weeks, which is the minimum length an employee can be furloughed for. That being said, claims can be backdated to 1 March. From 1 July the minimum claim period will reduce to 1 week and claim periods will no longer be able to overlap months.  In addition, claims for the period to 30 June will have to be made by 31 July and employers will need to ensure they do this or risk missing out on their reclaim.



    It has been announced that employers who have previously had their application for the CJRS wrongly rejected due to arrears with tax liabilities are now able to re-apply (please view the full statement here).


    For more information or advice, please watch for updates on this site as more information becomes available or contact Jonathan Cunningham (01254 604318 / or Julie Mason for existing PM+M payroll clients (01254 604311 /


    This information is correct as of 11 June 2020. This blog is for general guidance only. Recipients should not act upon any of the information provided without seeking specific professional advice tailored to your circumstances, requirements or needs. Please contact PM+M before making any decisions based on any matters relating to this blog.

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