Your questions on furlough answered: amended guidance - in depth - Gateley
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Your questions on furlough answered: amended guidance

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Since announcing the scheme HMRC published initial guidance on 26 March which has been subsequently updated eight times. The latest version was published on 1 May 2020. Updates have also been made to the guidance on calculating 80% of wages.

There is also an updated step by step guide to making the claim and submitting the necessary information. 

The guidance is important as it sets out how HMRC expect employers to use the Scheme and when submitting a claim for payment it is necessary to declare that it is being made in accordance with the guidance. HMRC reserve the right to check claims at a later date.

Guidance is though just guidance and when considering how any legal rights and obligations should be exercised it is the legislation underpinning the Scheme that will take precedence. In this case the legislation takes the highly unusual form of a  Direction made under the provisions of the Coronavirus Act 2020. It has not had the benefit of being scrutinised, debated and where necessary amended following a full parliamentary process and this appears to have led to some of the provisions being unhelpfully ambiguous. That ambiguity could possibly elevate the importance of the HMRC guidance in practice.   

We have reviewed our previously published FAQ’s to take into account the most recent changes and how these may impact in practice on claims under the scheme.  

For guidance on collective consultation and HR1 issues please click here.

The headline features of the Job Retention Scheme:

  • The Scheme will run for at least 4 months from 1 March until 30 June 2020 having been extended from the original end date of 31 May 2020. 
  • All employers are eligible provided they had created and started a payroll on or before 19 March 2020.
  • Employees can only be furloughed if on pay roll and HMRC had received the RTI submission confirming they were on pay roll as at 19 March 2020.
  • Anyone who was on pay roll and left employment after 28 February can be re-employed and furloughed.
  • Fixed term contracts may be renewed or extended, and the employee placed on furlough.
  • An employer may furlough the extremely vulnerable who are at a higher risk and have been advised to stay at home. 
  • Employees who are unable to work because they have caring responsibilities resulting from Coronavirus can be furloughed including those who need to look after children
  • Employees must not work for you during a period of furlough (which must be for a minimum period of 3 weeks) and the legislation suggests a furlough agreement may need to expressly record that the employees have been instructed not to work.
  • The agreement for furlough (and the terms of employment that will apply during furlough) must be agreed with employees, recorded in writing and kept for five years.
  • The Government contribution is 80% of gross wage costs up to a maximum of £2,500 per month per furloughed employee.  The Government will also cover employer national insurance and compulsory employer pensions contributions on top.  To be clear £2,500 is the ceiling on the Government contribution, meaning the highest salary for which the Government contribution will cover the full 80% is £37,500.
  • For salaried employees, you must use the actual salary before tax, as of 19 March 2020. If you have already placed employees on furlough based on their salary as of 28 February 2020, and this differs from their salary on 19 March, you can use the 28 February date instead for the first claim you make. 
  • Employers will be able to furlough employees who have transferred to them provided that they were on the transferor’s pay roll prior to 19 March 2020
  • Where pay is variable any discretionary payments are excluded from the calculation of the 80%. 
  • All usual deductions apply for income tax, national insurance and auto enrolment employee pension contributions.  
  • Both the Apprenticeship Levy and Student Loans should continue to be paid as usual but will not be claimable.
  • It is expected that payments will be received six days after claims have been submitted through the HMRC online portal. 

If you are looking for information on the legal implications of the Job Retention Scheme, see our latest insight

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Your Questions Answered

  1. Do we need to be able to prove that furloughed employees would have been made redundant if they were not furloughed to access the grant?

    No. There had been a softening in the guidance around the threshold for eligibility and references to redundancy removed. The legislation states the “purpose of CJRS is to provide for payments to be made to employers on a claim made in respect of them incurring costs of employment in respect of furloughed employees arising from the health, social and economic emergency in the United Kingdom resulting from coronavirus and coronavirus disease.”

    The qualifying costs are those in respect of an employee who has been instructed by the employer to cease all work in relation to their employment for a period of 21 calendar days or more, and the instruction is given by reason of circumstances arising as a result of coronavirus or coronavirus disease.
  2. Will an employee need to have any period of minimum service in order to qualify as within the scheme? 

    No (but they generally need to have been on the payroll as at 19 March 2020 and HMRC must have been notified at that point they were on pay roll through the RTI submission process). 
  3. Are employees who have TUPE transferred after 28 February 2020 eligible for the scheme?

    Those employees who had transferred employment under TUPE after 28 February 2020 and who were on the transferor’s pay roll as at 28 February 2020 may be furloughed by the new employer.
  4. Are employees who have left employment able to be re-employed and then furloughed?

    Employees who were employed and on the employer’s payroll on 28 February but who subsequently left the employer’s employment can be re-employed and then furloughed provided that the employer had an RTI submission notifying payment for that employee on some date on or before 19 March 2020.  This is the case whether the employment ended before or after 19 March.

    However if the employee started work after 28 February and was not employed as at 19 March 2020 they will not be eligible under the scheme.  

  5. What about the situation intra-group where employees are moved onto a new PAYE scheme after 19 March 2020?

    Where a group of companies has consolidated its payroll schemes after 28 February 2020 then the employer operating the new scheme will be able to furlough the employees on the pay roll provided they were on pay roll in another part of the group as at 28 February 2020.
  6. What happens about accruing annual leave during furlough? What do you do about holiday pay?

    The latest Government guidance Holiday entitlement and pay during coronavirus states that agency workers, including those working through an umbrella company, are entitled to accrue holiday under the Working Time Regulations and or under their contract in the normal way under the Job Retention Scheme.

    Where agency workers are engaged under a contract of employment which sets out their entitlement to holiday, that is 5.6 weeks or more in accordance with the Working Time Regulations, their contract will continue to operate as before and they will continue to accrue holiday on furlough as they would normally when between or otherwise not working on assignments. This holiday entitlement may be taken during the furlough and the grant used to cover up to 80% of the worker’s wage cost with the employer liable for holiday pay above this figure.

    However the guidance does now recognise that some agency workers on a contract for services may not be entitled to the accrual of holiday or to take holiday under the Working Time Regulations while on furlough because they are not workers or treated as workers under the Regulations when between assignments or otherwise not working on assignments.

    This is an important distinction that will need to be made in order to assess holiday pay liability during a furlough.

  7. Can an employee on unpaid leave be furloughed?

    If an employee started unpaid leave after 28 February 2020, you can put them on furlough instead. If you put them on furlough then you should pay them at least 80% of their regular wages, up to the monthly cap of £2500. An employee on unpaid leave as at 28 February 2020 could not be furloughed until the period of leave had expired. This would usually have been agreed at the start of the unpaid leave.  
  8. Can an employee on sick leave or who is self-isolating be furloughed?

    Where Statutory Sick Pay is payable or liable to be payable in respect of an employee, whether or not a claim to Statutory Sick Pay is made, the legislation suggests an employee cannot be placed on furlough. However the guidance states that ‘short term illness/self isolation should not be a consideration in deciding whether to furlough an employee. Due to this apparent conflict it would generally be safer to wait until an initial period of SSP entitlement ends i.e. the sick note expires, before placing the employee on furlough. If a furloughed employee subsequently becomes sick during the furlough period, the legislation suggests their entitlement to SSP should be disregarded as they will continue to be covered by the furlough payments. The Guidance states that they must be paid at least SSP during that time which 80% of normal pay will usually exceed in any event. However it suggests that it is possible for the employee to be moved onto SSP rather than furlough.
  9. Can employees who are shielding in line with public health guidance or who are carers for children/vulnerable adults be placed on furlough?

    The Guidance says that employees who have been advised to shield may be placed on furlough. If the employer does not wish to place the shielding employee on furlough they have the safety net of being entitled to sick pay following changes to the Statutory Sick Pay Regulations made on 16 April 2020. Concerns have been raised that the legislation states that an employee may not be furloughed whilst entitled to SSP. However as shielding is voluntary it would appear possible for the employer to still furlough the employee without being in breach of the legislative provisions. This interpretation is supported by the fact the SSP amending provisions were accompanied with explanatory notes that explained the entitlement to SSP was to provide a safety net for employees who might otherwise have been placed on unpaid leave. It is also relevant that the HMRC sick pay manual was changed shortly after the SSP amendments to clarify that an employee on furlough would not be entitled to SSP.  This would appear to mean that the HMRC guidance and the legislation are not, as would first appear, contradictory in this respect.

    The new SSP legislation does not apply to anyone living with someone who is shielding pursuant to public health advice and in line with the Scheme guidance furlough would appear to remain a possibility for those people.  Similarly, employees who are unable to work because they have caring responsibilities resulting from Coronavirus can be furloughed including those who need to look after children.
  10. What about others who are not employees but on pay roll?

    The guidance confirms that the scheme applies to not only those engaged as employees but also any workers who are not in business on their own account; office holders including company directors; salaried members of Limited Liability Partnerships (LLPs) and agency workers including those employed by umbrella companies. The latest version of the guidance also makes clear that even company directors who are paid yearly may be included. The key issue is whether they are paid through PAYE.
  11. Does an employer have to show a fair selection process where only part of the workforce will be asked to agree a period of furlough leave?

    The employer should agree with their staff in relation to who should be on furlough and when deciding that furlough should apply to particular groups of employees should be careful to avoid discriminating on the grounds of any protected characteristic.

    If after furlough ends there is no work for the employee to return to do it may be necessary to consider making them redundant. There is a risk that this will be challenged as an unfair process if a fair selection process has not been carried out.
  12. What do we need to have in place for a valid furlough of employees?

    The legislation states that an employee is a furloughed employee if-

    (a) the employee has been instructed by the employer to cease all work in relation to their employment,

    (b) the period for which the employee has ceased (or will have ceased) all work for the employer is 21 calendar days or more, and

    (c) the instruction is given by reason of circumstances arising as a result of coronavirus or coronavirus disease.

    It adds that an employee has been instructed by the employer to cease all work in relation to their employment only if the employer and employee have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work in relation to their employment.

    The guidance only states that employees must not work whilst on furlough. It may be that a furlough agreement must expressly say that employees must not carry out any work in order for it to be valid under the legislation.

    An alternative interpretation of the legislation is that simply by agreeing to furlough status the employee is being instructed not to work because this is implicit in any furlough.

    In light of the wording in the legislation employers should revisit furlough agreement wording and consider whether further communication is needed with employees to secure formal agreement which addresses the express requirement to carry out no work.
  13. If we have written to employees explaining they are furloughed and they have not objected, does this meet the requirements of the legislation outlined at question 11 above? 

    The wording in the legislation does suggest that there should be evidence of a two-way communication with employees confirming furlough status and expressly stating that no work is to be carried out whilst furloughed. This clearly is of concern where the only written documentation consists of a communication to employees that they have been furloughed. However following publication of the legislation the HMRC guidance has been updated and in respect of this issue it states that “there needs to be a written record, but the employee does not have to provide a written response”. This suggests that it may be possible that the written communication to the employee that they have been furloughed may be sufficient for the purpose of claiming under the Scheme. In support of that it is relevant that the employer declares when submitting a claim through the online portal that the guidance has been followed.

    The guidance also makes it clear that a collective agreement between the employer and trade union would also amount to an acceptable written record of agreement. 
  14. Are the employer NICS, pension contributions and other benefits covered by the words “workers wage costs” which appeared in the initial guidance to describe what the Government will cover?

    Employers will receive a grant covering employer’s national insurance and minimum auto enrolment pension contributions on the 80% payment. This will be in addition to the £2,500 cap. Employers will not be able to claim for additional national insurance or pension contributions made where they have chosen to top up the salary.

    Employers will also not be able to claim for payments to the apprenticeship levy.

    Employers will need to continue to fund benefits due under the contract too unless it is agreed that they will be discontinued during the period of furlough.
  15. How is the value of the wage costs calculated to work out the 80%? 

    This depends on the type of contract they are on. A full or part time employee on a salary will have an entitlement to 80% of their monthly salary as at 19 March 2020.

    Where the employee has variable hours or their pay varies from month to month the amount payable will be calculated by taking either the earnings from the same pay period the previous year or, if higher, an average from the 2019-2020 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.

    Employers should include in the calculation all regular payments the employer is obliged to pay to employees including past overtime, fees and compulsory commission payments.

    However discretionary bonuses, tips (including those distributed through troncs) and commission payments are excluded. This is likely to cause some confusion in practice as in many cases the issue of whether a commission or other payment is compulsory or discretionary will not be clear. The legislation refers to the payments being due under “a legally enforceable agreement, understanding, scheme, transaction or series of transactions”. This is quite a wide description and the references to transactions may bring within scope extra payments where a legal right could be established by way of custom and practice.  

    The legislation also includes some wording suggesting that any payment will only be part of the reference pay if it is “not conditional on any matter”. This is a confusing sub paragraph in the legislation when looked at against what appears to be clear guidance that only discretionary matters should be excluded.  Taken at face value, all payments are conditional on something, and we do not believe this wording can be intended to contradict the guidance.
  16. How will salary sacrifice be treated for the purposes of calculating the amounts due?

    The 80% will be based on the salary after sacrifice as this will be regarded as the amount due rather than the pre-salary sacrifice.

    Benefits provided through salary sacrifice schemes should not be included in the salary calculation. 

    Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. In the latest guidance HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.
  17. Can we pay less than the Government’s 80% contribution under a furlough agreement?

    The legislation says this is not possible. In the legislation under the heading of “Qualifying costs – further conditions” it refers to where the employee is being paid less than the maximum £2,500 that they should be paid “an amount equal to at least 80% of the employee’s reference salary”.

    Many employers will have agreed furlough arrangements based on basic pay only after the 26 March guidance was issued which had stated that fees, commission and bonus payments were excluded from furlough payments payable by the Government. 

    The legislation provides that it will be possible to make a further payment to the employee to meet the requirement that the pay be at least 80% of the total due, but only in respect of payments made to employees on or before 17 April.  Therefore, any payments made to employees after 17 April will need to be at least 80% of the reference salary for the employer to able to make a claim regarding those payments.

    Where any shortfall regarding payments made on or before 17 April is made up by employers to meet the 80% minimum requirement, it will be treated as if paid at the same time as the initial payment.   

    Where there is any doubt as to the inclusion of certain pay elements in the calculation of reference pay, employers may wish to err on the side of caution and include such elements to make sure they do not fall short of the minimum 80% threshold to be eligible to claim under the Scheme.
  18. Can an employee be on intermittent furlough leave?

    Yes, to an extent. A worker must be furloughed for a minimum period of 3 weeks in order to be eligible for the Government scheme. Provided this minimum period is adhered to and there is provision in the furlough agreement reached with the employee allowing for it, there is nothing to prevent an employer from requiring an employee to return to work after three weeks (and then sending them back on furlough leave at a later date for a further period which it appears would also need to be for a minimum of 3 weeks). 

    Many employers intend to rotate employees in and out of furlough, with an eye on treating people consistently and people’s physical and mental wellbeing. 
  19. Can an employee be placed on furlough leave during a period of notice of dismissal?

    The guidance suggests that they can.  However, the change of status would have to be agreed with the employee.  During the period when the employee is serving their notice prior to dismissal there may be little to encourage an employee to agree to furlough and reduced pay. This is because an employee is generally entitled to be paid in full if they are ready and willing to work but no work is available to them.  The larger the salary, the less likely it may be that someone will agree furlough. 

    Where statutory minimum notice applies, legislation requires an employer to pay full pay during that notice period. This may well be the case during a furlough period.
  20. What notice do I have to give to bring a period of furlough to an end?

    This will depend on the terms that you agree with your employee when furlough leave commences. The guidance is silent on this. It is advised that employers require their furloughed employees to sign a furlough agreement setting out the terms of their absence and making express provision for return to work and flexibility around furlough. 
  21. Will it be an unfair dismissal to make an employee redundant if they could have been placed on furlough leave as an alternative? 

    Remember employees generally need to have accrued two years’ service at the effective date of termination to have the right to claim unfair dismissal.  It would be a factor that the Employment Tribunal would take into account as an employer should always look at all alternatives to dismissal before dismissing for redundancy. The dismissal may still be fair if the employer is able to explain why it decided not to furlough the employee. The key is to document why furlough was not pursued. If the employer can offer a sensible explanation an Employment Tribunal should not interfere.
  22. Will the employee still need to receive national minimum wage for the hours they would have been in work had they not agreed to a period of furlough leave?

    No. This will not be working time for the purpose of national minimum wage calculations. If the employee carries out any training whilst on furlough this will need to be paid at national minimum wage. This may be covered by the 80% grant but if not the shortfall the employer will need to make up the difference
  23. Will an employee continue to accrue paid holiday entitlement based on their normal wage during the furlough leave?

    Contractual rights in relation to holiday will continue unless amended by agreement. The employee will also be able to rely on statutory holiday rights under the Working Time Regulations 1998. These provide an employee with the right to accrue a minimum of 5.6 weeks paid holiday which normally have to be taken in the current leave year. However, amendments to the Working Time Regulations 1998 have been made which allow workers who have not been able to take holiday due to coronavirus issues to carry over up to 4 weeks unused leave into the next 2 leave years. The employer and employee remain able to reach a separate agreement if they wish to extend this to the full 5.6 weeks.
  24. Can an employee be on holiday whilst also furloughed?

    The guidance has been updated to include references to holiday pay. This confirms that an employee can take holiday whilst on furlough. 

    This is reflects what the ACAS guidance says that ‘furloughed workers’ can request and take their holiday. It also suggests that an employee may be required to take holidays. 

    Employers should not, however, view this a green light to force employees into lots of “holiday” during a furlough period.  That may well be unlawful under existing legislation and case law.  Some modest and agreed holiday may well be permitted, including the bank holidays as they fall due. 
  25. How would we calculate holiday pay during furlough?

    The ACAS guidance states that “Furloughed workers must get their usual pay in full, for any holiday they take.”

    With effect from 6 April 2020 the new 52-week reference period for calculating holiday pay comes into force so that may well apply for employees with no normal hours when calculating the pay for the 5.6 weeks statutory leave under the Working Time Regulations 1998.

    In respect of at least 4 weeks leave there is a legal requirement that the pay reflects ‘normal pay’. That has been established as including all regular additional payments that the employee would have expected to receive had they been in work. This calculation would appear more generous than that which will apply to the Government’s 80% contribution to furlough pay calculations.  

    In respect of holidays over and above 5.6 weeks the employer is able to agree whatever it wishes including that this can be forfeited during the period of furlough. 
  26. Will an employee on furlough leave be able to take a second job during the hours that they would have been at work? 

    Subject to any restrictions in the employment contract the Guidance confirms that there are no restrictions on the employee undertaking work for another employer during the period of furlough.
  27. Would furlough leave be available where an employee has multiple jobs?

    The employee would be entitled to furlough leave in respect of any of these jobs if they are with different employers.
  28. Will an employee on maternity leave or other statutory family leave be able to agree a period of furlough leave?

    This is still not entirely clear.

    The latest update to the guidance states that where the employee on maternity leave is receiving just Maternity Allowance she will need to end her maternity leave early by giving at least 8 weeks’ notice in order to be eligible for furlough pay. 

    Similarly where the employee is receiving just Statutory Maternity Pay the states that the normal rules for maternity and other forms of parental leave and pay apply and claims for reimbursement should be made through the normal procedures not through the Job Retention Scheme.  

    However, whilst that might suggest that maternity pay and furlough pay are mutually exclusive the guidance then states that where an employer offers enhanced (earnings related) contractual pay it may be included as wage costs that the employer can claim through the Job Retention Scheme. 
  29. Would an employee need to terminate maternity leave and start furlough, or could they be on maternity leave and furlough at the same time?

    The guidance is not clear on this issues. It suggests that during any period that the employee is receiving just maternity allowance or statutory maternity pay the Job Retention Scheme should not be used and the employee would not need to be furloughed. However where there are enhanced payments due to the employee on leave it may be possible to furlough the employee and claim some of those payments under the Scheme. 
  30. Will a period of furlough leave before maternity leave be taken into account for calculating the amount of statutory maternity pay due?

    New legislation in force on 25 April 2020 requires that where the employee was on furlough during the relevant period for calculating maternity pay entitlement she shall be treated as receiving her normal pay rather than a reduced rate of pay for that period. The guidance states the new calculation will apply to employees who start their maternity leave on or after 25 April 2020.

    This will also apply to other forms of statutory pay for family related leave.

  31. Can employees volunteer or train whilst furloughed?

    A furloughed employee can take part in volunteer work or training, “as long as it does not provide services to or generate revenue for, or on behalf of” the employer.

    They could not, therefore, offer to work free of charge or on a voluntary basis for their employer.

    Note the guidance confirms that if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% Government grant.

    They are also able to provide voluntary services elsewhere whilst furloughed.
  32. Will an apprentice on furlough leave be able to continue to carry out their college studies?

    The latest guidance does confirm that apprentices may be furloughed and carry on training. It should be remembered though that they will be entitled to the appropriate minimum wage rates for all periods when they are undertaking training. 
  33. How often can we submit a claim to HMRC for furlough pay?

    Employers can submit a claim as and when pay roll is due. The initial claim may be backdated for the period that the employee has been on furlough. The Guide says “You should make your claim using the amounts in your payroll - either shortly before or during running payroll. Claims can be backdated until the 1 March where employees have already been furloughed.” It also possible for claims to cover payments due in future pay roll runs that would be due in the next 14 days. The period that the employee was on furlough will need to be clearly identified and this should not be less than three weeks. 

What will need to be submitted to HMRC? 

The Guidance states that a claim will need to be made through the online portal and it will be important for employers to register online first in order to do this.  You will need to provide the following information:

  • Your employer PAYE reference number
  • The number of employees being furloughed
  • National Insurance Numbers for the furloughed employees
  • Names of the furloughed employees
  • Payroll/employee number for the furloughed employees (optional)
  • Your Self-Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
  • The claim period (start and end date)
  • Amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
  • Your bank account number and sort code
  • Your contact name and phone number
  • You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
  • If you have fewer than 100 furloughed staff you will be asked to enter details of each employee you are claiming for directly into the system - this will include their name, National Insurance number, claim period and claim amount, and payroll/employee number.

For more information regarding the updated guidance to the Job Retention Scheme contact our expert listed below and for more information regarding COVID-19 visit our Coronavirus hub.

This article was originally published on 8 April 2020, it was last updated on 14 May 2020.

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