Q: What are the key terms of the furlough scheme between November 2020 and September 2021?
The key terms of the extended furlough scheme are that employers (including those who have not used the furlough scheme before) can furlough staff and claim 80% of their salaries, up to a cap of £2,500 from the government.
Employers must still pay employer NICs, pension contributions and an element of holiday pay (see our FAQs on furlough and holiday).
Furlough was originally introduced at the beginning of lockdown in March 2020, and has been extended four times from the original May 2020 end date. (The extensions were to June 2020, then October 2020, followed by a last minute extension to March 2021 and then April 2021).
The scheme has now been extended for the fifth time until the end of September 2021. Until the end of June 2021 the government contribution was 80%. From 1 July the government contribution has been reduced:
- From 1 July, the government will contribute 70% and employers will have to pay 10% for hours not worked plus NICs and pension contributions.
- In August and September the government will pay 60% and employers 20% plus NICs and pension contributions.
Until September the furloughed employees will still continue to receive up to 80% of their pay for hours not worked. Flexible furlough will continue to apply so employees can receive their normal pay for any hours that they work and receive the grant for the remaining unworked hours.
Employees whose Real Time Information (RTI) submission notifying payment for them was made to HMRC on or before the extension was announced, are eligible for grants under the furlough scheme extension.
Periods on or before 30 April 2021
Employers can claim for employees if:
- they were employed on 30 October 2020; and
- a PAYE Real Time Information (RTI) submission was made to HMRC for that employee between 20 March 2020 and 30 October 2020.
Employers can claim for employees if:
- they were employed on 2 March 2021; and
- a PAYE Real Time Information (RTI) submission was made to HMRC for that employee between 20 March 2020 and 2 March 2021.
Employers can claim for employees who have not previously been furloughed. This will include employees who worked continuously between March and October 2020 for the claims before 30 April 2021. Similarly, employees who worked before 2 March 2021 can be included in the furlough claims from 1 May 2021.
Employers can claim for employees on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals can be furloughed. Employees on all categories of visa can be furloughed and grants under the scheme do not count as access to public funds for the purposes of visa conditions.
Further detail about the extension of the furlough scheme continues to emerge and so employers should refer to the government website for the latest information.
Employers seeking to extend furlough until the end of September 2021 will need to obtain agreement.
Q: What key datesshould employersbe aware of during the rest of the furlough scheme?
The following dates are relevant during the rest of the furlough scheme until it ends in September 2021:
- 1 July 2021: From this date the government contribution will reduce to 70% towards the furlough grant and employers will have to pay 10% for hours not worked.
- 1 August 2021: From this date until the end of September the government will pay 60% towards the furlough grant and employers will have to pay 20% for hours not worked.
- 30 September 2021: The furlough scheme closes at the end of September 2021.
Q: Can employers claim the furlough grant for furloughed employees serving contractual or statutory notice periods as part of a redundancy process?Some employers are implementing a redundancy process at various stages before and after September 2021. The timing of the process may have been affected by the reduction in the government's 80% wage contribution during July and August. Employers should consider the alternatives to redundancy and the processes set out in our post furlough guide.
The position concerning notice pay has changed during the pandemic. Prior to December 2020 employers could claim the furlough grant for furloughed employees serving contractual or statutory notice periods. The later Treasury guidance confirms that from this date onwards employers cannot claim furlough for any day when an employee is serving statutory or contractual notice. The cost of notice pay after 1 December 2020 is therefore not covered by the scheme and employers will have to pay this themselves in full.
This means that employers thinking about dismissing for redundancy or otherwise need to accept that any redundancy and notice pay after this date will be payable by the employer in full rather than allocating a portion of the furlough grant towards the notice payments.
In some cases, the restructuring may be already in place and the employer knows that employees are very unlikely to be needed beyond September 2021.
Employers who made redundancies in 2020 and then decided to rehire and furlough when the scheme was extended will have previously agreed with the employees what happens to any redundancy payments already made.
In the decision-making process employers will have had to evaluate the likelihood of employees challenging the fairness of selection for redundancy if furlough was not considered as an alternative during the operation of the scheme.
Q: What should employers do if opting for flexible furlough because a full return to work is not possible?
- Involve ensure employees (or union representatives).
- Agree flexible working hours or patterns and keep agreements and records.
- Select who will be flexibly furloughed, avoiding all forms of discrimination especially sex, age and disability.
- Inform relevant employees that they are on flexible furlough leave and keep a written record that confirms the flexible furlough arrangement.
- Decide on the length of the claim period, what to include when calculating wages and employees’ usual hours and furloughed hours.
- Plan for what will happen when the furlough scheme ends in September 2021.
Q: Can employers claim jointly for employees even if they were furloughed for different periods?
Under the versions of the furlough scheme employers can include all employees who were furloughed during one claim period, even if they were furloughed at different times within that period or are paid at different times.
If an employer’s pay period overlaps more than one month those employers have to calculate and submit a claim for all employees who were furloughed covering that calendar month. Employers cannot make more than one claim during a claim period and therefore should include all of the employees they want to furlough for that claim period. Employers cannot make claims that overlap or make changes to a claim after submission.
The previous government guidance gives examples of an employer who furloughs two employees at the start of the pay period and adds a third a short time later. The claim period starts when the first employee is furloughed.
Alternatively, some employees may have been furloughed continuously with claim periods following on with no gaps in between the dates and another employee may worked for some of the days but then be furloughed again. The employer should still include all employees furloughed during the claim period. Employers do not have to wait until the end of a claim period to make their next claim. Employers can claim before, during or after payroll is processed.
Q: What claim information is needed for furloughed employees?
Employees can be furloughed full time or part time (with a mixture of furlough hours and working hours). Employers must also report and claim for a minimum period of seven consecutive calendar days and:
- Employers need to report actual hours and usual hours as explained below.
- The claim period must start and end within the same calendar month.
- The claim period must last at least seven days unless the claim is for the first few days or the last few days in a month.
- If pay periods span more than one-month then separate claims should be calculated to cover the days that fall into each month.
- Claim periods cannot overlap, and employees claimed for will need to be included in each separate claim made.
Employers will also need the following information about your business and employees, including:
- employer UK bank account number and sort code
- employer PAYE scheme reference number
- number of employees being furloughed
- National Insurance number for each employee
- start date and end date of the claim
- Unique taxpayer reference.
Accountants, payroll services or other advisers who are authorised to do PAYE online for employers can claim on their behalf.
Claims for those employees' furloughed hours needs to be calculated by reference to their usual hours worked in a claim period.
The government guidance on the furlough scheme says that before calculating the claim employers need to work out:
- the length of the claim period
- what to include when calculating wages
- both the employees' usual hours and the furloughed hours.
Employers then need to work out the total:
- amount being paid to furloughed employees
- employer NICs
- employer pension contributions.
The overall cap is then proportional to the hours not worked. Employers must report hours worked as well as the usual hours an employee would be expected to work.
Employers need to retain records of the employee's usual hours, actual hours worked and their furloughed hours for each claim period.
When to claim
Employers should ideally claim once they are sure of the exact number of hours being worked during the claim period. Claims can be made up to 14 days before the end of a claim period, but if employees are flexibly furloughed it is better to claim when the employer knows exactly how many hours the employees will have worked.
Generally, claims can be made in advance but at the start of the scheme when the system is being updated employers may need to claim in arrears, in addition:
- There is a shorter claim window claims so that relating to each month should be submitted by day 14 of the following month.
- Employers can make claims in anticipation of an imminent payroll run, at the point they run their payroll or after they have run their payroll.
Employers need to plan ahead to avoid missing deadlines to reclaim the government contribution. Grant payments should arrive six working days after the claim.
For advance claims there is a mechanism for paying the grant back to HMRC if the employee ends up working more than expected.
For example, an employer and employee may agree that an employee, previously on furlough, returns to work half time, meaning they now work for 20 hours compared to a 40-hour working week before the pandemic. For the hours the employee is not working they will be covered by furlough pay, and for the hours worked will be paid their salary as normal. If the employee normally earns £3,000 a month, they would have got full furlough pay of £2,400 a month. On returning to work half time the employee would earn £1,500 a month from the employer (as the proportion of normal monthly salary) plus £1,200 for the 20 weekly hours of furlough (half the monthly furlough pay). This means the employee would get a total of £2,700 a month for working half time (compared to £300 less if they were on full furlough).
Q: How are fixed and variable hours and pay calculated for furloughed employees?
Employers need to identify the reference period to work out employees’ usual wages. Under the various phases of the scheme employers who are new to furlough claims, and for new employees hired during the qualifying of the scheme, the reference pay and usual hours should be updated to take account of the extension period as explained below.
Fixed hours and pay
- For employees employed and on the payroll before 20 March 2020 who work fixed hours and whose pay does not vary, the contractual hours used to work out claims should be the hours in the last pay period ending on or before 19 March 2020.
- For employees on fixed pay who were not previously furloughed or who were employed on or after 20 March 2020, who work fixed hours and whose pay does not vary, the contractual hours used to work out claims should be the hours in the last pay period prior to 30 October 2020; this will only apply for periods starting after 1 November 2020.
- For employees first reported on the payroll between 31 October 2020 and 2 March 2021 they can be furloughed from 1 May 2021. Details of how to calculate these employees’ wages will be provided in updated government guidance. However presumably for those who work fixed hours and whose pay does not vary, the contractual hours used to work out claims should be the hours in the last pay period prior to 2 March 2021.
For example, for a fixed salary employee who was not previously furloughed, the grant will be 80% of the wages payable in the last pay period ending on or before 30 October 2020. The usual hours will also be the contracted hours worked in the last pay period ending on or before 30 October 2020.
Variable hours and pay
For employees employed before 20 March 2020 who work variable hours and pay, the usual hours are either the highest of:
- the average number of hours worked in the tax year 2019 to 2020, or
- the corresponding calendar period in the tax year 2019 to 2020 so for e.g. July 2019 or August 2019.
For employees who were not previously furloughed or employed on or after 20 March 2020 on variable pay or hours, the usual hours are based on the average of the 2020/2021 tax year. This the average hours worked between:
- the start date of the 2020 to 2021 tax year, (for example, 6 April 2020)
- the day before the furlough extension period begins.
For example, for employee whose pay varies and who was not previously furloughed the grant would be 80% of the average salary payable between the start date of their employment or 6 April 2020 (whichever is later) and the day before their furlough extension period starts.
In working out the usual hours, items such as annual leave and overtime are included.
The 70% (60% in August and September 2021) grants available are reduced to reflect the proportion of usual hours that have been worked. The monthly cap is reduced proportionately as well. If the hours worked are unknown for example for piece rate workers employers should estimate the hours based on the average rate of work per hour.
For variable hours employees there are examples on the Government website of working out the average number of hours worked based on either the previous tax year or the corresponding calendar period.
Other calculation information
- An employee’s working pattern does not have to match their pay period (for example, an employee could work 40 hours across a week, but be paid monthly).
- If an employee with fixed hours took annual leave, sick leave or family related statutory leave at any time during the last pay period before 19 March 2020, this leave is ignored when working out their usual hours.
- If calculations produce a number that isn’t a whole number then employers should round up to the next whole number.
It is unnecessary to work out usual and furloughed hours for fully furloughed employees. The maximum wage amount will still need to calculated, as will the amount of the employer's contribution to furlough pay between July and September 2021. For any hours worked, employees will be paid by their employer as normal subject to their employment contract and employers will be responsible for paying the tax and NICs due on those amounts.
There is extensive Government guidance available, including:
- Pre-claim steps
- How much employers can claim (including the employer percentage contributions)
- General updated claim for wages guidance - claim for employees' wages
- Examples of calculations: Calculating a claim for a flexibly furloughed employee
- Which employees can be put on furlough
Q: What records on furlough claims should employers keep?
Employers should keep records of the following for six years:
- any agreement with the employee
- the amount claimed for each employee
- the claim period for each employee
- the claim reference number
- calculations (in case HMRC need more information about the claim)
- usual hours worked, including any calculations for employees you furloughed
- actual hours worked for flexibly furloughed employees.
The last two items above will give the employee’s furloughed hours for each claim period.
There has been some inconsistency in guidance about how long records need to be kept for. The latest government guidance says that employers should keep a written record of the agreement with the employee for five years. All other records should be kept for six years which is the usual limitation period.
Q: How flexible can the 'part-time' work be under flexible furlough? Can employees work 3 days one week and no days another week, for example, depending on workload?
From 1 July 2020 onwards employers and employees have been able to agree the shifts, hours or days they choose, they will enter into a written furlough agreement in advance specifying the working and furlough time in any shift pattern. There is flexibility to agree furloughing employees on either a full-time or part-time basis, and can vary the hours worked can be varied by agreement with the employee. Employers and employees can agree, for example, to work three days one week and be fully furloughed in another week depending on the workload.
Claims can be for minimum periods of a week although they can be for longer periods. Claims cannot straddle a month.
For employees who already had written furlough agreements the extension of the furlough to September 2021 may have required agreed changes to the existing wording depending on what was agreed before. For many, furlough will effectively continue until the end of the scheme, although employers should at least agree timings for any days employees are required to work during flexible furlough.
Returning to work may require other contractual changes to enable adherence to new working arrangements or government return to work guidance. Any changes to the terms of existing employment contracts will usually need employee’s (or recognised trade union’s) consent. Any variations need to avoid potential discrimination against those with disabilities or with caring responsibilities.
Q: Under the furlough scheme will HMRC fund holiday pay if an employee works 2 days, and takes 3 days holiday?
The inter-relationship between flexi-furlough, holidays and holiday pay is complex.
A full-time employee can agree to work two days and take three days holiday in a normal working week. Assuming the employee has 28 days holiday they are prepared to use, the pattern can be adopted for a maximum of nine weeks. How much furlough grant can be claimed for the three non-working days depends on the month when the grant is applied for.
- If the employee returns to work full time but books three days holiday in any week then the employer will have to fund both the working days and the holiday pay in full as normal. The employer cannot claim any portion of this back through the furlough grant.
- Alternatively, the employer and an employee can enter into a furlough agreement that states that the employee will work on a pattern of two days per week and is furloughed for three days per week, the current guidance would allow the employee to then book holiday on those three furloughed days each week.
If the employee books holiday on three furloughed days per week the position is mathematically complex. The employer would have to pay full salary and NI and any pension contributions for the two days per week the employee is working per week. The government grant covers part but not all of the employee’s full holiday pay for their three day a week partially furloughed holiday time.
Employers must fund the difference between the government contribution and the furloughed employees’ holiday and other entitlements. The following would then apply to further payments depending on which month the holiday is taken:
- June 2021: For claims relating to this period, on a two days working and three-day furlough pattern the employer could claim 80% grant towards the employee’s holiday pay for three days furlough time, but the 80% grant figure would be capped at a £1,500 contribution. The employer would have to top up to full holiday pay above the 80% grant or £1,500 per month. (The cap is not the full usual £2,500 because the employee is furloughed for three-fifths of the week and the cap is pro rata). The employer must also pay 100% of the employer’s NI and minimum pension contributions for both the two working and three non-working days.
- July 2021: The employer could claim a 70% grant which is probably subject to a cap of £2,187.50 per month for the hours furloughed employees do not work although government guidance has not yet confirmed this amount. (The capped figure is based on the percentage reductions to furlough previously applied in September 2020). The full July grant cap for an employee on full furlough would reduce to £1,312.50 in proportion because of the two days part-time hours worked for this employee. The employer would pay the NI and any pension contributions and top up to full holiday pay above the 70% grant.
- August and September 2021: The employer could claim a 60 % grant which is probably subject to a cap of £1,875 for the hours furloughed employees do not work although government guidance has not yet confirmed this amount. (The capped figure is based on the percentage reductions to furlough previously applied in September 2020). The full August and September will reduce in proportion to £1,125 because of the two days part-time hours worked for this employee. The employer would pay the NI and any pension contributions and top up to full holiday pay above the 60% grant.
- September 2021: The scheme ends at the end of September 2021 and the employer would pay full salary and NI as before the pandemic unless any other arrangement is concluded with the employee.
Q: Are we still be able to furlough staff on and off (ie furloughed fully for 3 weeks, off furlough for 4 days, part furlough for 2 weeks then back on full furlough)?
Yes, from 1 May 2021 employers have been able to furlough staff on and off as they may have done previously with considerable flexibility. For example, an employee can still be furloughed fully for 3 weeks, working part time for 4 days (and presumably furloughed for 1 day), then on a combination of part-time working and furlough for 2 weeks then back on full furlough. Employers should agree the pattern with the employee and record this in a written furlough agreement.
For previous claims employers should remember that there is a minimum claim period of one week although claims can still be submitted in respect of longer periods such as fortnightly or monthly. Claim periods will no longer be able to overlap calendar months.
Q: How does flexible furlough work for those with no set hours?For those with no set working hours the amount of grant claimed under flexible furlough arrangements is complex. Employers and employees can still agree whatever pattern they choose for these workers. When submitting claims for a no set hours employee on flexible furlough, the employer will have to include information on actual hours worked, as well as the usual hours that the employee would have been expected to work under their contract in the relevant claim period.
The information about usual hours is based on previous averages (as under the first phases of the furlough scheme).
Employers have to work out variable employee’s usual hours for an employee who works variable hours based on payslips, pay records, time sheets and other records to show time worked.
Differing approaches to calculate usual hours for variable hours employees depending on whether the employee had earnings from the employer reported on a Real Time Information (RTI) submission to HMRC on or before 19 March 2020. Employees who were first reported on the employer’s payroll between 31 October 2020 and 2 March 2021 can be furloughed from 1 May 2021. Details of how to calculate these employees’ wages will be provided in updated guidance in due course.
For employees with no set hours or who were employed on or after 20 March 2020 the usual hours are based on the average of the 2020/2021 tax year. This means the average hours worked from 6 April 2020 and the employee's first furlough day on or after 1 November 2020.
For those with no set hours who were previously furloughed, employers claimed for the grant percentage basing the percentage on the higher of either:
- the corresponding month’s earnings from 2019 to 2020
- average number of hours worked in the 2019-2020 year.
If the employee with no set hours has not been employed for a whole year the average is likely to be based on monthly earnings since they started work. An online calculator is available to help employers work out how much can be claimed as wages, national insurance contributions and pension contributions with numerous examples and further guidance for those with no set hours.
When calculating the usual hours the following are included:
- any annual or other leave for which the employee was paid their full contractual rate
- any overtime hours but only if the pay for those hours was not discretionary.
There are examples of how to work out the average number of hours worked for employees who work variable hours on the government website.
Q: Can employees returning from maternity leave be placed on furlough?
Yes, if there is not enough work for an employee upon their return from maternity leave they can be furloughed even if the employer is furloughing them for the first time. This applies to employees returning from other types of statutory parental leave as well, including shared parental, adoption, paternity or parental bereavement leave. It could be maternity discrimination to refuse to furlough an employee because they have been on maternity leave.
Any employee on payroll before 2 March 2021 who returns to work after any form of maternity or other parental leave will be eligible for the furlough scheme until it closes on 30 September 2021. Subject to any further guidance, there seems to be no distinction in treatment between those on statutory and contractual leave as there was previously.
Complexities arose under the earlier phases of the furlough scheme as maternity returners were an exception to the 10 June 2020 cut-off date and could be furloughed for the first time after that date. Those absent on contractual maternity leave under the earlier phase of the furlough scheme were treated as any other employee furloughed for the first time and could be too late for the flexible furlough scheme. However, this applied to the phase of the scheme in operation between June and October 2020.
Notice to end maternity leave
Current government guidance implies that employees returning from maternity leave must give the statutory eight weeks' notice to end maternity leave early in order to be furloughed and obtain furlough pay instead. The guidance does not confirm if the employee and employer can agree to shorten that eight-week period. Previously under the first phases of the furlough scheme, employers and employees could agree to shorten the notice period, but the latest wording of the guidance suggests that they can’t.
Employers should bear in mind that there is room for legal debate. Whilst the government guidance says eight weeks’ notice is required, normally women only have to give eight weeks’ notice to return to work early if the employer met all their requirements. This includes informing the employee in writing of the date that the 52-week maternity leave period would normally end. This notice should have been within 28 days of the date of notification of maternity leave or within 28 days of when the maternity leave started. Many employers omit to give notice of the end of maternity leave. If the employer did not give written notification of the end of maternity leave, the employee may be able to return to work earlier with a notice period of less than eight weeks. The best approach is for employers to communicate and be flexible if possible.
Since 1 November 2020 employer’s claims are no longer limited to the maximum number of employees previously claimed for in any group furlough claim made under the first phase of the scheme.
If employees do not wish to return promptly after maternity leave and do not qualify for furlough leave, employers can discuss the employee’s alternative suggestions which may include working from home, working part-time, sabbaticals, a postponed return date, unpaid parental leave and so on.
Q: Can employees returning from statutory paternity leave be placed on furlough?
For employees returning from a contractual enhanced paternity or other leave the position may be more complicated. Under the earlier schemes those returning from contractual paternity or other leave after 10 June 2020 who had not been previously furloughed were less likely to qualify for furlough leave under the scheme.