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 pay employer NICs and pension contributions. Furlough was 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. The government contribution will remain at 80% until June 2021. Then the government contribution will be reduced as previously planned:
- From 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. This is thought to be the previous extension at midnight on 30 October 2020, however confirmation of this is awaited.
Employers can claim for employees who have not previously been furloughed. This will include employees who worked continuously between March and October 2020.
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 will need to obtain agreement.
Q: What dates should employers be aware of during the transition from one furlough scheme to another?
The following dates are relevant during the transition from one scheme to another:
- 23 September 2020: This is the key date for those that who have been made redundant, they can be rehired and then furloughed if they were employed as of 23 September and on the payroll on or before 30 October.
- 30 October 2020: Employers can claim for employees who were employed on this date as long as they have made a PAYE RTI submission to HMRC between the 20 March and 30 October 2020, unless they re-employed an employee after 23 September 2020.
- 1 November 2020: The extended scheme starts on this date. There is no gap in support between the original end-date of the scheme and the extension starting. For employees furloughed from this date onwards there are slightly different reference periods and calculations.
- 1 November to 11 November 2020: Claims can be made in arrears for this period.
- 11 November 2020: Employers can claim from 8am on this date under the extended scheme.
- 13 November 2020: Retrospective furlough agreements can be put in place by the end of this date. This backdated agreement should be valid as long as the employee has genuinely been furloughed during this time rather than working all of their usual hours.
- 30 November 2020: This is the last date for claims up to and including 31 October.
- 1 December 2020: From this date onwards, employers cannot claim the furlough grant for any day when an employee is serving statutory or contractual notice. From this date the costs of notice pay will no longer be covered by the scheme.
- 14 December 2020: Claims relating to November 2020 will have to be made by this date.
- January 2021: The government contribution under the furlough scheme will not be reduced at the end of January as originally thought.
- September 2021: The furlough scheme is extended until the end of September 2021.
Q: Do we put employees on the Job Support Scheme or the furlough scheme?
Employers with insufficient work to enable staff to work their full-time hours can put employees on the furlough scheme (or Coronavirus Job Retention scheme) which runs until 30 April 2021.
In December the government extended the furlough scheme to 30 April 2021. As a result:
- The start of the Job Support Scheme (scheduled to start in November 2020) and the Job retention bonus have been cancelled indefinitely.
- The furlough scheme extension now applies until 30 April 2021.
The Job Support Scheme (JSS) had less generous government funding than furlough and had two limbs, one for businesses that could remain open and for those forced to close. Employers who have already obtained employee agreement to JSS scheme should obtain employees’ agreement to a new furlough or alternative arrangement instead.
Q: Can employees made redundant in the Autumn of 2020 be placed on the extended furlough scheme instead?
Yes, employees made redundant in the weeks leading up to the announcement of the extension of the furlough scheme can be re-employed and furloughed provided that they were on the payroll on 23 September 2020 and have since been made redundant or stopped working for the employer.
Employers who prepared for the furlough scheme to come to its original end on 31 October by making employees redundant in the month or so prior will need to consider whether to re-employ and furlough staff. The employees affected need to have:
- been employed as of 23 September by having a PAYE RTI submission made for them on or before 23 September 2020; and
- still be on the payroll on or before 30 October.
Employees on fixed-term contracts that have expired since 23 September can also be re-hired and furloughed.
Key points to note are:
- Employers do not have to do rehire and furlough, but they can do so. They will need to consider this, if the employee requests it. Agreement to re-furlough is always at the employer and employee’s discretion provided they can agree the terms.
- Under the furlough scheme, redundancies can still be implemented (the furlough grant can currently go towards notice pay but not redundancy pay, although notice pay may be excluded - see below).
- Employers may refuse to rehire and furlough because of a number of factors. For example, the costs related to NICs, pension contributions and accrued holiday may be an expense they wish to avoid. In addition, the government have hinted that the government grant to make up the 80% of salary may be reviewed in January 2021 so it is possible that employers may be required to contribute more to furlough salary as the scheme progresses.
There may be employers who were planning to implement redundancies at the end of January because the government had originally planned that the government 80% wages contribution would be reduced then. Any such employers should take into account the December 2020 announcement that the furlough scheme is extended for an extra month, until the end of April 2021, and that the government will continue to pay 80% of wages until the end of the scheme.
The position concerning notice pay has changed. Employers can claim the furlough grant for furloughed employees serving contractual or statutory notice periods before 1 December 2020. The updated 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 may need to give notice before 1 December 2020 or 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 April 2021. The employer has to assess the likelihood of having to repeat the redundancy process again if matters have not picked up by then. Employers who decide to rehire and furlough will also have to agree with the employees what happens to any redundancy payments already made.
In the decision-making process employers will have to evaluate pressure from existing staff to help previous colleagues as leaving employees unemployed when furlough is at least an option may affect the morale of remaining staff. If the redundancy process was ongoing or subject to an appeal, employees may also be able to challenge the fairness of selection for redundancy if furlough was not considered as an alternative.
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 April 2021.
Q: Can employers claim jointly for employees even if they were furloughed for different periods?
Under the versions of the furlough scheme applicable until the end of October 2020 employers could 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. It is thought that the furlough scheme applicable until April 2021 is the same regarding joint claims.
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 before and after October 2020?
Under the phases of the scheme both before and after October 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 previous 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 for claims for periods after 1 August
- employer pension contributions for claims for periods after 1 August.
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.
- Claims relating to November 2020 must be made by 14 December 2020.
Employers need to plan ahead to avoid missing deadlines to reclaim the government contribution. Grant payments are anticipated six working days after the first claims.
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 under the extension?
If employees were already furloughed under the scheme applicable before the end of October 2020 employers should calculate any furlough claims as they did previously.
For employers who are new to furlough claims, and for employees hired between 20 March and 30 October 2020, the reference pay and usual hours should be updated to take account of the extension period.
Fixed hours and pay
- For employees employed 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.
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 80% (or 70% and 60% in September and October) 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 August and October 2020. 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 - this applies under the extension of the scheme to April 2021. Employers and employees can agree, for example, to work three days one week and be fully furloughed in another week depending on the workload.
From 1 July claims can be for minimum periods of a week although they can be for longer periods. Claims cannot straddle a month from July onwards.
For employees who already have written furlough agreements the change to extended furlough from November onwards will require agreed changes to the existing wording depending on what was agreed before. For many, furlough will effectively continue although employers should at least agree timings for any days employees are required to work during flexible furlough.
Returning to work may require other changes to enable adherence to Government return to work guidance, or to allow social-distancing at work. 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 from November 2020, will HMRC fund 80% of the 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.
Subject to any further government guidance, a full-time employee can agree to work two days and takes 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 also fund the difference. The following would then apply to further payments depending on which month the holiday is taken:
- June 2020: The employee would have to be fully furloughed and could not work two days per week. The employer would be able to claim 80% grant towards the employee’s holiday pay for five days furlough time, subject to the cap of £2,500.
- July 2020: The two days working and three-day furlough pattern could start. The employer would be able to 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 £2,500 because the employee is furloughed for three-fifths of the week and the cap is pro rata)
- August 2020: The grant would cover 80% towards the employee’s holiday pay for three days furlough time but 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. From 1 August onwards, 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.
- September 2020: The employer could claim a 70% grant subject to a cap of £1,125. The full October grant cap would be £1,875 for an employee on full furlough but this will reduce in proportion to 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.
- October 2020: The employer could claim a 60 % grant subject to a cap of £1,672.50. The full September grant cap would be £2,187.50 for an employee on full furlough but this will reduce in proportion to 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.
- November 2020: The grant would cover 80% towards the employee’s holiday pay for three days furlough time but capped at a £1,500 contribution. The cap is not the full £2,500 because the employee is furloughed for three-fifths of the week and the cap is pro rata. The employer would have to top up to full holiday pay above the 80% grant and pay 100% of the employer’s NI and minimum pension contributions for both the two working and three non-working days.
- April 2021: The scheme ends at the end of April 2021 and the employer would pay full salary and NI as before the pandemic unless any other arrangement is concluded with the employee.
Q: From 1 November 2020 will we still be able to furlough staff on and off as we have been able to do previously (ie furloughed fully for 3 weeks, off furlough for 4 days, part furlough for 2 weeks then back on full furlough)?
Yes, subject to any further government guidance, from 1 November employers will still be 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 for1 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:
- From 1 July to 30 October 2020 employers cannot claim for more than the highest number of employees previously included in a claim submitted under the first phase of the furlough scheme.
- There is a minimum claim period of one week from 1 July 2020 onwards 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.
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 under the furlough extension from 1 November, 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.
It is not clear if there is any distinction between those returning from statutory leave and contractual leave as there was under the earlier phases of the scheme. Presumably any employee on payroll before 30 October 2020 who returns to work after any form of maternity leave will be eligible for the furlough scheme until it closes on 30 April 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.
Statutory maternity leave: Problems arose under the earlier phases of the furlough scheme. In summary, the government confirmed that parents on statutory maternity leave who returned to work even after the previous 10 June cut-off date were still eligible for that phase of the extended furlough scheme. Maternity returners were an exception to the previous 10 June cut-off date and could be furloughed for the first time after that date. The employer must operate the statutory scheme and certain other criteria must be met.
Contractual maternity leave: Those absent on contractual maternity leave returning to work between 10 June and 30 October 2020 seemed to be in a different position under the earlier phase of the furlough scheme. Although they were returning from leave they were treated as any other employee furloughed for the first time and could be too late for the flexible furlough scheme in operation between June and October.
Notice to end maternity leave
After 1 November 2020 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.
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 after 1 November 2020 be placed on furlough?
Further guidance is needed for employees returning from a contractual enhanced paternity or other leave. Under the earlier scheme 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.