Guides & Advice
The Job Retention Scheme | your questions answered
UPDATED 3 MARCH - The Chancellor has confirmed that the furlough scheme will be extended until the end of September 2021.
We’ve updated our FAQs and laid out the commonly asked questions, and answers, about the Coronavirus Job Retention Scheme (furlough scheme). and This post explains how you can utilise this furlough to keep your business going and retain staff during these difficult and unprecedented times, covering the most frequent furlough questions for employers.
What are the job retention scheme and furlough leave?
Furlough leave is a job retention scheme announced by the Government in March 2020 which allows employers to retain staff while they address any economic downturn as a result of COVID-19.
- The Government had paid up to 80% of the wage costs (subject to a cap of £2,500) of any employees who are designated as furloughed, up until the end of August 2020.
- From September 2020 Government contributions to wages under the furlough scheme were reduced to 70% (up to a maximum of £2,187.50) with employers paying at least 10% of wages.
- From October 2020, Government contributions to wages were reduced further to 60% (up to a maximum of £1,875), with employers paying 20%.
- On 17 December 2020 the Government announced a further extension of the furlough scheme to the end of April 2021, confirming that the Government will continue to pay up to 80% of an employee’s wage (up to a maximum of £2,500).
On 2 March 2021, the evening before the Budget, the Chancellor announced that the furlough scheme will be further extended until the end of September 2021. The Government will continue to pay up to 80% of an employee’s wage (up to a maximum of £2,500) but from July, employers will be expected to pay 10% towards the hours their staff do not work, increasing to 20% in August and September.
Employers will have to pay employer national insurance and pension contributions, although the Chancellor has confirmed this will be reviewed in January.
Furloughed employees are those who have been designated as having no work to do (i.e. will remain at home and do not have the requirement to complete any tasks) but who will be retained by the employer.
Since 1 July 2020, furloughed employees have been able to return to work on a part-time basis (flexible furlough), or remain fully furloughed. Employers pay in full for days worked and can claim under the CJRS for days not worked, subject to the relevant caps. An employee who is fully furloughed is allowed to take part in volunteer work, as well as training, so long as the work does not provide services to or generate revenue for, or on behalf of your organisation.
When does the furlough scheme end?
The scheme, initially announced to run from 1 March 2020 for three months has, as of 2 March 2021, been extended once again until the end of September 2021.
Is there a minimum period for furlough?
There is no minimum time that a worker can be on furlough leave. However, when submitting a claim to HMRC to recover furlough wage costs, the claim must cover a period of at least seven calendar days, unless a claim is being made for the first or last few days in a month.
Employees who are union or non-union representatives may also undertake duties and activities for the purpose of individual or collective representation of employees, or other workers, whilst fully furloughed. This is on the condition that they do not provide services or generate revenue for the employer.
Which employees will be eligible for furlough leave?
To be eligible, the employee must have been on the payroll on 30 October 2020. If they were hired after this, they will not be eligible.
The job retention scheme is not just limited to those who would otherwise have been made redundant. Rather, eligibility is not so prescriptive as to require a drop off in work akin to a redundancy situation. The focus is on the business’ operations being severely affected by coronavirus, with this impact clearly varying significantly from one employer to another.
As stated in paragraph 6.7 of the guidance, the employer and employee will need to agree in writing for the employee being placed on furlough. In terms of payments, the employer can claim for earnings, which it reasonably expects to be paid.
Employees who are self-isolating or on short-term sick leave, cannot be placed on furlough leave but can be placed on furlough leave afterwards. Employees on maternity leave should continue to receive maternity pay but can agree to return early and be placed on furlough leave. The Government confirmed on 9 June that employees who return to work in the coming months after being on statutory maternity and paternity leave, will be permitted to be furloughed (even after the 10 June end-date for new entrants). However, this will only apply if their employer has previously furloughed other employees.
On 5 January 2021 the guidance was updated to confirm that employees may be furloughed if they are unable to work, including from home, or working reduced hours because they:
- are clinically extremely vulnerable, or at the highest risk of severe illness from coronavirus and following public health guidance
- have caring responsibilities resulting from coronavirus (COVID-19), such as caring for children who are at home as a result of school and childcare facilities closing, or caring for a vulnerable individual in their household
Who does the furlough leave scheme apply to?
The scheme is available to all UK employers, regardless of size, including businesses, charities, recruitment agencies (where agency workers are paid through PAYE) and public authorities. Guidance on how to claim can be found on the gov.uk website. It’s also worth noting that, under the extended scheme, neither the employer nor the employee needs to have previously used the furlough scheme.
The scheme does not apply to the self-employed - there is a separate scheme available for self-employed individuals (Self-Employment Income Support Scheme).
What is the Self Employment Income Support Scheme?
The Self Employment Income Support Scheme allows those that are self-employed to claim a grant if they can prove their business has been impacted by the pandemic. There have been three schemes to claim for grants so far.
The fourth grant will be available to claim from April 2021 for those who feel their business has been negatively impacted between 1 February 2021 and 29 April 2021. It is available to those who have traded in the 2018-19 and 2019-2020 tax years (and submitted self-assessment tax returns by 2 March 2021), meaning around 600,000 additional self-employed people will now be eligible for government help. The grant will be worth 80% of three months' average trading profits (up to £7,500).
The fifth grant will apply to businesses who feel their business has been impacted from 1 May 2021 to 31 July 2021:
- The fifth grant will be 80% of average monthly trading profit (up to £7,500) to those who can prove their turnover has fallen more than 30%.
- If average monthly trading profit has fallen less than 30%, the grant will cover 30%.
What does the furlough contribution include?
The guidance states that the Government will contribute towards all wages costs, meaning that the contribution includes costs such as employer pension and national insurance contributions up until the end of July 2020. From August 2020 employers have had to pay these contributions. The employee will, however, pay tax on the salary (if earnings are above the taxation threshold).
Is commission included in the money that employers can claim back from the Government?
Yes. In addition to basic salary, the guidance states that an employer can reclaim 80% of compulsory contractual commission on past sales back from HMRC. Past overtime payments can also be reclaimed.
Does the 80% include non-monetary benefits such as health insurance or a car allowance?
No. The guidance expressly states that these costs cannot be reclaimed as part of the 80%.
Will employers need to top up the contribution so that employees receive their full pay?
An employer can choose to top up to 100%, but does not have to (subject to general employment law and the renegotiating any contractual entitlements).
Can employees be brought back off furlough on a part-time basis? What is flexi furlough?
Since 1 July 2020, furloughed employees have been able to return to work on a part-time basis (a process known as flexi furlough). Employers have to pay full salary for hours worked and can claim under the CJRS for hours not worked, subject to the relevant caps. The number of employees for whom a claim can be made under this new scheme is limited to the maximum number claimed for in a single claim under the old scheme (i.e. for the period up until 10 June 2020).
When claiming under the new scheme, the claim must cover a period of at least seven calendar days (unless the claim is being made in the first or last few days in a month). However, subject to compliance with this when submitting the claim to HMRC, under the new scheme, employers are able to furlough employees for any amount of time and any shift pattern. As before, employers will need to agree in writing any flexible furlough with the employee.
Non-working days or hours will count as ‘furloughed days/hours” and no work can be undertaken on said days. There are a number of record-keeping requirements under the new scheme, namely that: the furlough letter confirming the basis upon which the employee agrees to ‘flexible furlough’ must be kept for five years. Employers also have to keep records for six years of the amount claimed and the period of the claim for each employee; the calculation details and reference numbers; and the usual hours worked, the actual hours worked and the number of hours employees are furloughed for.
This accurate record-keeping is key to the operation of flexible furlough, and the guidance makes clear that employers should only make a claim when ‘you have certainty about the number of hours your employees are working during the claim period’. Furloughed hours will ultimately be the difference between an employee’s usual hours and the actual hours worked, even if this is different from what was agreed when the flexible furlough was implemented.
Can apprentices be furloughed?
Yes, apprentices can be furloughed, however, employers must pay apprentices at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage as appropriate for all the time they spend training. This means employers must cover any shortfall between the amount they can claim for the wages through this scheme and the appropriate minimum wage.
Can company directors be furloughed?
Yes and while on furlough leave, company directors can still perform their statutory duties, relating to the filing of his/her company’s accounts or providing other information that relates to the administration of the director’s company. They cannot carry out any other work for the company if furloughed. The guidance also confirms that company directors with an annual pay period can benefit from the scheme, as long as they meet the relevant conditions.
Can furloughed employees take another job?
Yes. Employees can start a new job when on furlough leave (meaning they might end up earning 80% of the old salary and 100% of a new one. Whilst this was not prohibited in previous guidance, the latest guidance expressly allows it. Employees will however have to check that their contractual terms allow them to start a new role, and seek approval if necessary.
What about staff without guaranteed hours and those on the minimum wage?
For employees whose pay varies, the employer can claim for the higher of (a) the same month’s earning from the previous year (e.g. earnings from March 2019); or (b) the employee’s average monthly earnings in the 2019-20 tax year.
Individuals are only entitled to the minimum wage for the hours they work. So where staff are furloughed – and therefore cannot work – they will still be limited to 80% of their normal earnings even if this results in their pay being below the minimum wage based on their normal working hours. However, they are entitled to be paid national minimum wage for any time spent training.
What about employees who have been served with notice of termination of employment?
Since 1 December 2020, employees under notice are no longer eligible to be furloughed.
Can you make employees redundant during furlough?
Even with all the financial support available, it is inevitable that COVID-19 will force some employers to make a number of their employees redundant. However, employers must ensure that their HR teams have all the resources and support they need.
To protect people’s livelihoods, on 30 July 2020 the Government announced that employees who are made redundant while on furlough leave will be eligible for redundancy pay based on their normal wages - not the furlough rate.
The new legislation will also apply to statutory notice pay, so that statutory notice pay is also based on normal wages, rather than the lower furlough wages.
What if employers have already dismissed staff?
An employer can potentially re-hire employees whose employment terminated and claim for them under the extended CJRS. The employer must have made a PAYE RTI submission to HMRC for the employee between 20 March 2020 and 30 October 2020, notifying a payment of earnings for them and the employee must have stopped working for the employer on or after 23 September 2020.
What if employees refuse furlough leave?
If an employee refuses furlough leave, normal employment rules will apply, i.e. if there is no work for that employee to do, employers could choose to make them redundant. If there are contractual layoff or short-time working provisions in the contract, these could also be applied.
What if an employee wants to be placed on furlough leave, but employers want to retain them as normal?
If an employer has work for an employee to do (albeit at home), provided that employee does not fall within one of the vulnerable categories (which may result in them being entitled to sick pay) and remains fit and well and is able to do their job, the refusal to carry out their role is a potential disciplinary issue and should be dealt with in the usual way.
Can employees be forced off furlough by their employers? If so, how exactly could this happen?
The furlough scheme has not altered basic employment law principles. Any variation in the terms on which someone is employed requires consent from both parties. When employees commenced furlough, their employer may well have set out in advance the conditions under which that period of furlough would come to an end – possibly a specified date or possibly by way of a notice being served by the employer. In those situations, employees can be forced off furlough in accordance with what has already been contractually agreed. However, in the absence of any such provisions, an employer will need to secure the employee’s consent in order to bring the period of furlough to an end.
Can an employee take holiday during furlough leave?
Yes, Employees continue to accrue holiday whilst on furlough leave and can also take holiday during furlough leave. The Working Time Regulations require holiday pay to be paid at the employee’s normal rate of pay, so employers will be required to top up the pay to 100% for the holiday period.
Note that employers do have flexibility over when employees can take holiday in line with the requirements of the Working Time Regulations.
What about employees who have TUPE transferred?
TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006) governs the transfer of employees from one organisation to another. Previously it was unclear whether new employers could benefit from the coronavirus job retention scheme if the employees transferred after 28 February 2020. However, the guidance now states that a new employer can claim in respect of an employee who TUPE transferred to them after 31 August 2020 if the following conditions are met:
- They were employed by the transferor (their former employer) before 31 October 2020.
- After 31 August 2020, there was a TUPE transfer of the employee to the new employer and the employee remained in employment.
- Immediately before the transfer the transferor had a qualifying PAYE scheme and made a payment to the employee, as notified to HMRC in a return delivered to HMRC after 19 March and before 31 October 2020, or, if earlier, the last day of the employee's employment with the transferor before the TUPE transfer.
- The transferor did not report a cessation of the employee's employment to HMRC after the payment, other than in relation to the change in employer on the TUPE transfer.
How do I claim the Jobs Retention Bonus?
The Job Retention Bonus, which would have seen a £1,000 bonus paid to businesses for each employee brought back from furlough leave, will no longer be available. The government has however said that a different job retention bonus will be introduced at a later date.
This guide has answered a wide range of furlough questions for employers. If you have any queries on the furlough leave scheme or need any guidance or support, speak to a member of your local employment team or get in contact with us by using filling out our enquiry form.
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