Employers Furlough Guide

Job Protection Scheme – ‘Furlough’ Employers Guide 15th June 2020 UPDATE


Employees that have been furloughed are still your employees.
They may be at home for quite some time, so it is important as their employer to stay connected with them during this period.

A lack of contact could cause undue worry which can lead to mental health issues as well as employees seeking alternative work elsewhere for feeling devalued.

You do not want to lose your greatest assets!

The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers starting from 1 March 2020 and ending on 31st October where you can furlough employees and apply for a grant that covers up to 80% of their usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage (grant scheme reduces in level of support from August, further details set out within this document).

If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages through the scheme.

Do not get tied up with the term, this is not a term that is familiar to us in the UK and is generally applied in the US. It technically means temporarily laying off employees due to a downturn in business.

Employees with an employment status of ‘furlough’ must not carry out any work or duties for the employer. This includes any period of reduced working hours or days. In simple terms, the employee is instead kept on the payroll with no work carried.

Any entity with a UK payroll can apply, including businesses, charities, recruitment agencies and public authorities. that had created and started a PAYE payroll scheme on 19 March 2020. You can only claim for furloughed employees that were on your PAYE payroll on or before 19 March 2020 and which were notified to HMRC on an RTI submission on or before 19 March 2020.

Individuals can also furlough employees such as nannies provided they pay them through PAYE and they were on their payroll on, or before, 19 March 2020.

If you have employees hired after 19 March 2020 they cannot be furloughed or claimed for (except for TUPE). Furloughed employees can be on any type of contract, including Full-time employees, part-time employees, employees on agency contracts and Employees on flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed.

Employees returning from a period of maternity, paternity, adoption, shared parental or parental bereavement leave after 10th June can still be furloughed for the first time and be eligible for the Flexible Scheme. However the following conditions must apply:

  • you have previously submitted a claim for any other employee in your organisation in relation to a furlough period of at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June
  • the employee you wish to furlough for the first time started maternity, shared parental, adoption, paternity and parental bereavement leave before 10 June and has returned from that leave after 10 June
  • the employee was on your PAYE payroll on or before 19 March 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020

Employees on sick leave or self-isolating should continue to receive sick pay, however if there is no work for them after their period of sickness or self-isolation, then they can also be furloughed. Short term illness/ self-isolation should not be a consideration in deciding whether to furlough an employee. If, however, employers want to furlough employees for business reasons and they are currently off sick, they are eligible to do so, as with other employees. In these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee. You can claim SSP and furlough for the same employee, but not for the same period of time.

You can claim for furloughed employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home and you would otherwise have to make them redundant.

Support these employees as much as you can, including protecting their income. If they are well enough do so then consider them working from home, otherwise they would ne entitled to SSP as a minimum. The Government asks businesses, where possible, to be financially supportive towards these individuals.

Statutory payments for maternity, paternity, etc apply as normal. If you offer company enhanced pay, this is treated as wages and could therefore be claimed under the CJRS of 80% of that portion of wage. This applies to all leave such as maternity, adoption, paternity, shared paternity, parental and parental bereavement leave.

A new employer is eligible to claim under the CJRS in respect of the employees of a previous business transferred after 19th March 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership.

From March until 31st July, employers can claim 80% of pay (up to £2,500) per employee plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Fees, commission or bonuses are not included, however you can now claim for overtime where payment for overtime was non-discretionary. Employees will still be subject to usual income tax and other deductions. This part of the scheme will close for new entrants on 30th June and claims can be made up until 31st July. Since furlough must last for a minimum of 3 weeks, the last date you can furlough an employee for the first time will be 10th June.

In August, employers can claim 80% of pay (up to £2,500) per employee only, and employers are therefore liable to pay the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage (3%).

In September, employers can claim 70% of pay (up to £2,187.50) per employee, with the employer being liable for the Employer National Insurance contributions and minimum automatic enrolment employer pension contributions, plus 10% wages to make up 80% of the total up to a cap of £2,500.

Yes! From 1st July, a NEW FLEXIBLE FURLOUGH SCHEME will be introduced where you can do just that. You can decide the hours and shift patterns that your employees will work on their return and you will be responsible for paying their wages in full while working.

Any working hours arrangement that you agree with your employee must cover at least one week and be confirmed to the employee in writing. When claiming the CJRS grant for furloughed hours, you will need to report and claim for a minimum period of a week. You can choose to make claims for longer periods such as on monthly or two weekly cycles if you prefer.

The Government has provided guidance on how to calculate claims and can be found here.

There are a number of examples on the Government website to help you calculate claims, these examples can be found here.

Yes. Employers can top up the amount, however they are not obliged to.

The employer can claim for the higher of
(i) the same month’s earnings from the previous year (e.g. earnings from March 2019); or
(ii) average monthly earnings in the 2019-20 tax year. If the employee has been employed for less than a year,

you can claim for an average of their monthly earnings since they started work.

Employees are only entitled to the minimum wage for the hours they work. So if they are furloughed and do not work, and 80% of their normal earnings would take them below the minimum wage based on their normal working hours, they still only receive 80% as they are not working. However they are entitled to be paid NMW for any time spend training.

The scheme covers employees who were either made redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages through the scheme subject to contractual clause and consultation.

When issuing the ‘furlough’ status letter to employees, make it clear that this employment status is subject to change, confirm how it will be reviewed and the agreement from both parties on making a further employment status change.

Under the new Flexible Scheme, you can make any flexible arrangement that you like. There are no minimum periods so you can make it work to suit your business.

If your employee has more than one employer, they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually. Employees can be furloughed in one job and receive a furloughed payment but continue working for another employer and receive their normal wages.

If contractually allowed, your employees are permitted to work for another employer whilst you have placed them on furlough.

For any employer that takes on a new employee, the new employer should ensure they complete the starter checklist form correctly. If the employee is furloughed from another employment, they should complete Statement C.

So long as the work or training does not generate any income for the business. Furloughed employees can engage in training, if in undertaking the training the employee does not provide services to, or generate revenue for, or on behalf of their organisation. Furloughed employees should be encouraged to undertake training.

Where training is undertaken by furloughed employees, at the request of their employer, they are entitled to be paid at least their appropriate national minimum wage for this time. In most cases, the furlough payment of 80% of an employee’s regular wage, up to the value of £2,500, will provide sufficient monies to cover these training hours. However, where the time spent training attracts a minimum wage entitlement in excess of the furlough payment, employers will need to pay the additional wages

Employers reserve the right to cancel these holidays, following the normal rules regarding notice period (twice as much notice as the length of the holiday) where the employer does not have the funds to pay for annual leave and up to 4 weeks of unused leave can be carried into the next 2 leave years, following amendments to regulations by the government. Holidays during furlough will be under review by the Government and therefore guidance on this may change.

Employees can continue to request holidays as per the normal process and where holidays have been approved the employer must pay full salary on these days (remember that on 6th April 2020, the rules around holiday pay change and must be paid based on the previous 52 weeks average pay). Employers can request furlough payments whilst employees are on a period of annual leave. Employers reserve the right to refuse holiday requests during a period of furlough, within reason. Holidays during furlough will be under review by the Government and therefore guidance on this may change.

It is important that employers review their employment contracts. Where an employment contract specifies what the bank holidays are, then employees will be on holiday on these dates. Pay should be normal (100%) and a holiday is therefore used. Employers can request furlough payments whilst employees are on a period of annual leave. Holidays during furlough will be under review by the Government and therefore guidance on this may change.

Employees on fixed term contracts can be furloughed. Their contracts can be renewed or extended during the furlough period without breaking the terms of the scheme. Where a fixed term employee’s contract ends because it is not extended or renewed you will no longer be able claim grant for them.

As well as employees, the following individuals who are paid via PAYE, but who are not necessarily employees in employment law terms the grant can also be claimed.

Office Holders

Office holders can be furloughed and receive support through this scheme. The furlough, and any ongoing payment during furlough, will need to be agreed between the office holder and the party who operates PAYE on the income they receive for holding their office. Where the office holder is a company director or member of a Limited Liability Partnership (LLP), the furlough arrangements should be adopted formally as a decision of the company or LLP.

Company Directors

As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

Salaried Members of Limited Liability Partnerships (LLPs)

Members of LLPs who are designated as employees for tax purposes (‘salaried members’) under the Income Tax Act 2005 are eligible to be furloughed and receive support through this scheme.

The rights and duties of a member of an LLP are set out in an LLP agreement and in the absence of an agreement, default provisions in the LLP Act 2000, based upon company and partnership law. Such an agreement may include separate agreement between the LLP and an individual member setting out the terms applicable to that member’s relationship with the LLP.

To furlough a member, the terms of the LLP agreement may need to be varied by a formal decision of the LLP, for example to reflect the fact that the member will perform no work in the LLP for the period of furlough, and the effect of this on their remuneration from the LLP. For an LLP member who is treated as being employed by
the LLP (in accordance with s863A of ITTOIA 2005), the reference salary for this scheme is the LLP member’s profit allocation, excluding any amounts which are determined by the LLP member’s performance, or the overall performance of the LLP.

Agency Workers (including those employed by umbrella companies)

Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through this scheme, including where they are employed by umbrella companies.

Furlough should be agreed between the agency, as the deemed employer, and the worker, though it would be advised to discuss the need to furlough with any end clients involved. As with employees, agency workers should perform no work for, through or on behalf of the agency that has furloughed them while they are furloughed, including for the agency’s clients.

Where an agency supplies clients with workers who are employed by an umbrella company that operates
the PAYE, it will be for the umbrella company and the worker to agree whether to furlough the worker or not.

Limb (b) Workers

Where Limb (b) Workers are paid through PAYE, they can be furloughed and receive support through this scheme. Those who pay tax on their trading profits through Income Tax Self-Assessment, may instead be eligible for the Self-Employed Income Support Scheme.

HMRC have designed a portal for you to make your claim. There is a new link and this can be accessed here.

It is likely to take up to 6 days from the date of your claim.

Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.

Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.

The reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary.

All the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money. No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme. Where the employer provides benefits to furloughed employees, including through a salary sacrifice scheme, these benefits should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.

The reality is, that unless you have a ‘lay-off’ or ‘lack of work’ clause within your employment contracts, then you will not be able to unilaterally make these changes. It works both ways. You cannot simply tell an employee they are ‘furlough’, but at the same time an employee cannot demand being ‘furloughed’. Both the employee and employer must agree. Scenarios for dealing with both contractual clause and no clause are detailed below:

1.I have a ‘lay-off’ or ‘lack of work’ clause in my employee’s employment contract.

There is no requirement for you to consult with employees and you can immediately change the employment status of your employee(s) to ‘furlough’. The employee will stop all work duties, stay at home and receive a salary of 80%.

2. I do not have a ‘lay-off’ or ‘lack of work’ clause in my employee’s employment contract.

A period of consultation and negotiation with the affected employee(s) will be required. Issue a letter to the employee(s) setting out their options:

  • Become ‘furlough’
  • Stay at home and take unpaid leave
  • Be made redundant*

*Whilst this remains an option, some employers may not have the funds to make any statutory or company enhanced redundancy payments. In this scenario, employees may need to seek redundancy funds from the Government.

If you’re claiming for employees who are flexibly furloughed, you’ll need to have agreed the furlough arrangement with the employee (or reached a collective agreement with a trade union) and keep a written agreement that confirms the furlough arrangement.

Under the new Flexible Scheme, any employees you place on furlough ca. be furloughed for any period of time up until the date the furlough scheme ends. Therefore there is no minimum requirement as per the previous scheme where employees must have been furloughed for a minimum period of 3 consecutive weeks.

You will need the following

  • to be registered for PAYE online
  • your UK bank account number and sort code (only provide bank account details where a BACS payment can be accepted)
  • the billing address on your bank account (this is the address on your bank statements)
  • your employer PAYE scheme reference number
  • the number of employees being furloughed
  • each employee’s National Insurance number
  • each employee’s payroll or employee number (optional)
  • the start date and end date of the claim
  • the full amounts that you’re claiming for including:
  • employee wages
  • employer National Insurance contributions (for claims up to 31 July)
  • employer minimum pension contributions (for claims up to 31 July)
  • your phone number
  • contact name


For the claim period you’ll also need:

  • the number of usual hours your employee would work in the claim period
  • the number of hours your employee has or will work in the claim period
  • you will also need to keep a record of the number of furloughed hours your employee has been furloughed in the claim period

You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.

Updated guidance can be found here, as well as a step by step guide.

HMRC will check your claim, and if you’re eligible, pay it to you by BACS to a UK bank account within 6 days from the date of your claim.

You must pay the employee all the grant you receive for their gross pay in the form of money. Furloughed staff must receive no less than 80% of their reference pay (up to the monthly cap of £2500).

Employers cannot enter into any transaction with the worker which reduces the wages below this amount. This includes any administration charge, fees or other costs in connection with the employment.

The Chancellor has confirmed that the scheme will close on 31st October.

  1. HMRC and the Government have not been specific regarding the requirements for this and therefore it depends how you worded your original furlough letter. If you specified an end date then you will need to extend or bring it forward if that date is no longer relevant.

There is no period of notice required, unless that was previously agreed, although you would expect to receive reasonable notice and 24 hours as a minimum.

If you don’t end furlough for all of your employees at the same time then you may wish to select a percentage based on various factors such as skill set and job roles. It may also be an idea to ask for volunteers.

For more information and guidance on returning to work legally and safely after lockdown, please refer to our Employers Guidance on Returning to Work after Lockdown where we discuss in detail the process for getting employees back to work.

We recommend that you start to prepare for that now by considering steps to minimise employee costs such as recruitment freeze, outsourcing some services, reviewing bonus structures, job share scheme, and many more that we can chat to you about individually. However, this may not be enough and you may need to consider other options such as redundancy and amending employment contracts to reduce working hours and/or days as well as salary costs – all requiring a very careful consultation.

Although there is nothing specifically in the guidance on this, yes you can.

If you choose to pay in lieu of notice, you cannot claim this through the CJRS.

Where the employee is on notice and on furlough at the same time, then you can continue to claim furlough. However, the part that is unclear is whether notice is paid at 80% or 100% salary and may depend on the reason why the employee is furloughed in the first place. To avoid any risk, the safest option would be to be 100% however if you are considering a different approach we recommend you contact us to discuss this in more detail.

Yes, however, the scheme is in place to prevent redundancies so may be viewed as unfairly dismissed.

That said, the guidance does say that employees can be made redundant whilst on furlough. You might choose to wait until the end of the scheme to commence a redundancy process, however many businesses may not be in a position financially to wait and therefore commence the process whilst employees are furloughed. Whatever you decide, we recommend you speak to us or seek legal advice before progressing.

Additional consideration should be taken with regards to consultation periods:

  • 20 or more redundancies in a 90 day period = 30 day consultation

  • 100 or more redundancies in a 90 day period = 45 day consultation

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