This article provides guidance for managing furlough and the Job Retention Scheme. This information is being continually checked and updated where necessary where Government guidance changes.
Furlough and the Job Retention Scheme
Originally a term typically used in the US, the concept of “furlough” has not existed in UK employment law until now. However, with the coronavirus (COVID-19) pandemic causing issues for businesses across the UK, the Government has implemented the Job Retention Scheme to avoid lay-offs and redundancies.
“Furlough” generally means a temporary leave of absence from work. In short, a furloughed employee is someone who, rather than being dismissed for redundancy by you, or being put on lay off, is kept on the payroll during a period where you cannot offer work for them. For example, if your business has experienced business downturn, or has had to temporarily close, you can furlough employees as a way of retaining them until business can return to normal.
Under the Job Retention Scheme, staff placed on furlough by following the correct procedure will have 80% of their wages covered by the Government, up to a maximum of £2500 per employee. This means that you can continue to pay them while they are furloughed, and 80% of the cost will be covered through a Government grant. Wages can be claimed from the period starting 1 March 2020 until the end of October. On 12 May 2020, an extension to the end of October was confirmed. From August, the Scheme is likely to run slightly differently to allow the sharing of wage costs between the employer and the Government where employees are brought back to work on a part-time basis. Further details are expected at the end of May.
When to use the Job Retention Scheme
The Government’s guidance outlines that the Scheme has been introduced to help businesses severely affected by the coronavirus. However, most businesses are currently not expected to demonstrate that they had an objective need to furlough their staff, such as if they had no alternative aside from redundancy. Guidance released on 17 April 2020 for employers in education, early years provision and children’s social care refers to a “redundancy” criterion in deciding which employees to furlough, in the general context that the Government does not expect many publicly funded employers to use the Scheme. The HMRC have stated that they may retrospectively audit claims, but it is not clear if this will take into account reasons for making the claim.
In order to make use of the Scheme, the Government has confirmed that companies must have:
created and started a PAYE (pay as you earn) payroll scheme on or before 19 March 2020*
enrolled for PAYE online, a process that can take up to 10 days
a UK bank account.
Provided your company meets the above, it can make use of the Scheme. There is no limit on company size or sector.
Before making any decisions to furlough staff, it is important you are aware of which staff can legally be furloughed under the Job Retention Scheme. To be eligible, the individual must be PAYE meaning that you deduct their tax and National Insurance contributions before you pay them and are told how much to deduct through their tax code. Individuals must also have been on the payroll since at least 19 March 2020 and been notified to HMRC through a real time information (RTI) submission on or before 19 March 2020.
Full time, part time, temporary, zero hours and fixed-term staff can all be included as long as they are PAYE, as can apprentices. Office holders, (including directors), salaried members of LLPs, agency workers and those who fall into the employment status category of “worker” can be included.
An employee on a fixed-term contract can be re-employed, furloughed and claimed for if either:
their contract expired after 28 February 2020 and an RTI payment submission for the employee was notified to HMRC on or before 28 February 2020, or
their contract expired after 19 March 2020 and an RTI payment submission for the employee was notified to HMRC on or before 19 March 2020.
Employees who started and ended the same contract between 28 February 2020 and 19 March 2020 will not qualify for this scheme. This is not specific to employees on fixed-term contracts, the same would apply to employees on all other contracts.
Foreign nationals are eligible to be furloughed. You can furlough employees on all categories of visa.
*Previous guidance had contained a cut-off date of 28 February 2020 meaning that employers could not furlough, and claim the wages of, anyone who started after this date. The guidance was updated on 15 April 2020 to provide a new cut-off date of 19 March 2020 with the added RTI criterion.
Furlough and employees transferred under TUPE
Government guidance published on 30 April 2020 confirms that employees who were subject to a TUPE transfer after 28 February 2020 can be furloughed and the new employer can claim for their wages, to the prescribed amount, via the Scheme. This reverts the position back to that which had been in place before 15 April 2020, which is when the Government amended their guidance to state that employees who had been transferred after 19 March could be claimed for under the Scheme. For now the position is this: employees transferred after 28 February 2020 can be claimed for provided they are on the “new” employer’s payroll, and an RTI submission made, on or before 19 March 2020.
Choosing staff to furlough
It is up to you who you place on furlough. Decisions should be taken in line with business need and account for any particular challenges that it may be facing. You do not have to furlough all your staff. Where selection does need to take place, it may be appropriate to implement a similar selection period as would be used in a redundancy situation so that the most effective employees remain in work. An addition to Government guidance on 23 April 2020 stated that a collective agreement between employer and employee will be sufficient as evidence.
Normal rules on discrimination still apply. You should take care not to make any decisions which could be seen to be discriminatory and be able to justify why certain staff have been placed on furlough over others.
Staff can volunteer themselves to be furloughed if they choose to. However, the final decision will rest with you. There is no automatic right to be furloughed.
Placing staff on furlough
How you place staff on furlough depends on what you wish to pay them during this time. If you are only going to pay the 80% that will be covered by the Government, and not top up wages, you will need to obtain their agreement to reduce their pay. The agreement to furlough should be confirmed in writing to the employee and a record kept for five years. On 15 April 2020, a Treasury Direction on the Scheme set out a requirement for employers to obtain agreement in writing that the employee will cease to do all work.
From the start of August, it is currently expected that the 80% payment to employees will remain in place but will need to be funded, in part, by the employer where the employee returns on a part-time basis.
If more than 19 employees are to be placed on furlough, and you have pre-existing consultation process in place in their contracts, you may have to follow it. If there is no consultation process in place and to begin consultation on this would present difficulties with the election of representatives and actually fulfilling consultation, there may be a defence because of the special circumstances. In all but the most extreme cases, there is likely to be an expectation that some form of consultation is undertaken.
When seeking an agreement with staff, it is important to be open and honest with them and clearly outline why this is necessary. Remember, staff are more likely to agree to it if the alternative is a redundancy.
Furloughing agency workers
Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through the 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.
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.
Furloughing staff on maternity or other forms of family leave
All staff currently receiving maternity pay, or other family leave pay, should continue to receive that as normal. Current Government guidance does not prohibit individuals returning from their leave early to be furloughed, subject to agreement between yourself and them. However, it is likely that staff will not be able to return to this leave when their period of furlough comes to an end.
27 April Update
Staff who are planning to take maternity, paternity, adoption, shared parental or bereavement leave on or after 25 April should have their statutory pay calculated by assessing their normal earnings, and not reduced earnings as a result of being furloughed.
Furloughing staff who have left the business
You can re-hire and furlough any ex-employees who left after 28 February 2020 if you want to. The ex-employee must have been on your payroll on 28 February 2020 and have been notified to HMRC on a RTI submission on or before 28 February 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 28 February 2020. You can also re-hire anyone who left on or after 19 March 2020 but they must have been on your payroll on 19 March 2020 and have been notified to HMRC on an RTI submission 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. Again, this will be entirely up to you; however, you should be careful to make decisions that are non-discriminatory when deciding who to re-hire. You should seek written agreement that the employee will cease to do all work during furlough. Other employees maybe in the position where they are serving out their notice of redundancy but have not yet left the company. Employers may choose to withdraw the redundancy notice and place the employee on furlough instead.
Furloughing staff who are on sick leave or self-isolating
Staff in your company may be receiving statutory sick pay (SSP) for other conditions, or they may be receiving it as a result of the coronavirus. Government guidance details that individuals who have coronavirus symptoms, or live in the household of those who do, need to self-isolate for a period. During this time, they should receive SSP from day one of their isolation if their absence started on or after 13 March 2020.
Staff that are receiving SSP cannot be furloughed at the same time. However, you can take staff off SSP to furlough them, provided you make it clear which option you wish to explore. If you continue to pay SSP, you cannot claim back staff wages under the Scheme.
The Treasury Direction indicates that employees on sick leave when a decision to furlough is made can only be furloughed after they have returned to work. Employers have a choice for subsequent periods of sickness/self-isolation over whether the employee stays on furlough or is placed on sick leave.
Furloughing staff who are “shielding”
Some of your staff may have been told to isolate themselves by the Government as they have been deemed at a higher risk from the coronavirus. You can seek to furlough staff in this position, even if there is work for them to do; however, you should consider if they could feasibly work from home first.
Furloughing staff with caring commitments
Government guidance outlines that staff who have caring commitments, such as those who need to look after children as a result of the coronavirus school closures, can also be furloughed. This is the case even if there is work for them to do, although it is advisable to consider if they could feasibly work from home. Employees who are on unpaid leave which started after 28 February can be furloughed. Anyone who started unpaid leave on or before 28 February can only be furloughed once their period of unpaid leave ends.
Managing staff on furlough
Staff that are furloughed must not undertake any work for your company or any linked or associated organisation. If they do, you will not be able to claim the Government grant for their wages under the Scheme.
Employees are able to undertake training and do volunteer work, as long as they do not provide services to or make any money for you or any linked or associated organisation. If training is done, it is likely that this will need to be online because of the social distancing measures in place. Furloughed employees undertaking training should be paid as normal for the time.
While on furlough, employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers. However, in doing this, they must not provide services to or generate revenue for, or on behalf of their organisation or a linked or associated organisation.
While furloughed, staff may wish to get second jobs. In this situation, your normal rules on employees getting second jobs should still apply; however, you may wish to be flexible in the circumstances. It will be in your best interests to continue any restrictions on other employment which may create a conflict of interest, such as work with a competitor or client.
Staff may also wish to volunteer while furloughed, such as for the NHS. If you do allow your employees to take on other work during their normal working hours, or if they do volunteer, you should ensure that they understand that they must be available for duty when work is available again.
Managing annual leave during furlough
During a period of furlough, statutory annual leave of 5.6 weeks per leave year continues to accrue. Staff unable to take their full statutory leave entitlements as a result of the coronavirus, such as being furloughed, can carry over their leave into the next two leave years. This only counts for statutory leave - it is up to you if you continue to let contractual leave accrue; however, this should be specified when seeking agreement to furlough.
Annual leave can be taken during furlough but you must pay the employee normal pay during it. Please refer to our FAQs on furlough and the Job Retention Scheme for more information.
Calculating furloughed staff wages
For salaried employees’ pay, you should consider what they earned in the last pay period prior to 19 March 2020. You can reclaim up to 80% of wage costs up to a cap of £2500 per month. This is going to be in place until the end of July, from which point it is currently expected that the 80% payment to employees will remain in place but will need to be funded, in part, by the employer where the employee returns on a part-time basis.
As you remain liable for National Insurance and pension contributions for furloughed staff, the Government will also cover the associated employer National Insurance contributions and minimum auto-enrolment pension contributions on the reduced wage (see Tax, National Insurance and pension contributions for furloughed staff below.
Guidance published on 15 April 2020 clarifies that, if, based on previous guidance, you had calculated your claim based on the employee’s salary as at 28 February 2020 (and that differed from their salary in their last pay period prior to 19 March 2020), you can choose to still use this calculation for your first claim.
The situation for those with variable or irregular pay is different. If the employee has been employed (or engaged by an employment business) for a full 12 months prior to the claim, you can claim for the higher of either:
the same month’s earning from the previous year, or
average monthly earnings from 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.
Commission, bonuses and discretionary payments are not included when calculating pay. All elements that you are obliged to pay your employees such as wages, past overtime, fees and compulsory commission payments can be included.
Tax, National Insurance and pension contributions for furloughed staff
Payments made to furloughed employees will be subject to PAYE and National Insurance contributions.
You remain liable for National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of your furloughed employees. However, the Government will cover, in addition to the 80% of staff wages, National Insurance contributions associated with that (capped) payment, plus minimum automatic enrolment employer pension contributions in respect of that (capped) payment.
Applying for the Government grant
The HMRC online portal to apply for staff wages opened on 20 April 2020. Claims can be backdated to cover staff furloughed since 1 March 2020.
It is currently understood that employers will be able to make one claim every three weeks. In submitting the claim, you should access the portal and have the following information to hand:
your company’s PAYE reference number
the amount of staff you have furloughed
the National Insurance numbers, names and payroll/works numbers of those being furloughed
your company’s self-assessment or corporation tax unique taxpayer reference or company registration number
the start and end dates for the period of furlough being claimed
the amount that is being claimed as worked out by yourself (see Calculating furloughed staff wages above)
your company’s contact details, bank account number and sort code.
You can’t make more than one claim during a claim period, so when preparing to make a claim you need to decide the length of the claim period. This means you should include all the employees that you want to furlough for that claim period, because you won’t be able to make another claim for the same period or one that overlaps, and you can’t make changes to your claim once it is submitted. In deciding what your claim period is, it helps to think about how frequently you run your payroll.
Government guidance states that once a claim is made, it will be checked and the grant paid within six days.
Taking staff off furlough
Staff can be furloughed more than once, depending on the needs of your business. However, each period of furlough must last for at least three weeks in order for you to make a claim for their wages. You can also rota staff in and out of furlough if you wish.
If you wish to end a period of furlough, you should notify the employee when you expect them to return to work. You should also make clear if this is to be in the workplace or working from home.
Depending on your circumstances, it may also be necessary to extend a period of furlough. Again, notification should be provided to the staff member.
Furloughing staff in early year’s provision, children’s social care and education
There are various types of support open to these industries. However, all relevant organisations should first consider any potential options to reduce their operating cost and secure commercial loans, eg Business Interruption Loans, before seeking to use the Coronavirus Job Retention Scheme or seeking specific support from the Department for Education (DfE).
Educational settings that are in receipt of some public funding should only furlough employees if they meet the following conditions:
the employee works in an area of business where services are temporarily not required and where their salary is not covered by public funding
the employee would otherwise be made redundant or laid off
the employee is not involved in delivering provision that has already been funded
(where appropriate) the employee is not required to deliver provision for a child of a critical worker and/or vulnerable child
the grant from the Coronavirus Job Retention Scheme would not lead to financial reserves being created.
Early years providers
The Government will continue to pay local authorities for free early years entitlement places for 2, 3 and 4–year-olds to support providers at this time.
A private provider should only furlough employees, and therefore seek support through the Coronavirus Job Retention Scheme, if they meet the conditions set out above.
If it is difficult to distinguish whether staff are funded through free entitlement or private income for the purposes of meeting the first three conditions, then an early years provider can access the JRS to cover up to the proportion of its pay bill which could be considered to have been paid for from that provider’s private income. This would typically be income received from “parent-paid” hours, and excludes all income from the Government’s free entitlements (or “DSG income”) for all age groups.
In line with the conditions of the scheme, providers should initially use the month of February 2020 to represent their usual income in calculating the proportion of its paybill eligible to be covered by the scheme. Providers should adjust these proportions in subsequent furloughing applications if their income from the Government’s free entitlements changes, but are not expected to make any adjustments in relation to changes in parent-paid income.
If a provider’s average monthly income is 40% from DSG and 60% from other income, the provider could claim CJRS support for up to 60% of their paybill. This would be done by furloughing staff whose usual salary/combined salaries come to no greater than 60% of the provider’s total paybill.
Children’s social care
As placements will continue to be needed, local authorities will continue to pay fees to children’s social care providers so the Government would expect providers not to furlough staff. In the rare circumstances that providers feel they have no choice but to furlough staff, they should only seek support through the Scheme if they meet the conditions above.
Funding for residential care will continue.
Mainstream state-funded schools
The Government do not, in general, expect schools to furlough staff. However, schools may have a separate private income stream (for example, catering, sports facilities lettings, or boarding provision funded by parents in state boarding schools). Where this income has either stopped or been reduced and there are staff that are typically paid from those private income streams, it may be appropriate to furlough staff.
Schools should first seek to make the necessary savings from their existing budget or consider options to redeploy these staff before furloughing them. Only after all other potential options have been fully considered should schools furlough those members of staff and seek support through the Scheme subject to the 5-point criteria above.
Where these conditions are met, schools should receive a grant from the CJRS which is in line with the proportion of its paybill which could be considered to have been funded by a school’s private income.
If a school’s average monthly private income stream (for example, from parent-paid school meals) provides 4% of the schools’ overall income, the school could claim support through the CJRS for up to 4% of its paybill after exhausting options to meet costs from existing budgets and redeployment. This would be done by furloughing staff (for example, catering staff) whose usual salary or combined salaries are linked with the income lost and come to no greater than 4% of the provider’s total paybill.
Schools are not expected to consider each stream of private income separately so a school should consider its total income from private sources, as a proportion of its overall income, and the pay of all the staff it proposes to furlough, as a proportion of its total paybill.
Supply teachers and other contingent workers in state-funded schools
Where schools are the workers’ direct employer
Schools will continue to receive their budgets for the coming year as usual, regardless of any periods of partial or complete closure. This will ensure that they are able to continue to pay for staff and meet their other regular financial commitments.
The Government expects schools to ensure any employees funded by public money continue to be paid in the usual fashion from their existing staff budgets, and not furloughed.
Where schools have live assignments with contingent workers, and where the school is the workers’ employer, schools should continue to pay these workers from their existing school budgets and not furlough them.
Where schools have terminated contracts with contingent workers due to coronavirus earlier than the original terms set out, and where the school was the workers’ employer under that contract, schools should reinstate these contracts on the terms previously agreed, as long as the contractor is not already accessing alternative support through another Government support scheme.
Where schools are not the workers’ direct employer
Schools are advised to refer to all parts of the Procurement Policy Note 02/20 (PPN 02/20), which provides guidance for public bodies on payment of their suppliers for the purposes of ensuring the continuity of critical service during and after the coronavirus (COVID-19) outbreak.
Where schools have agency workers on live assignments who can continue to work, they may continue to make previously agreed payments for the supply of workers in line with the approach set out in PPN 02/20. Agencies who receive money for workers in line with this guidance should not furlough these workers, and should follow the open book accounting rules set out in PPN 02/20 to provide schools with proof that workers are continuing to be paid as normal.
Where schools have agency workers on live assignments who cannot continue to work due to coronavirus (COVID-19), schools and agencies should refer to the guidance set out in Procurement Policy Note 02/20: Contingent Workers Impacted by COVID-19.
The supplier relief guidance covers the length of existing live assignments up to the end date that had been previously agreed. It does not require these assignments to be extended further if the resource will not be required.
Where agency workers are not on live assignments with schools, or where a previously agreed assignment is due to end, schools and agencies should discuss any further demand for the worker. If there is no further demand, the employer can apply to furlough the worker through the Scheme. Once a worker has been furloughed, they become unavailable to work and cannot provide services for their employer for a minimum of 3 weeks. Schools and agencies should bear this in mind when discussing ongoing resource requirements and agencies should keep this under regular review.
High needs funding
High needs funding will continue to be paid to the following types of setting, whether from local or central government:
local authority-maintained schools (mainstream, special and pupil referral units)
academies and free schools (mainstream, special and alternative provision)
non-maintained special schools
independent schools, including independent special schools
independent alternative provision
high needs places in further education (FE) colleges and sixth form colleges
special post-16 providers
Teaching and non-teaching staff (administration, operations, maintenance and catering) should not be furloughed where they are funded from continued high needs funding, and where necessary and feasible, should be available for redeployment within settings and in other settings to assist in maintaining provision for vulnerable children and young people, and the children of critical workers.
State-funded residential special provision is delivered in various types of setting, including state-maintained schools, non-maintained special schools, independent schools and special post–16 institutions. While the educational costs will continue to be funded from the DSG, the residential costs are met from social care budgets. Local authorities will continue to receive funding for social care provision and should continue to pay residential costs so that the employment and payment of staff supporting children and young people who require residential provision can continue.
As with colleges, special post-16 institutions may rely on non-grant income for young people with EHC plans. If such income has ceased or reduced, it may be appropriate for special post-16 institutions to seek support from the Scheme to furlough staff who are working on activities relating to those non-grant income streams.
Mainstream independent schools
Independent schools have been asked to remain open for the children of critical workers and the most vulnerable children. Independent schools are, in general, funded by fee income paid by parents. Since schools have closed to the majority of pupils, they, like other businesses, may be facing a sudden and substantial loss of income. These institutions should access support schemes in order to retain staff and enable the school to reopen fully in due course.
However, if there are any activities for which schools continue to receive public funding, such as looked after children placed by a local authority, or local authority support for pupils with EHC plans, the Government expects schools to use that money to continue to pay those staff in the usual fashion and therefore not furlough them or seek support through the Scheme.
Independent special schools
Local authorities will continue to receive their high needs budgets and should continue to pay top-up and other high needs funding to independent special schools, so that the employment and payment of staff supporting children and young people with SEND can continue. Some independent special schools also have pupils who are funded privately instead of under an EHC plan. These institutions should only access support schemes in relation to the proportion of staff that is not supported through public funding, and only to the extent that the school is facing a loss of income because the children have been withdrawn by their parents leading to a loss of fee income.
Further education and apprenticeships
Where the provider is continuing to receive public funding through any of its usual routes they should continue delivering this provision where feasible, including through remote delivery. They should not furlough staff whose salaries are paid from continuing Education and Skills Funding Agency (or any other public) income. This applies to both teaching and non-teaching staff.
The Government recognises that many providers rely on funding from a mix of public sources and other income streams such as fees, employer contributions and commercial income. Where public income has reduced or non-public income has ceased or reduced, it may be appropriate for providers to seek support from the Scheme to furlough staff. Providers should only furlough employees if they meet the five conditions above.
If it is difficult to distinguish whether staff are funded through continuing public funding, for the purposes of meeting the first three conditions, then the total proportion of teaching and non-teaching staff (based on gross payroll) that are retained (for example, not furloughed) should, as a minimum, be equivalent to the continuing public income, as a proportion of all income that the provider usually receives. For example, if the only source of public funding is through a grant, and non-grant income makes up 25% of total income, then this should be the total maximum proportion of staff (based on gross payroll) that could be furloughed.
Where providers consider furloughing staff, they should ensure that they take a fair and reasonable approach to part-time, sessional and temporary staff, reflective of good HR practice and legal requirements.
The Government expects that in most circumstances, HE providers will be able to continue paying their staff as usual because HE delivery has largely moved online, and staff are maintaining key services, including those for students remaining on campus.
If HE providers meet the criteria for financial assistance such as the Coronavirus Business Interruption Loan Scheme (CBILS) they should consider applying for these. Where those schemes are not appropriate, HE providers are eligible for the Job Retention Scheme. HE providers should only furlough employees and seek support through the Scheme if they meet the 5-point conditions.
If it is difficult to distinguish whether staff are funded through public or commercial income for the purposes of meeting the first three conditions, and some staff will be funded through multiple sources, as a guiding principle, HE providers should not seek to furlough a higher proportion of their wage bill than could reasonably be considered to have been generated through commercial income, including from non-public research grants and contracts. It is likely that decisions on whether to furlough staff will need to be taken on a case by case basis.
Where research work has been paused (for example, where grant holders have requested a no-cost extension to UK Research & Innovation grants) and therefore providers are not able to receive payments towards staff costs for a period, resulting in a loss of income due to ceased or reduced delivery of research programmes, providers should consider their eligibility and apply for the wide range of financial support that HM Treasury has already announced for businesses, including the Scheme in line with the above conditions.
Government steps to avoid fraudulent claims
Chancellor Rishi Sunak stated, in his Government briefing on 8 April 2020, that the Scheme had been put together in a way to prevent spurious claims. HMRC’s Chief Executive, Jim Harra, confirmed measures had been put in place to minimise fraud, which were:
the requirement for an employer to have already been authenticated by HMRC
a four- to six-day payment processing period to allow background checks
checks on employers after a pay-out has been made to verify a claim was real.
Payment of the grant will be withheld or repayment required if the claim is based on dishonest or inaccurate information or was found to be fraudulent. A hotline has also been set up on which employees can report employers’ abuse of the system.
Last reviewed 12 May 2020