How does the scheme work?

 

If you cannot maintain your workforce because your operations have been affected by coronavirus (COVID-19), you can furlough employees and apply for a grant to cover a portion of their usual monthly wage costs where you record them as being on furlough.

The Coronavirus Job Retention Scheme has been extended until 30 September 2021. Until 30th June you can still claim 80% of an employee’s usual salary for hours not worked, up to a maximum of £2,500 per month.

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From 1st July the Employer will need to contribute more towards employees' furlough payments:

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You can claim for employees who were employed on 30 October 2020, as long as you have made a PAYE RTI submission to HMRC between the 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee. This may differ where you have made employees redundant, or they stopped working for you on or after 23 September 2020 and you have subsequently re-employed them.

All employers with a UK, Isle of Man or Channel Island bank account and UK PAYE schemes can claim the grant. You do not need to have previously claimed for an employee before the 30 October 2020 to claim.

Employers can furlough employees for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked.

You will need to pay for employer National Insurance contributions and pension costs. 

Coronavirus Job Retention Scheme grants are not classed as state aid.

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Which employees can be furloughed

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You can claim for employees on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed. Grants under the scheme are not counted as ‘access to public funds’, and you can furlough employees on all categories of visa.

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Fixed Term contract

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If the employee’s fixed term contract has not already expired, it can be extended or renewed. You can put the employee on furlough as long as they were employed by you on or before 30 October 2020. You must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.

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If your employee’s fixed term contract expired on or after 23 September 2020, they can be re-employed and claimed for. This applies as long as your employee was employed by you on 23 September 2020 and you made a PAYE RTI submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.

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Apprentices

Apprentices can be furloughed in the same way as other employees and they can continue to train whilst on furlough.

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However, you must pay your Apprentices at least the Apprenticeship Minimum Wage/National Living Wage/National Minimum Wage (AMW/NLW/NMW) as appropriate for all the time they spend training. This means that for time spent training you must cover any shortfall between the amount you can claim for their wages through this scheme and their appropriate minimum wage.

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Employees who can't work

Your employee is eligible for the grant and can 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.

 

 Employees self-isolating or on sick leave

If your employee is on sick leave or self-isolating as a result of coronavirus, they may be able to get Statutory Sick Pay (SSP). The Coronavirus Job Retention Scheme is not intended for short-term absences from work due to sickness.

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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.

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Employers can furlough employees who are clinically extremely vulnerable or at the highest risk of severe illness from coronavirus. It is up to employers to decide whether to furlough these employees. An employer does not need to be facing a wider reduction in demand or be closed to be eligible to claim for these employees.

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You can claim back from both the Coronavirus Job Retention Scheme and the SSP rebate scheme for the same employee but not for the same period of time. When an employee is on furlough, you can only reclaim expenditure through the Coronavirus Job Retention Scheme, and not the SSP rebate scheme. If a non-furloughed employee becomes ill due to coronavirus, needs to self-isolate or shield, then you might qualify for the SSP rebate scheme, where you can claim up to two weeks of SSP per employee.

 

 

Qualification 

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To claim furlough pay for your employees, you must have:

• created and started a PAYE payroll scheme on or before 30 October 2020
• enrolled for PAYE online
• a UK, Isle of Man or Channel Island bank account

Any entity with a UK payroll can apply, including businesses, charities, recruitment agencies and public authorities.

You can only claim for furloughed employees that were employed and on payroll on 30 October 2020. This means you must have made a PAYE RTI submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee. This may differ where you have made employees redundant, or they stopped working for you on or after 23 September 2020 and you have subsequently re-employed them.

 

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If you receive public funding

If you have staff costs that are publicly funded (even if you’re not in the public sector), you should use that money to continue paying your staff, and not furlough your staff.
Organisations can use the scheme if they are not fully funded by public grants and they should contact their sponsor department or respective administration for further guidance.
 

 

If you’re an administrator

Where a company is being taken under the management of an administrator, the administrator can furlough and claim for employees.
Administrators should only use the scheme if there is a reasonable likelihood of retaining the employees. For example, this could be as a result of an administration and pursuit of a sale of the business.

 

Agreeing to furlough employees

You should discuss with your staff and make any changes to the employment contract by agreement. When making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.

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Eligibility for the grant

To be eligible for the grant, you must have confirmed to your employee (or reached collective agreement with a trade union) in writing that they have been furloughed. You must:
• make sure that the agreement is consistent with employment, equality and discrimination laws
• keep a written record of the agreement for five years
• keep records of how many hours your employees work and the number of hours they are furloughed (i.e. not working)
The employee does not have to provide a written response and you do not need to place all your employees on furlough.

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Types of furlough

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You can:
• fully furlough employees - they cannot undertake any work for you while furloughed full time
• flexibly furlough employees - they can work for any amount of time, and any work pattern but they cannot do any work for you during hours that you record them as being on furlough.
If you flexibly furlough employees, you will also need to agree this with the employee (or reach collective agreement with a trade union) and keep a new written agreement that confirms the new furlough arrangement.

You do not need to place all your employees on furlough and you can continue to fully furlough some employees and place others on flexible furlough if you wish. Employees cannot undertake any work for you during time that you record them as being on furlough.

Where consistent with employment law, any flexible furlough or furlough agreement made retrospectively that has effect from 1 November 2020 will be valid for the purposes of a Coronavirus Job Retention Scheme claim as long as it is made according to the conditions above. Only retrospective agreements put in place up to and including the 13 November 2020 may be relied on for the purposes of a claim.

 

Flexible furlough agreements

There is no minimum furlough period, agreed flexible furlough agreements can last any amount of time. Employees can enter into a flexible furlough agreement more than once.
Although flexible furlough agreements can last any amount of time, unless otherwise specified the period that you claim for must be for a minimum claim period of seven calendar days.

 

When your employees are on furlough

During hours which you record your employee as being on furlough, you cannot ask them to do any work for you that:
• makes money for your organisation or any organisation linked or associated with your organisation
• provides services for your organisation or any organisation linked or associated with your organisation
 

Your employee can:
• take part in training
• volunteer for another employer or organisation
• work for another employer (if contractually allowed)

 

Paying employee taxes and pension contributions

Your employees will still pay the taxes they normally pay out of their wages.
You must deduct and pay to HMRC income tax and employee National Insurance contributions on the full amount that you pay the employee, including any scheme grant.

You must also pay to HMRC the employer National Insurance contributions on the full amount that you pay the employee, including any scheme grant.

You must report these payments via a Full Payment Submission (FPS) to HMRC on or before the pay date.
Your employee will also still pay pension contributions (both employer and automatic contributions from the employee), unless the employee has opted out or stopped saving into their pension. You are not able to claim for employer National Insurance contributions and pension contributions.

 

Keeping employee rights

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Whilst on furlough/flexible furlough, employees still have the same rights at work, including:
• Statutory Sick Pay (SSP)
• annual leave
• maternity and other parental rights
• rights against unfair dismissal
• redundancy payments

Grants cannot be used for redundancy or notice payments.

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Holiday pay

Furloughed employees continue to accrue leave as per their employment contract.

You can only place employees on furlough if coronavirus (COVID-19) is affecting your operations.
You should not place employees on furlough just because they are going to be on paid leave.
The employer and employee can agree to vary holiday entitlement as part of the furlough agreement, however almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.

Employees can take holiday whilst on furlough. If they are flexibly furloughed then any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours. You should not put your employees on furlough for a period just because they are on holiday for that period. This means that employees should only be placed on furlough because your operations have been affected by coronavirus (COVID-19) and not just because they are on paid leave. 

The Working Time Regulations (WTR) require holiday pay to be paid at the employee’s normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the last 52 working weeks (twelve weeks in Northern Ireland). Therefore, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations.

Employers will be obliged to pay employees who are on holiday additional amounts over the grant, though will have the flexibility to restrict when leave can be taken if there is a business need and the correct notice is given. This applies for both the furlough period and the recovery period.

If an employee usually works bank holidays then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave then the employer would either have to top up their usual holiday pay, or give the employee a day of holiday in lieu.
 

If your employee does volunteer work

A furloughed employee can take part in volunteer work during hours which you record your employee as being on furlough as long as it is for another employer or organisation.

 

If your employee does training

Furloughed employees can engage in training during hours which you record your employee as being on furlough, as long as in undertaking the training the employee does not provide services to, or generate revenue for, or on behalf of their organisation or a linked or associated organisation. Furloughed employees should be encouraged to undertake training.

Where training is undertaken by furloughed employees during hours which you record your employee as being on furlough, 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 (see National Minimum Wage Section for more details).

 

Furloughed employees working as union or non-union representatives or as pension trustees

During hours which you record your employee as being 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 your organisation or a linked or associated organisation.

During hours which you record your employee as being on furlough, employees who are pension scheme trustees or trustee directors of a corporate trustee may undertake trustee duties in relation to the pension scheme. However, a professional, independent pension scheme trustee who has been furloughed by the independent trustee company cannot undertake trustee work that would provide services to or generate revenue for, or on behalf of, the independent trustee company or any organisation linked or associated with that independent trustee company during hours which you record them as being on furlough.