Update of Furlough Leave as of 26/03/20

A summary of the rules around implementing Furlough Leave as per the Government’s Guidance on Claiming for Wages through the Coronavirus Job Retention Scheme update last night.


  • Furlough Leave is a way of the government providing support in the form of a grant for you to continue paying part of your employees’ monthly wages for employees who would otherwise be laid off due to a downturn in work as a result of coronavirus
  • The scheme started on 1/3/20 and will continue for at least 3 months; employers can use the scheme any time in this period
  • Any UK business can apply as long as it was operating a payroll as of 28/2/20
  • HMRC will reimburse 80% of furloughed workers monthly wage costs, up to a cap of £2,500 per month
  • In addition, HMRC will reimburse the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on the subsidised wage
  • Fees, commission and bonuses cannot be included in the calculation of the employee’s monthly wage
  • The employer designates employees as furloughed and will claim the grant via an HMRC portal
  • The employer can choose to pay the additional 20% but doesn’t have to
  • Furlough income is subject to tax and NI in the normal way
  • Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme
  • Employers will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme
  • The minimum amount of time an employee can be placed on furlough leave is 3 weeks
  • People on furlough leave remain your employees and have the same rights as they did previously to Statutory Sick Pay (SSP) maternity and other parental rights, rights against unfair dismissal and to redundancy payments.

Who can be placed on furlough leave?

  • Furloughed employees must have been on your PAYE payroll on 28/2/20
  • They can be on any type of contract, including full time, part time, zero hours or flexible as long as they were employed on or before 28/2/20
  • It is not expected that furlough leave will be used by organisations who are in receipt of “public funds” which cover the wage costs of an employee.

What does the grant cover and how do I calculate it?

  • For full time and part time salaried employees, the employee’s actual salary before tax, as of 28/2/20 should be used to calculate the 80%
  • For zero hours contracts or flexible hours, if the employee has been employed for a full twelve months prior to the claim, you can claim for the higher of either:
    • the same month’s earning from the previous year
    • average monthly earnings from the 2019-20 tax year
  • For zero hours contracts or flexible hours, 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. If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
  • Agency staff can also be furloughed (this will be done by the agency as the employer)
  • For staff on the National Living Wage (NLW)/National Minimum Wage (NMW), this means that they will receive less than the NLW/NMW (which is applicable to working time only, see * below)
  • You can also claim the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on the subsidised wage.
  • If you choose to top the salary up to 100%, Employer National Insurance Contributions and automatic enrolment contribution on the top-up salary will not be funded through this scheme. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).

Where you have already taken action

  • Claims can be backdated to 1/3/20
  • The scheme can therefore cover employees who were made redundant since 28/2/20, if they are rehired by their employer
  • It can also cover employees who are currently on unpaid leave if the unpaid leave started after 28/2/20.

Sick leave / shielding

  • Employees on sick leave or self-isolating should receive SSP but can be furloughed after this
  • Employees who are shielding in line with public health guidance can be placed on furlough leave.

Maternity, paternity, adoption, shared parental leave

  • Statutory maternity, paternity, adoption and shared parental pay is not changing and should be administered and paid as it usually would
  • Any contractual entitlement to maternity, paternity, adoption and shared parental pay can be claimed through the furlough scheme

Working whilst on furlough leave

  • Employees cannot undertake any service delivery or revenue-generating work for you at all while furloughed
  • They can volunteer for you as long as they are not undertaking service delivery or revenue-generating work for you
  • They can undertake training and continuous professional development eg complete online training courses. *If they are required to do this, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
  • Employees working reduced hours or for reduced pay are not eligible to be furloughed
  • Employees remain employed by you throughout (so annual leave accrues)
  • If your employee has more than one employer they can be furloughed for each job. If they are furloughed from one job they can still undertake work in the other job role
  • Each job is separate but the cap applies to each employer individually (so if an employee has 2 jobs for one employer, the employer can only claim up to £2,500)

HR process

  • Furloughing amounts to a contract variation because of the removal of work (as well as the reduction in salary) and must therefore be agreed with employees
  • You should write to them to confirm the decision so that there is a record between you
  • If more than 20 staff are involved, it may be necessary to engage collective consultation processes to gain agreement to changes to terms of employment
  • Decision making on the process, including selection for furlough leave, is still subject to equality and discrimination legislation
  • When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider redundancy.


  • To claim, you will need:
    • your ePAYE reference number
    • the number of employees being furloughed
    • the claim period (start and end date)
    • amount claimed (per the minimum length of furloughing of 3 weeks) – you need to calculate the value of your claim
    • your bank account number and sort code
    • your contact name and phone number
  • HMRC will retain the right to retrospectively audit all aspects of your claim.
  • You can submit one claim every 3 weeks
  • Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account
  • You are advised to make your claim in accordance with actual payroll amounts, either at the point at which you run your payroll or in advance of an imminent payroll
  • You must pay the employee all the grant you receive for their gross pay
  • The portal for claiming is not currently live, more advice to employers on the logistics of claiming the grant, including payment for Employer National Insurance contributions and minimum automatic enrolment employer pension contributions, is expected to follow.

For procedural advice and documentation please contact us.

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