Update on Furlough Leave as of 21.04.20

We have produced this advice because i) there have been updates to the Government’s Coronavirus Job Retention Scheme which alter advice we have previously provided on this subject by email and through our webinars and ii) to ensure you have the most recent rules and guidance available to us at this time.This advice summarises the main points but more detail can be found in the Treasury’s Direction to HMRC and the Employer and Employee guidance provided by HMRC. Please note that there are one or two inconsistencies between the Treasury’s Direction to HMRC and the Employer and Employee guidance provided by HMRC. We have therefore aimed to take the path with least risk in our advice to you below.

The portal for claiming is now live and 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 now available here. A step by step guide to making your claim can be found here.

We may also have provided advice in recent days and weeks to those in your team authorised to come to us for advice, by phone, email or Zoom. Key changes are shown below in bold italic.


  • Furlough Leave is designed to help employers whose operations have been severely affected by coronavirus (COVID-19) to retain their employees and protect the UK economy
  • It 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, mainly, be otherwise laid off due to a downturn in work as a result of coronavirus (but there are other scenarios where it can be used, see below)
  • The scheme started on 1/3/20 and will continue for at least 3 months; it was extended on 17/4/20 until 30/6/20 and 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 19/3/20
  • 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
  • Contractual fees, commission and bonuses plus monetary benefits in kind (eg a contractual car allowance) can be included in the calculation of the employee’s monthly wagediscretionary fees, commission, bonuses etc cannot be included
  • The employer designates employees as furloughed and will claim the grant via an HMRC portal
  • Furloughing amounts to a contract variation and must therefore be expressly agreed with employees
  • When on furlough leave, an employee cannot undertake service delivery or income generating work for, or on behalf, of the organisation or any linked or associated organisation
  • 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
  • The employer must pay the employee all the grant it receives for their gross pay.

Who can be placed on furlough leave?

  • Furloughed employees must have been on your PAYE payroll on 19/3/20 and on your Real Time Information (RTI) system as of that date
  • 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 19/3/20
  • 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; however where organisations are not primarily funded by the government and there are workers who cannot be redeployed to assist with the coronavirus response, the scheme may be appropriate for some staff.

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 the pay period before 19/3/20 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 or March 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

  • If employees have ceased all work and agreed in writing to be furloughed, claims made via the portal 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 (although make sure you understand the risks around this if you are minded to do this)
  • 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 placed on furlough leave after this – this does not have to be due to a downturn in work
  • Furloughed employees who become ill must be paid at least SSP. It is up to employers to decide whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate.
  • Employees who are shielding in line with public health guidance can be placed on furlough leave – this does not have to be due to a downturn in work
  • Employers paying SSP in these circumstances will only be able to reclaim 2 weeks of SSP but will be able to reclaim 80% of salary via a furlough grant after this.

Employees with caring responsibilities

  • Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be placed on furlough leave, eg employees who need to look after children. This does not have to be due to a downturn in work.

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 for you 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.
  • They can volunteer or continue to work for other organisations and they can undertake new roles (as long as your contract of employment permits other work and as long as they are available to return to your role when their furlough leave ends)
  • 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)

Annual leave

  • Employees on furlough leave continue to accrue annual leave as per their employment contract
  • Employees can take holiday whilst on furlough leave and if they do this, the Working Time Regulations (WTR) require holiday pay to be paid at the normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay the employee received in the previous 52 working weeks
  • Likewise for Bank holidays taken in the furlough period, the employer should either top up pay to the usual holiday pay or give a day of holiday in lieu
  • Employers are therefore obliged to pay the additional amounts over the grant
  • There is no rule or guidance to prevent employers from exercising their right to require employees on furlough leave to use up annual leave (ie directed annual leave), in situations where the employer gives 2 days’ notice for 1 day’s annual leave to be taken
  • HMRC states that it is keeping the policy on holiday pay during furlough under review so more developments should be anticipated.

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
  • The guidance states that a written reply from the employee is not required (but we strongly recommend this)
  • HMRC requires you to keep a copy of the furlough leave contract variation for 5 years
  • Please note that the period you can claim furlough grant for an employee commences from the date that the employee finishes work and starts furlough, not when the decision is made, or when they are written to confirming their furloughed status
  • 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.


  • Information on claiming (including a calculator) is available here
  • You can make your claim here
  • HMRC will retain the right to retrospectively audit all aspects of your claim.
  • 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.

Please contact us on 01562 840060 / hello@rootshr.org.uk for any further advice.