As a result of the economic impact of the COVID-19 pandemic, the government introduced the Coronavirus Job Retention Scheme (CJRS) on 20 March 2020. The scheme was intended to avoid redundancies by alleviating the pressure on employers to continue paying wages in full during the crisis period.
The CJRS online claim portal opened on 20 April 2020.The scheme applies in respect of employees (and certain workers) who have been “furloughed”, meaning that they have been put on a period of leave during which they are not required to work. The scheme allows the employer to agree with employees that they will be put on temporary leave of absence (furlough), and then allows the employer to recover a proportion of pay from HMRC in respect of employees on that leave. The reimbursement that employers can seek per employee is limited to the lower of 80% of wage costs or £2,500 per calendar month, plus employer national insurance contributions and employer auto-enrolment pension contributions on the furlough pay. The scheme is in place for 4 months until the end of June 2020 with backdated claims allowed from 1 March 2020.
This note answers some frequently asked questions that have arisen from both employers and employees in respect of the scheme. Links to useful resources will be provided through and at the end of the document.
How the CJRS operates
How does an employer make a claim under the CJRS for reimbursement?
To claim, the employer will need to be enrolled for PAYE online and submit to the CJRS:
- The employer’s PAYE reference number.
- The number of employees being furloughed.
- The names, national insurance numbers and (optionally) payroll/employee numbers of the employees being furloughed.
- The employer’s name, Self-Assessment Unique Taxpayer Reference, Corporation Tax Unique Taxpayer Reference or company registration number.
- The claim period (start and end date).
- The full amount claimed (for a minimum length of three consecutive weeks) for all employees, including employer NICs and employer minimum pension contributions. The CJRS calculator found here (https://www.tax.service.gov.uk/job-retention-scheme-calculator/?_ga=2.218780825.1291120991.1587371920-778629040.1580374300) can be used to calculate the amounts due.
- The employer’s UK bank account number and sort code.
- A contact name and phone number.
- The claim can only be made at the point at which the employer runs payroll or in advance of an imminent payroll because actual payroll amounts need to be submitted.
- As an employer you need to have created and started a PAYE payroll scheme on or before 19 March 2020 but you can still register for PAYE online and HMRC have sped up the process for employers to do so.
- Where the employer has an agent authorised to act for PAYE purposes, the agent will be able to submit the claim on the employer’s behalf. However, where employers use a file-only agent (who only files their RT1 return but does not act on other matters) that agent will not be able to submit the claim on their behalf.
- Where the employer is claiming in respect of 100 or more furloughed employees, the employer will be asked to upload a file (in .xls, .xssx, .csv or .ods format) containing employees’ information rather than input it directly into the system.
What happens after a claim is submitted?
After an employer has submitted their claim they will receive a claim reference number. HMRC will then check that the claim is correct and pay the claim amount via BACS into the employer’s bank account. The employer must:
- Keep a copy of all records, including: the amount claimed and claim period for each employee; the claim reference number for their records; and the calculations used in case HMRC need more information about the claim.
- Tell their employees that they have made a claim and that they do not need to take any more action.
- Pay their employees their wages, if they have not already done so.
How long does it take for HMRC to pay employers after they submit their claims?
Four to six working days after submission of the claim. However, employers should not contact HMRC until they have not received payment more than 10 working days after submitting their claim.
What help will HMRC provide to employers to assist them in submitting their claims?
HMRC has issued the 80% guidance (https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme), the CJRS calculator (link provided above) and a YouTube video Coronavirus (COVID-19) Job Retention Scheme (https://www.youtube.com/user/hmrcgovuk)) to assist employers in calculating their claims.
Can an employer make multiple claims in respect of the same period?
No. Employers may furlough different groups and numbers of employees at different times but an employer can only make one claim during a claim period for each PAYE scheme it operates.
HMRC has confirmed that employers cannot make changes to their claim once it has been submitted.
What is meant by “claim period”?
The term “claim period” is not defined in the HMRC guidance or the Treasury direction and it is likely that an employer can specify their own claim period.
Although the minimum furlough period is three weeks, there is no obligation to make a claim every three weeks and it does not appear that employers are required to use the same claim period in each claim.
An employer can start its claim period from 1 March 2020 (the earliest possible start date for claims under the CJRS). On the second page of the calculator, an employer can specify the end date of their claim period.
Employers may decide to submit a claim before running payroll in order to ensure that funds are received in time to make payment. The employer can apply up to 14 days before the end of the claim period it has chosen, but payment may take up to six working days, so there may be a relatively narrow window to achieve this result.
What does the reimbursement cover?
Employers can claim up to the lower of 80% of usual monthly wage costs or £2,500 per employee, plus the associated employer national insurance contributions and minimum auto-enrolment employer pension contributions on the capped furlough pay.
In calculating the employee’s reference salary, only regular salary or wages are taken into account. Regular in this context does not appear to mean “frequent”. Non-monetary benefits, including taxable benefits in kind, should not be included in the reference salary.
The maximum level of grant for employer pension contributions is set in line with the minimum automatic enrolment employer contribution of 3% on qualifying earnings. Student loan payments will not be covered by the grant from the CJRS nor will the Apprenticeship levy and these should be paid as usual.
What is the start date for the purposes of reimbursement?
The claim should start from the date the employee finishes work and starts furlough, not the date the decision to furlough them was made or the date on which they were written to, confirming their furloughed status.
Does the reimbursement limit include auto-enrolment pension contributions and employer’s NICs?
No. These payments can be reclaimed in addition to the cap.
Is £2,500 the net amount the employee receives or is it subject to tax and NI?
The sum paid to the employee during furlough is gross and then subject to income tax and national insurance in the usual way.
How does the cap work where the employee has more than one job?
The cap on reimbursement applies to each employer individually.
What can an employee do if their employer doesn’t pass on the reimbursement to them?
In most cases the employee will already have received the pay in respect of which the employer is being reimbursed so this issue will not arise.
However, where pay is deferred until reimbursement is received from HMRC, and the employer does not pass it on to the employee, they have the following options:
- If the employer has failed to pay the employee sums which they are contractually due then they may have a claim for unlawful deduction of wages or breach of contract.
- HMRC encourages employees who are concerned that their employer is abusing the scheme by claiming on their behalf and then not paying what they are entitled to report the employer through HMRC’s Report fraud to HMRC service (https://www.gov.uk/government/organisations/hm-revenue-customs/contact/customs-excise-and-vat-fraud-reporting)
There is no mechanism for employees to apply directly to the scheme where their employer has failed to pass on the reimbursement.
Eligibility for the scheme
Which employers are eligible for reimbursement?
The scheme is open to an employer who:
- Had a UK PAYE payroll scheme registered on HMRC’s real time information (RTI) system for PAYE on 19 March 2020
- Has enrolled for PAYE online.
- Has a UK bank account.
This includes businesses, charities, recruitment agencies with agency workers paid through PAYE and public authorities
Where a company is in administration, the administrator will be able to access the CJRS. However, it is expected that an administrator would only access the scheme if there is a reasonable likelihood of rehiring the workers in light of, for example, an anticipated sale of the business.
Are public sector, local authority and charity employers covered?
Yes, although the government expects that the scheme will not be used by many public sector organisations, as the majority of public sector employees are continuing to provide essential public services or contribute to the response to the coronavirus outbreak.
Where employers receive public funding for staff costs, and that funding is continuing, the government expects employers to use that money to continue to pay staff as usual rather than put them on furlough. This also applies to non-public sector employers who receive public funding for staff costs.
The government has issued specific guidance on the use of the CJRS by education, early years and children’s social care providers in England. The guidance sets out specific conditions for access to the CJRS for these employers and can be found here: https://www.gov.uk/government/publications/coronavirus-covid-19-financial-support-for-education-early-years-and-childrens-social-care/coronavirus-covid-19-financial-support-for-education-early-years-and-childrens-social-care
Which individuals are covered?
Making eligibility under the CJRS subject to the existence of an RTI submission for a furloughed employee may have consequences for new employees. For example, if an employee’s pay is processed for the first time in the March payroll (potentially towards the end of March), the cut-off date of 19 March 2020 may not be met. The HMRC guidance makes clear that an employee who was employed on 19 March 2020 will not be eligible for the CJRS, if the RTI submission notifying HMRC was made after 19 March 2020.
The following table helps to explain the position:
|Was the employee employed with you as of this date?||Date RTI submission notifying payment was made to HMRC||Eligible for CJRS?|
|28 February 2020||On or before 28 February 2020||Yes|
|28 February 2020||On or before 19 March 2020||Yes|
|28 February 2020||On or after 20 March 2020||No|
|19 March 2020||On or before 19 March 2020||Yes|
|19 March 2020||On or after 20 March 2020||No|
|On or after 20 March 2020||On or after 20 March 2020||No|
An employer can claim in respect of the following:
- Full-time employees.
- Part-time employees.
- Employees on agency contracts.
- Employees on flexible or zero-hour contracts.
- Fixed term employees
- Apprentices (provided that they are paid at least the applicable apprenticeship national minimum wage rate for all the time they spend training. See https://www.gov.uk/government/publications/coronavirus-covid-19-apprenticeship-programme-response/coronavirus-covid-19-guidance-for-apprentices-employers-training-providers-end-point-assessment-organisations-and-external-quality-assurance-pro)
Non-UK nationals can be furloughed by a UK employer and an employer can furlough employees on all categories of visa.
Where an employee has more than one job, their employments are treated separately for the purposes of furlough, and the reimbursement cap applies to each employer individually.
Some individuals who may not be employees under employment law will be eligible for the CJRS.
“Employment”, “employed”, “employer” and “employee” for the purposes of the scheme have the meaning as set out in section 4 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) rather than their meanings under the Employment Rights Act 1996 (ERA 1996). Workers are therefore included, provided that they meet the section 4 ITEPA definition of an employee, were on the employer’s payroll on 19 March 2020 and are paid through PAYE.
The grant can therefore be claimed for the following groups:
- Office holders (including company directors).
- Salaried members of limited liability partnerships (LLP).
- Agency workers (including those employed by umbrella companies).
- “Limb (b) workers”.
Furlough will need to be agreed between the office holder and the party that operates PAYE on the income they receive for holding their office. Where the office holder is a company director or member of an LLP, the furlough arrangements should be adopted formally as a decision of the company or LLP.
Salaried company directors are eligible to be furloughed and receive support through the CJRS. A decision to furlough a director should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director concerned. Work undertaken by a director to fulfil a legal obligation to file company accounts or provide other information relating to the administration of the company is permitted. Furloughed directors should not do work of a kind that they would carry out in normal circumstances to generate commercial revenue.
This also applies to salaried individuals who are directors of their own personal service company (PSC).
Note: Directors’ dividends cannot be taken into account when calculating furlough pay as it is not possible for HMRC to identify which dividends have been received in lieu of wages.
Salaried members of limited liability partnerships
Members of LLPs who are designated as employees for tax purposes (“salaried members”) under the Income Tax (Trading and Other Income) Act (ITTOIA) 2005 are eligible to be furloughed and receive support through this scheme.
To furlough a member, the terms of the LLP agreement (or any such agreement between the LLP and the member) may need to be varied by a formal decision of the LLP. The LLP agreement would need to be amended to reflect the fact that the member will perform no work for the LLP for the period of furlough, and the effect of this on their remuneration from the LLP. 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 who are paid through PAYE are eligible to be furloughed, including where they are employed by umbrella companies.
It is assumed that it will be the agency rather than client who is putting the worker on furlough as it will normally be the agency that is operating PAYE in respect of the worker. Furlough should therefore be agreed between the agency and the worker, although it would be appropriate to discuss furlough with any end clients involved.
Agency workers should perform no work for, through, or on behalf of the agency that has furloughed them while they are furloughed, or 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 furloughing arrangements.
“Limb (b) workers”
Workers who are not employees are often known as “limb (b) workers” because the definition of worker, which goes beyond the traditional definition of employee, in the ERA 1996 is found in section 230(3)(b).
As mentioned above, the question in the context of the CJRS is whether the limb (b) worker is paid through PAYE and the employment status is determined by tax law rather than employment law principles.
However, certain aspects of the scheme do not sit easily with the way in which zero hours and other casual workers work who might be “limb b” workers and so discourage employers furloughing such individuals:
- The idea of instructing a zero hours worker to cease all work in connection with their employment because of COVID-19 is likely to be artificial where they were not otherwise working on a contract at the time.
- The manner of calculation of the earnings which are recoverable from the CJRS is not clear. As all payments made to zero hours workers are likely to rely on them being offered and accepting work, it is arguable that recovery is not possible through the CJRS in respect of these workers.
- All workers and employees will continue to accrue annual leave during furlough and holiday pay will be recoverable up to the 80%/£2,500. Where the worker would not otherwise be engaged under a contract by the employer during the furlough period (and would not, therefore, accrue holiday) the employer may regard this as an unnecessary additional liability and choose to terminate the contract instead.
Are the self-employed covered?
No, but a scheme has been set up to provide the self-employed with similar rights.
How are fixed-term employees treated?
Employees on fixed term contracts can be furloughed and they are in the same position as other individuals in terms of eligibility. Their contracts can be renewed or extended during the furlough period without breaking the terms of the CJRS provided that the extension takes place before the contract ends.
As long as the employee appeared on a return to HMRC made on or before either 28 February or 19 March 2020 and their contract did not terminate before that date, then the employer can claim reimbursement of wages. Employees who started and ended the same contract between 28 February and 19 March 2020 will not qualify for the scheme on the basis that they do not meet the eligibility requirement of being employed on either 28 February or 19 March.
HMRC appear to take the view that there is no policy objection, in principle, to fixed-term employees whose contracts have terminated being re-engaged for the purposes of furloughing them.
Does the employee have to be at risk of redundancy to be covered by the scheme?
While that was at first the general understanding of the scheme, the Treasury direction clarifies that a redundancy situation is not a pre-condition for access to the scheme. It suggests that, provided there is a connection between putting employees on furlough and the consequences of COVID-19, the purpose of the scheme will be met. When using the portal to make a claim, employers are required to confirm that they are claiming “costs of employing furloughed employees arising from the health, social and economic emergency resulting from coronavirus”.
It therefore suggests that there is no specific requirement for furlough to be offered as an alternative to redundancy or lay-off, provided that the employer’s operations were affected by COVID-19 and the application to the CJRS is a consequence of that.
There is unlikely to be a forensic analysis of the circumstances of furlough by HMRC. However, the Treasury direction does provide that no claim may be made where it is abusive or otherwise contrary to the aims of the scheme and the government will retain the right to retrospectively audit all aspects of the scheme with scope to claw back fraudulent or erroneous claims.
Can an employer move employees who are already on reduced hours onto furlough?
Yes. Some employers have already placed employees temporarily onto reduced hours and pay due to the downturn in work as a result of the pandemic. The employer will not be able to seek reimbursement in respect of wages and costs for employees who are still working on reduced hours. The scheme only applies where employees are put on “full” furlough.
The underlying purpose of the scheme seems to be to assist struggling employers and keep employees in employment even where there is currently no work for them to do. There seems to be no reason in principle why an employer should not move employees from reduced hours onto furlough, particularly if the employer’s financial circumstances change.
The difficulty with this point is that the scheme may financially disincentivise employers from keeping their business open. Keeping a business running with staff on reduced hours allows an employer to keep a revenue stream and retain customer loyalty. However, this is likely to be more expensive for the employer than putting all staff on furlough and have HMRC pay 80% of their wages.
Can trainee solicitors be furloughed?
The Law Society has confirmed that trainee solicitors can be furloughed in the same way as any other qualifying employee and the SRA has issued guidance confirming that the requirement for appropriate supervision of trainees may be satisfied where firms put in place sensible arrangements for supervisors to review trainees’ work remotely.
Can employees whose employment terminated before or after the scheme was announced be re-engaged by their previous employer and furloughed?
Yes. Employees who were made redundant or otherwise stopped working after 28 February 2020 can qualify if they meet the eligibility requirement and are re-engaged by their former employer. They will qualify from the date they are put on furlough.
The employer can therefore claim reimbursement of wages following re-engagement provided that the employee appeared on a return to HMRC made on or before 28 February or 19 March 2020.
If an employee is re-engaged solely to allow them access to an income through the scheme then arguably the employer is only incurring the cost concerned because they have taken the decision to re-engage, rather than because of the effects of COVID-19. This is particularly so if their original termination had nothing to do with the pandemic.
Where an employee is being furloughed by their current employer, they should not be re-engaged by their former employer in order to put them on furlough.
What about employees who had already been given notice of redundancy before the CJRS was announced?
It seems possible under the rules of the scheme for an employer to propose to employees who have been given notice of redundancy but are still employed, that they be put onto furlough instead.
However, unlike employees who are expecting to have a continuing relationship with their employer (and agreeing to a reduction in their pay in order to save jobs), an employee’s consent may not be forthcoming where they have already been given notice of termination and are due to be leaving their employment.
Can an employee who resigned before the furlough scheme was introduced and is working their notice be furloughed?
The government guidance does not specifically deal with this issue but it seems possible provided that the employee meets the usual eligibility criteria in terms of start date and timing of RTI submission.
However, unlike employees who are expecting to have a continuing relationship with their employer (and agreeing to a reduction in their pay in order to save jobs), an employee’s consent may not be forthcoming where they have already issued notice of their resignation and are due to be leaving their employment. As stated above, under the Treasury direction there is a requirement that the costs are incurred because of the effects of COVID-19, and that the employee is furloughed because of circumstances arising as a result of the pandemic. This will not necessarily apply in every situation where an employee who resigned before the scheme was introduced is working their notice.
Can employees on unpaid leave be furloughed?
Yes. An employer can furlough employees whether or not their unpaid leave started before or after 28 February 2020. This includes those who went on unpaid leave to care for children at home due to school and childcare facilities closing and to care for vulnerable individuals in their houses. They cannot be furloughed until the date on which it was agreed that they would return from unpaid leave.
This appears to apply to those who are on statutory leave and others on non-statutory unpaid leave which commenced on or before 28 February 2020. Employees returning from statutory leave, including maternity, paternity, shared parental leave, adoption leave, sick leave and parental bereavement leave, can be furloughed. The guidance states that the furlough pay for those employees who are fixed rate employees should be calculated in accordance with their normal salary, not the pay they received while on statutory leave. For non-fixed rate employees, the guidance suggests that their furlough pay should be calculated based on the same month’s earnings from the previous year, or the average monthly earnings for the 2019-20 tax year.
Can you put employees on long-term sick leave on furlough?
For short-term absences as a result of COVID-19 or because an employee is self-isolating, statutory sick pay (SSP) should be paid, subject to the eligibility requirements being met. The CJRS is not intended to cover short-term sickness absence, as there is a three-week minimum furlough period, and short-term illness or self-isolation should not therefore be a consideration in deciding whether to furlough an employee.
For longer term absences, the guidance states that employers can furlough employees for business reasons, in the same way as other employees. If an employer furloughs those employees, they should no longer receive sick pay and would be classified as a furloughed employee.
The period in respect of which a claim can be made from the CJRS does not start until the SSP entitlement period has therefore ended. An employer can claim back from the SSP rebate scheme and the furlough scheme in respect of the same employee but not for the same period of time.
Can employees who are shielding be placed on furlough?
The position is not consistent because employees who are shielding are now entitled to SSP although this change only became law after 16 April 2020 and is not retrospective.
Employers can therefore claim in respect of shielding employees who were furloughed prior to 16 April 2020, on the basis that they were not entitled to SSP at the time they were furloughed. Employers who put shielding employees on furlough on or after 16 April 2020 will not be able to claim from the CJRS.
Can employees who are on compassionate leave be required to return to work and be put on furlough?
If the compassionate leave is unpaid and it began before or after 28 February 2020 then it appears that the employee could not be put on furlough until the date on which it was agreed they would return from the compassionate leave.
If the compassionate leave is paid, it seems that the employee could be furloughed while still on compassionate leave. Where the employee is contractually entitled to their full salary while on compassionate leave, the employer would either need to top this up or reach an agreement with the employee to receive only the furlough pay covered under the CJRS.
Can a new or expectant mother suspended on health and safety grounds be furloughed?
There are special duties that apply in respect of new or expectant mothers in the workplace: where there is a workplace risk and certain conditions are satisfied, an employer must suspend a new or expectant mother on full pay. The period of suspension should be kept as brief as possible and once the suspension ends, the employee must return to work. Where the nature of an employee’s role means that they cannot work from home or there is no suitable alternative work available that they can do from home, the employer should consider suspending them on full pay.
As explained above, employees who are shielding in line with public health guidance became entitled to receive SSP for periods on or after 16 April 2020 and are not eligible to be furloughed until their SSP entitlement ceases. Pregnant employees have been advised to shield following public health guidance. It is unclear from guidance or the Treasury direction whether they should be treated in the same way as medically suspended pregnant employees who have a legal right to receive full pay rather than just SSP.
Implementation of furlough
What steps must employers take to put employees on furlough?
Employers will need to:
- Decide which employees to designate as furloughed
- Notify furloughed employees of the intended change.
- Consider whether it needs to consult with employee representatives or trade unions.
- Agree the change with the furloughed employees. Most employment contracts will not permit an employer to reduce an employee’s pay, provide them with no work and change their employment status, without agreement. However, faced with the alternatives, which are likely to be unpaid leave, lay-off or redundancy, the majority of affected employees are likely to agree to be placed on furlough.
- Confirm the employee’s new status and obtain their consent in writing (email will suffice), including confirmation that the employee will cease all work in relation to their employment from the day that the furlough period commences .This is an eligibility requirement for accessing the subsidy, and a record must be kept of this correspondence for five years.
- Ideally, the employer should advise how long it expects furlough to continue, however, this may be difficult in the current climate. Employers may wish to put employees on furlough for an initial period, subject to review.
- Submit information to HMRC about the employees that have been furloughed and their earnings through the online portal. Employers must keep records and calculations in respect of their claims, including records of the amount claimed for each furloughed employee and the period for which they are furloughed
- Ensure that the employees do not carry out any further work for that employer or any associated employer or business while they are furloughed
What records should an employer keep in relation to employees on furlough?
An employer must keep a written record of all communications with the employee regarding the furlough arrangement, including all copies of the furlough agreement, for five years.
An employer must also keep a record of the claims for reimbursement it makes for furloughed employees’ wages under the CJRS.
Records of any agreed training undertaken by furloughed employees should also be kept. It is important to keep training records to show that the training undertaken is both directly relevant to the employee’s employment and isagreed between them and their employer preferably in writing.
When submitting a claim, employers must confirm that they meet the “exceptional purpose” of the scheme, that is, the payment of employment costs in respect of furloughed employees “arising from the health, social and economic emergency in the United Kingdom resulting from coronavirus and coronavirus disease”. In order to be in a position to respond to an audit on this point, employers should ensure that a written record is kept to confirm the reason that the COVID-19 pandemic necessitated putting employees on furlough. This could include details of any downturn in work, closure of the business or the impact of sickness or other absence upon the ability to continue operating.
How does an employer decide who to put onto furlough: do they need to go through an equivalent redundancy scoring exercise?
An employer could initially ask for volunteers. However, in some cases an employer may receive more volunteers than it wants to furlough. The procedure an employer follows to decide which employees to furlough may depend on its current financial situation. If the employer needs to very urgently furlough employees or make them redundant in order to be able to continue to trade, a limited selection procedure carried out on an urgent basis is likely to be acceptable. However, where an employer does not have any immediate financial concerns, it is likely to be more reasonable for it to follow a more comprehensive procedure.
Employers could draw up a matrix of objective criteria in a similar way to redundancy scoring.
Employers should ensure that their decisions on who to furlough are not based on discriminatory criteria, except where such discrimination is likely to be justified. For example, it will be directly discriminatory for employers to use age as a criteria and select employees over 70. However, this could be justified as a proportionate means of achieving the legitimate aim of protecting the health and safety of vulnerable employees as identified in government guidance.
Can an employer rotate furlough between its employees?
Yes although employees must be furloughed for a minimum of three weeks. This is in keeping with the current requirements for as many people as possible to avoid leaving their homes. Three weeks means 21 calendar days and employees can be furloughed multiple times, subject to the minimum three consecutive week period.
Since employers are likely to receive many requests or volunteers to be placed on furlough, it is likely to assist employee relations for employers to be able to move employees on and off furlough, subject to that minimum three week period, so that no employee feels that they have been unfairly denied the opportunity to take furlough.
Is there a specific amount of time an employee has to work before going back on furlough?
No. An employee does not need to have returned to work for a minimum period of time before being furloughed again. However, if an employer is rotating furloughed employees, those returning to work are likely to be back at work for at least three weeks (given that the minimum furlough period is three weeks).
An employer should also bear in mind the anti-abuse provisions relevant to the CJRS: claim must not be made under the CJRS if it is abusive or otherwise contrary to the exceptional purpose of the CJRS. This is a warning to employers that abuse of the CJRS will be open to scrutiny, if not immediately then certainly in any future audits. If an employee returns to work for only a very short period of time before being furloughed again, it is possible (although by no means certain) that this could suggest that the employee is being furloughed for some reason unconnected to COVID-19.
Can an employee be furloughed for a period that is not a multiple of three weeks?
Yes. Employees must be furloughed for a minimum period of three consecutive weeks.
It is, however, likely to be helpful for an employer to commit to a nominal end date at the outset of any furlough period, which will be at least 21 calendar days from the start of furlough. This approach will help to avoid any confusion over whether the furlough period lasted at least 21 calendar days. In addition, employees will want to understand how long they can expect to be furloughed for, so being open about the duration of furlough from the start may avoid employers having to deal with follow up queries on the same point. The furlough period can be extended if needed.
Will employers need to collectively consult if they intend to put 20 or more employees on furlough?
Yes. If sufficient numbers of employees are involved then it may be necessary to engage in collective consultation with appropriate employee representatives to procure agreement to change the employees’ terms. It is therefore clear that there is no exception to the obligation to collectively consult in this context, that is, where the employer intends to vary the contracts of 20 or more employees, and it intends to dismiss employees who do not consent to the change in their terms within a period of 90 days or less as redundant.
If no contractual variation is intended (because the employer already has the right to suspend and does not intend to reduce pay to the level that can be reimbursed) then it is less likely that collective consultation is required. However, even in that scenario, if the suspension were in the context of the employer proposing to make redundancies further down the line, the obligation could be triggered.
Can an employer use the special circumstances defence if collective consultation is not possible?
The employer would need to show that compliance was not reasonably practicable, and that the circumstances were “special”.
In terms of reasonable practicability, the effect of the pandemic may mean that there are practical difficulties with appointing representatives in the normal way and undertaking full consultation, and also in terms of remaining solvent while that process is undertaken Whether a particular employer is entitled to dispense with collective consultation altogether because it was not reasonably practicable will very much depend on the circumstances.
Given the unique and unprecedented nature of the pandemic and the economic effects of the government response, there is likely to be mileage in the argument that circumstances are “special”.
However, where there are special circumstances, this does not absolve the employer absolutely from the obligation to consult. The employer must still fulfil those obligations which it is reasonably practicable to comply, or which are unaffected by the special circumstances. In all but the most extreme cases, there is therefore likely to be an expectation that some form of consultation is undertaken, even if it is not reasonably practicable to meet all collective consultation obligations.
So what should employers do?
The scheme has the backing of the TUC and it is possible that employers will take the view that the risk of a collective consultation claim is low in the circumstances. An employer could proceed without undertaking collective consultation and take the risk that it is later found to be in breach. A middle ground could be for an employer to undertake a consultation for a shorter period on the basis that the change proposed is only a change to the employees’ contracts of employment, and then only proceed to a formal collective redundancy consultation if full employee consent is not obtained.
As furlough is a far better option for the majority of employees than lay-off or redundancy, it is possible that some employers will find that all employees agree to the proposal early on in the process and the full consultation period is not required.
Whatever action employers take, they should bear in mind that the furloughed employees will be returning to the workplace and so maintaining good employment relations is important.
Can an employer reach an agreement with a recognised trade union without the need for individual consultation?
In terms of achieving a lawful variation of individual contracts of employment, this would only be possible where there is a collective agreement which covers the matters being varied and which has been incorporated into individual workers’ contracts of employment. If the workforce do not have express incorporation clauses in their contract then the employer would need to seek individual consent.
Can an employee request their employer puts them onto furlough?
Yes, an employee can request this, but the employer does not have to agree. It is the employer’s decision which employees to place on furlough, if any. It seems that it is also the employer’s decision whether to place employees on furlough or make them redundant. Potentially redundant employees do not have a right to require their employer to place them on furlough as an alternative to redundancy.
However, it is hoped that many employers will see the new scheme as preferable to business closure and making redundancies. It is unclear yet whether refusing to place an employee on furlough and making them redundant could amount to an unfair dismissal.
Is the idea of furlough unfair on employees who have to continue working, particularly when many are going to have childcare difficulties?
It may seem unfair that some employees will be required to continue working, potentially increasing their risk of infection if they are unable to work from home, and others will be permitted to receive a substantial proportion of salary and not be required to do so.
However, provided the employer has used appropriate, non-discriminatory criteria to choose who is granted furlough, it is possible for an employer to lawfully choose to furlough only part of the workforce. Some employees may look at this issue the other way and prefer to continue to receive full pay so the employer may find that seeking volunteers for furlough identifies the preferences of individual employees and avoids a feeling of unfairness.
Is consideration required where an employee agrees to reduced pay and being put on furlough?
Any agreement to vary the terms of an existing employment contract must either be supported by consideration or executed as a deed. It is likely that, where furlough is being offered as an alternative to redundancy or lay-off then continued employment would be the consideration.
Are employers obliged to top up the remaining 20%?
Employers are entitled to continue paying full pay during furlough, but they are not obliged to do so. If they do top up, they can only claim back employer national insurance contributions and minimum auto-enrolment payments up to the cap of 80%/£2500.
Withholding 20% of an employee’s salary will, however, amount to breach of contract and unlawful deduction of wages unless the employee has given his/her consent . It is expected that the majority of employees will consent since furlough is a better alternative than unpaid leave, lay-off or redundancy.
If an employee is re-engaged for the purposes of the CJRS, will their continuity of employment be preserved?
Yes. There is nothing in the CJRS which has varied this position so statutory rules will apply.
Activities during furlough
Can a furloughed employee work for another employer?
Yes although the employee’s contract of employment will continue during furlough so any enforceable restrictions on working elsewhere during employment will continue to apply. However, in the circumstances, employers may consider relaxing any such restrictions to allow employees to take up a role with a non-competing business with their prior consent.
If a furloughed employee starts work for another employer, they should confirm their furloughed status with the new employer. The furloughed employee will need to be able to return to work for the employer that has furloughed them, and undertake any training that employer requires of them during furlough.
Can employees with more than one employer be furloughed?
Yes an employee can be furloughed by one employer and continue to work for the other, or can be furloughed by both employers. The scheme will reimburse each employer for 80% of the employee’s salary, up to the £2,500 cap for each job.
However, an employee cannot be furloughed by their current employer and also accept re-engagement by a former employer with a view to being furloughed by the former employer too and effectively obtaining funds through the CJRS twice.
Can employees on furlough do volunteer work?
Yes, but not for the employee’s employer where it is being used to profit from furlough and receive reimbursement of wages. That would likely be regarded as fraud and the government has explicitly identified the right to retrospectively audit all aspects of the scheme with scope to claw back fraudulent or erroneous claims.
Employees are also encouraged to report the employer if they are being asked to work whilst on furlough, or if they otherwise become aware of fraudulent behaviour relating to the scheme.
Can employees on furlough undertake training?
Yes but only in limited circumstances where it is directly relevant to the employee’s employment and agreement must be evidenced (preferably in writing) between employer and employee.
Can employee and trade union representatives continue with their duties while on furlough?
When an employee is put on furlough, they must not work for their employer, either by making money for the employer or providing services to the employer. Carrying out duties as an employee or trade union representative does not fall into the first category of making money for the employer and is more akin to volunteering . Nor are carrying out such duties likely to fall into the second category of providing services to the employer.
There is no guidance yet on whether being placed on furlough prevents an employee carrying out duties as an employee or trade union representative, so the position is not clear. However, since employers are required to use employee representatives in certain circumstances, such as collective consultation for redundancies or to carry out an information and consultation exercise in relation to a TUPE transfer, the employer may have no option but to let them continue with their duties. For this reason, and for reasons of sheer practicality, it seems more likely than not that employees may continue with their “work” as a representative while being on furlough.
What happens if a furloughed employee becomes sick?
The Treasury direction provides that an employee cannot be furloughed while eligible for SSP. When someone who has been furloughed following a period of entitlement to SSP coming to an end, then falls sick again during furlough, they can remain on furlough and “furlough pay”.
If the employee is entitled to contractual sick pay which equates to 100% of normal earnings, they may remain entitled to pay at that level if they become sick during furlough, unless the employer has specifically provided for contractual sick pay to be reduced to reflect furlough pay in the furlough agreement between employer and employee.
How should an employer keep in touch with employees on furlough?
An employer should consider what methods of communication it would normally use when an employee is not working (for example, because they are on a period of family-related leave). It is likely to be helpful to agree with an employee, before they are furloughed, how best they can be contacted during furlough (keeping in mind what technology the employee has access to at home) and who their point of contact at the employer will be. An employer should also check that the contact information it holds for an employee is up-to-date and accurate, ideally as part of the process of obtaining consent to furlough.
Given that an employee must cease all work while they are furloughed, an employer should refrain from excessive communication with a furloughed employee which may suggest that the employee is, in fact, working. However, keeping an employee informed of developments by a weekly email (for example) is unlikely to be problematic.
Where an employer is aware that a furloughed employee is particularly vulnerable (for example, because they have a disability), the employer should consider what “keeping in touch” arrangements may be particularly helpful for that employee. For example, an employee’s line manager (assuming that they are not also furloughed) may agree that they will call the employee on a weekly basis to touch base, answer any questions and provide any relevant updates. The manager should discuss with the employee in advance what communication methods are likely to work for them, having regard to their condition and what facilities they have available at home.
Do disciplinary proceedings have to be paused if an employee is on furlough?
No, disciplinary proceedings do not have to be paused when an employee is on furlough, although it is only likely to be possible to progress a disciplinary where those (other than the employee being disciplined) involved in the investigation and disciplinary hearing are not furloughed.
The main issue is likely to be whether the employee’s attendance at an investigation meeting or disciplinary hearing would be “work in relation to their employment” which is prohibited under furlough.
An employer will also need to consider the practical difficulties associated with conducting a fair disciplinary process while an employee is not in the office:
- Will the investigator have access to the documents and other evidence they need to complete their investigation?
- Does the employee who is subject to the disciplinary proceedings have access to the technology enabling them to attend meetings remotely?
- Will it be possible for the employee to be accompanied at any disciplinary hearing?
- Does the employee have somewhere quiet and private in which they can participate in the meeting?
- Can the timing of the meeting be adjusted to reflect the employee’s childcare or other commitments and ability to have a quiet space to participate in the disciplinary?
What should an employer do where an employee’s annual bonus is due for payment during furlough?
Ideally this issue should be dealt with in the furlough agreement between the employer and employee. If there is a contractual entitlement to payment of bonus during furlough then that right will not be extinguished unless the contract is varied to that effect. Putting an employee on furlough will not, in itself, cancel any contractual right to bonus because their terms and conditions of employment will remain in force during any period of furlough (except to the extent that any variation is agreed with the employee).
At the time furlough is being agreed, the employer should therefore consider seeking waiver or deferral of bonus payment. The employer should ensure that doing so does not bring an individual below 80% of pay or £2,500 (given that, arguably, contractual bonuses are included in the calculation of pay for CJRS purposes).
In practice, many bonus schemes involve partial discretion. An employee will have a contractual entitlement to participate in a specified bonus scheme, with only the amount of bonus being within the employer’s discretion. In such cases, an employee will have the right to a rational and non-arbitrary exercise of discretion by its employer as to the amount of bonus to be paid.
Depending on the terms of an employer’s bonus scheme and the nature of its discretion, it may be possible for an employer to rely on its discretion to avoid paying an annual bonus (assuming that custom and practice has not created an implied right to payment of some bonus amount). However, an employer must have regard to its implied duty not to act irrationally, arbitrarily or capriciously in exercising its discretion
Bonus schemes often provide that a bonus will not be payable if an employee is under notice at the time that a bonus payment is due so if notice is given or received by the employer during furlough then this could affect bonus entitlement.
What is the procedure to end furlough?
The HMRC guidance and the Treasury direction do not provide a mechanism for ending furlough. Ideally, the furlough agreement would provide for the circumstances in which furlough ends such as:
- The employer or employee ceases to be eligible for funding under the CJRS.
- The employer gives the employee notice (for example, one week) that their employment will resume on the terms and conditions which applied immediately before their period of furlough started, or on such amended terms and conditions as may be needed to take account of the applicable circumstances.
- The employee’s employment terminates for any reason (for example, by reason of redundancy).
Whether the employer can dictate the end of furlough will depend upon what has been explicitly or implicitly agreed between the parties. However, the absence of an explicit right to bring furlough to an end and require employees to return to work is unlikely to be an issue in most cases because employees are likely to be in receipt of less pay while they are furloughed and may be eager to return to work given the difficulties in securing alternative employment while the Covid-19 crisis continues.
If there is no contractual agreement in terms of ending furlough and a furloughed employee refuses to return to work in response to their employer’s request to do so, then failure to do so could be breach of the employment contract by the employee, meaning that they are not entitled to wages and they could be subject to disciplinary action for unauthorised absence.
However, an employer must consider whether there is any particular reason (such as shielding) to explain why an employee is not keen to return to work.
Can an employer make employees on furlough redundant?
Yes. An employee can be made redundant while on furlough or afterwards and an employee’s redundancy rights will not be affected by being furloughed.
However, an employer cannot claim reimbursement of redundancy payments under the scheme. While the government has put many measures in place to assist struggling employers, including the CJRS, some businesses will still be forced to close, particularly if the pandemic is protracted, making redundancies inevitable. However, where the business is continuing, there is the potential for the dismissal to be unfair.
How should employers approach redundancy pooling where some employees are furloughed and others are not?
In deciding whether a redundancy selection was fair, a tribunal must decide whether the employer’s choice of pool was within the range of reasonable responses.
The usual approach is to consider the type of work which is ceasing or diminishing and which employees perform that kind of work. If the employer confined its selection pool to those already furloughed, this may be regarded as unfair because the selection process for putting employees on furlough may not have been as vigorous as is required where dismissal is being considered. The conventional approach of identifying those who perform the same or similar work (whether they are currently furloughed and therefore not performing that work, or not) should be adopted.
TUPE and furlough
Are employees who transferred under TUPE on or before 19 March 2020 eligible for furlough with their new employer?
Yes although it depends.
An employer that inherits employees through the operation of TUPE prior to 19 March 2020 will be in the same position as any other employer in terms of eligibility.
However, the eligibility criteria could put employers that have inherited employees close to the 19 March eligibility cut-off at a disadvantage. This is because eligibility under the CJRS is subject to the existence of an RTI submission notified to HMRC on or before 19 March 2020. If the inherited employees’ pay is processed for the first time in the March payroll towards the end of that month, which may be the case where, for example, there is a TUPE transfer during early March, then the cut-off date for an RTI submission of 19 March 2020 may not be met.
If employees are transferred under TUPE after 19 March 2020, can the new employer put them on furlough?
Yes, but arguably not where there has been a service provision change (SPC).
The Treasury direction states that a new employer may make a claim under the scheme in relation to a “relevant employee” and be treated as if they had a qualifying PAYE scheme and had made a payment to that employee on or before 19 March 2020 if:
- On 19 March 2020, the employee was employed by an employer (former employer) who is not the new employer.
- After 19 March 2020, there was a change in the employee’s employer from the former employer to the new employer while the employee remained employed in the same business.
- Immediately before the change, the former employer’s PAYE scheme in relation to the employee was a qualifying PAYE scheme.
- The transfer of the business or undertaking (or part thereof) to the new employer did not result in the termination of contracts of employment by virtue of TUPE.
- The transfer of the trade, business or undertaking to the new employer did not break the continuity of the period of employment.
Annual leave and furlough
Will employees continue to accrue holiday during furlough?
Yes. Employees will continue to accrue annual leave during furlough. This is unsurprising and in accordance with the Working Time Regulations 1998 (WTR 1998) where workers are entitled to a statutory 5.6 weeks’ of paid annual leave a year.
An employer could attempt to negotiate a change in contractual terms such that any annual leave over and above statutory leave does not accrue during furlough, but this may make it less attractive to employees.
Where a worker does not take annual leave in the relevant leave year because they were on furlough, can they carry it forward to the next leave year?
The government has passed emergency legislation relaxing the restriction on carrying over the four weeks’ leave derived from the Working Time Directive (WTD). The legislation amends regulation 13 of the WTR 1998 to permit the carry-over of any untaken WTD leave where it was not reasonably practicable to take it in the leave year “as a result of the effects of the coronavirus (including on the worker, the employer or the wider economy or society)”.
The new carry-over rule could apply where a worker has been put on furlough and is unable to take leave due to COVID-19. However, as explained below, it is possible for workers to take annual leave during furlough, and so it is questionable whether furlough, in itself, renders it not reasonably practicable for the worker to take the leave in the relevant leave year.
Even if annual leave is not taken during furlough, if the worker has enough time in the remainder of the holiday leave year to take their annual leave once furlough had ended then arguably the new rule on carry-over would still not apply.
As will be seen below, the employer has the right to require the employee to not take their annual leave during furlough, which they may do for financial reasons . In that event, it would clearly not be possible or reasonably practicable for workers to take their annual leave at that time. Further, on return to work, the employer may decide to suspend annual leave in order to have the full workforce available to focus on rebuilding the business following the pandemic.
It is also potentially arguable that a period of furlough which coincides with a period of full or partial lockdown would render it not reasonably practicable that the worker could take their leave at that time on the basis that they are unable to enjoy rest and relaxation, although it may be a stretch to argue that being confined to home is equivalent to not being able to rest and relax.
Strictly speaking, only WTD leave (4 weeks) can be carried forward under the new emergency legislation. However employers may want to permit carry-over of allstatutory holiday, not just WTD leave, where such holiday is unable to be taken due to coronavirus. This is because the WTR 1998 oblige employers to allow workers the opportunity to take 5.6 weeks’ leave each year, regardless of whether it is reasonably practicable to do so. If an employer fails to allow additional leave to be taken and refuses to allow it to be carried over under a relevant agreement, this would amount to a breach of the WTR 1998.
Can annual leave be taken during furlough?
Yes. Workers can take annual leave during furlough. However, employers could exercise their right to designate furlough as a period during which no annual leave is taken or otherwise give counter-notice in response to a holiday request. This might be because they would have to pay employees their usual holiday pay during annual leave, that is, additional amounts due over the 80%/£2,500 cap.
Can an employer require a worker to take holiday during furlough?
As noted above, employers looking at their short-term financial position, may decide to instruct workers not to take their annual leave during furlough as they will need to top up the furlough pay. Given that it is possible to carry leave forward to the next two holiday years, the employer may be less concerned than it otherwise would be about workers having annual leave accrued on their return from furlough.
However given that employers can recoup an employee’s holiday pay via the CJRS up to the 80%/£2,500 limit, some employers may take the view that it would be cost effective to direct workers to take annual leave during furlough.
Can an employer require employees to take accrued holiday once the furlough period comes to an end?
In principle, the employer could require that annual leave is taken once the furlough period comes to an end. However, this is subject to the following:
- The employer needing to give sufficient notice as required under the WTR 1998.
- The possibility that the annual leave would not be regarded as a period of rest and relaxation. As explained earlier, in a period of complete lockdown there may be an argument that workers cannot enjoy the rest and relaxation which is the purpose of annual leave. However, whether such an argument would succeed is questionable, and if furlough is coming to an end then it is likely that government restrictions have been relaxed to some extent allowing employers to reopen. This point is therefore less likely to be relevant in this context.
- New Regulation 10 of the WTR 1998 provides that leave can be carried forward if it was not reasonably practicable to take it in the leave year “as a result of the effects of the coronavirus (including on the worker, the employer or the wider economy or society)” The extent to which a worker could assert this right by claiming that it is not reasonably practicable for them to take annual leave at the time designated by the employer for a reason related to COVID-19 is unclear. For example, if the worker were caring for a close relative who is shielding and they were also socially distancing to protect that relative, then they may assert that it is not reasonably practicable to take annual leave at that time.
What pay is a worker entitled to when they take annual leave during furlough?
Holiday taken during furlough should be paid in accordance with the WTR 1998 but an employer can only recover the 80%/£2,500 cap from the CJRS in respect of any annual leave taken so the employer will need to meet the shortfall.
However, this is an over-simplification because the complicated rules under sections 221-224 of the ERA 1996 continue to apply to the calculation of holiday pay (subject to the ECJ case law which has modified which aspects of remuneration are taken into account in relation to WTD leave by requiring that workers are paid their “normal remuneration”). The different scenarios are as follows:
Normal working hours and remuneration does not vary with the amount of work done
This category of worker includes those who are entitled to be paid a fixed wage or salary. The holiday pay of workers in this category is calculated with reference to the basic pay payable for those normal working hours (section 221(2), ERA 1996). This is subject to the ECJ case law which has modified which aspects of remuneration are taken into account, at least in relation to their WTD leave .As the normal working hours of a worker who is on furlough have (arguably) not changed, there is a good argument that their annual leave is payable at the rate of a normal week’s pay, and not at the rate they are receiving for the temporary period that they are not working.
Normal working hours where remuneration varies with the amount of work done, or where hours vary
For a worker with normal working hours whose remuneration varies with the amount of work done, holiday pay is based on the sum of the remuneration earned in the reference period (12 weeks, or 52 weeks from 6 April), divided by the total hours worked and then multiplied by a normal week’s hours.
For a worker with normal working hours whose hours vary (such as shift workers), holiday pay is based on the sum of the remuneration payable in the reference period (12 weeks, or 52 weeks from 6 April), divided by the total hours worked and multiplied by an average week’s hours.
However, in both cases, it is only average remuneration for working weeks which is taken into account. Whole weeks of absence are left out of the calculation. This means that whole weeks of furlough will likely not be taken into account, and holiday pay would be based on the relevant reference period prior to furlough starting. If the worker’s pay has been reduced for furlough then this means that they may, depending on their earnings during the reference period, be better off taking annual leave, if they are permitted to do so.
No normal working hours
For a worker with no normal working hours, holiday pay is based on the average weekly remuneration based on all remuneration payable in the past 52 weeks in which remuneration was payable by the employer.
Non-working weeks are taken into account, but weeks where no remuneration was earned are not (section 224(3), ERA 1996). This means that the question in this context is whether furlough pay is remuneration. There is obviously no precedent for this, but we consider it likely that furlough pay is remuneration for these purposes and would be taken into account. However, there could be argument that furlough pay does not reflect “normal remuneration” and should not be taken into account as it will artificially lower the level of a week’s pay. If it is taken into account then workers with no normal working hours could be entitled to receive less pay for a period of annual leave during furlough depending on the precise calculation, but it is likely that in most cases their annual leave would be payable at a rate higher than their furlough pay.
If a worker has pre-arranged annual leave which falls during furlough, is the worker entitled to cancel that leave?
WTR 1998 do not provide for cancellation of a notice to take annual leave by a worker. However, the contract of employment or the employer’s holiday policy may provide a mechanism for workers to do so.
In either event, employers would need to ensure that they do not breach the implied term of trust and confidence in refusing to accept a worker’s withdrawal of notice to take annual leave, or by issuing notice that the worker must still take annual leave on the days in question.
Most employers would be advised to react reasonably where workers wish to cancel annual leave because their holiday plans have been cancelled.
What happens to bank holidays which fall during furlough?
if employees usually work bank holidays, their employer can agree that this is included in the CJRS grant payment. If the employee usually has bank holidays off, their employer will need to either top up their pay to their usual holiday pay or give the employee a day off in lieu.
Impact of furlough on other rights
Will it be an unfair dismissal if an employer makes someone redundant rather than placing them on furlough?
It is difficult to determine whether an employment tribunal would find such a dismissal to be unfair.
While it is under no obligation to furlough, it is possible that if an employer decides to dismiss an employee without even considering furloughing, then this may be not be considered to be within the reasonable range of responses.
That said, there will be cases where an employer cannot afford to furlough employees and pay the 80% of salary until HMRC has set up the scheme and reimburses it. While those employers could ask for the employees to agree to defer payment until it is reimbursed by HMRC, some employees may be unwilling to agree to this, or not be in a financial position to do so. In those circumstances, it may be fair for an employer to dismiss for redundancy.
Is statutory redundancy pay calculated on the basis of furlough pay or normal pay?
The calculation is based on the employee’s length of service, age and week’s pay (calculated in accordance with the provisions in the ERA 1996 and capped at the statutory maximum). The calculation of a week’s pay varies depending on the type of worker, so the extent to which furlough pay will be taken into account depends on the answer to that question.
It will also depend on when the “calculation date” for calculating a week’s pay falls for a particular worker as this could potentially also affect whether furlough pay is taken into account.
The scenarios below may provide clarity:
Normal working hours and remuneration does not vary with the amount of work done
This category of worker includes those who are entitled to be paid a fixed wage or salary. A week’s pay is calculated with reference to the basic pay payable for those normal working hours. As the normal working hours of a worker who is on furlough have (arguably) not changed, there is a good argument that a week’s pay for statutory redundancy pay purposes is payable at the rate of a normal week’s pay, and not at the rate they are receiving for the temporary period that they are not working.
Normal working hours where remuneration varies with the amount of work done, or where hours vary
For a worker with normal working hours whose remuneration varies with the amount of work done, a week’s pay is based on the sum of the remuneration earned in the 12 week reference period, divided by the total hours worked and then multiplied by a normal week’s hours.
For a worker with normal working hours whose hours vary (such as shift workers), a week’s pay is based on the sum of the remuneration payable in the 12 week reference period, divided by the total hours worked and multiplied by an average week’s hours.
However, in both cases, it is only average remuneration for working weeks which is taken into account. Whole weeks of absence are left out of the calculation. This means that whole weeks of furlough will likely not be taken into account, and a week’s pay would be based on the relevant reference period prior to furlough starting.
No normal working hours
For a worker with no normal working hours, statutory redundancy pay is based on the average weekly remuneration. This is based on all remuneration payable in the past 12 weeks in which remuneration was payable by the employer. Non-working weeks are taken into account, but weeks where no remuneration was earned are not. This means that the question in this context is whether furlough pay is remuneration. There is obviously no precedent for this, but it is likely that furlough pay is remuneration for these purposes and would be taken into account.
How is SMP calculated for an employee who has been on furlough prior to maternity leave?
Entitlement to SMP and the rate payable depend on an employee’s normal weekly earnings. Normal weekly earnings are calculated as a weekly average of the employee’s total gross earnings from the employer and any associated employers during a reference period (the “relevant period”).
The Maternity Allowance, Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay, Statutory Shared Parental Pay and Statutory Parental Bereavement Pay (Normal Weekly Earnings etc.) (Coronavirus) (Amendment) Regulations 2020 came into force on 25 April 2020. They provide that where a woman is on furlough during part or all of the relevant period and her pay is reduced as a result, her normal weekly earnings for the purposes of eligibility and the rate payable for statutory maternity pay will be calculated based on the pay she would have received if she were not furloughed.
The regulations apply where the first day of the period in which statutory maternity pay is payable is on or after 25 April 2020.
The regulations make similar amendments in respect of:
- Maternity Allowance
- Statutory Paternity Pay
- Statutory Adoption Pay
- Statutory Shared Parental Pay
- Statutory Parental Bereavement Pay
The following links provide further information and resources on the Q&As above:
- The Treasury direction issued by the Chancellor on 15 April 2020 under sections 71 and 76 of the Coronavirus Act 2020 sets out the rules, detail and eligibility requirements of the scheme. The Treasury direction takes precedence over the HMRC guidance where the guidance deviates from it. https://www.gov.uk/government/publications/treasury-direction-made-under-sections-71-and-76-of-the-coronavirus-act-2020?utm_source=07c67266-8869-4f71-a0c1-54e37c8411ba&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate
- Employers’ CJRS guidance: first published 26 March 2020 and substantially updated on 4 April 2020, 9 April 2020, 15 April 2020 and 17 April 2020. Updated further on 20 April 2020 following the opening of the scheme, and again on 23 April 2020. https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
- Employees’ CJRS guidance: first published 26 March 2020 and substantially updated on 4 April 2020, 9 April 2020, 15 April 2020, 17 April 2020 and 23 April 2020. https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronavirus-job-retention-scheme#history
- The “80% guidance” first published 17 April 2020 and updated on 23 April and 27 April 2020. https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme
- A Step by Step Guide of CJRS for employers: first published 17 April 2020 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/881800/Coronavirus_Job_Retention_Scheme_step_by_step_guide_for_employers.pdf
- A Claim Guide for CJRS: first published 20 April 2020 and updated on 23 April and 27 April 2020. https://www.gov.uk/guidance/claim-for-wages-through-the-coronavirus-job-retention-scheme
- Reporting wages to CJRS guidance: first published 23 April 2020. https://www.gov.uk/guidance/reporting-payments-in-paye-real-time-information-from-the-coronavirus-job-retention-scheme
- CJRS calculator: first published 20 April 2020. https://www.tax.service.gov.uk/job-retention-scheme-calculator/?_ga=2.16357174.1291120991.1587371920-778629040.1580374300
- HMRC YouTube video CJRS (reflecting the position in the HMRC guidance where this deviates from the Treasury direction). https://www.youtube.com/user/hmrcgovuk
- Acas guidance on CJRS for employers and employees: last updated 23 April 2020. https://www.acas.org.uk/coronavirus/using-holiday
- Covid-19 support for businesses – updated to reflect the CJRS https://www.gov.uk/government/collections/financial-support-for-businesses-during-coronavirus-covid-19#support-for-businesses-through-the-coronavirus-job-retention-scheme
- Covid-19 guide for employees – updated to reflect the CJRS. https://www.gov.uk/guidance/guidance-and-support-for-employees-during-coronavirus-covid-19#furloughed-workers
- The government has also created a new website: https://www.businesssupport.gov.uk/