Furlough under the extension to the Coronavirus Job Retention Scheme ('the Extended CJRS')

PLEASE NOTE: The Extended CJRS came to an end on 30 September 2021. The FAQs set out below consider the rules applicable under the scheme as it applied up to that date.

1. What is the Coronavirus Job Retention Scheme and how is it being extended?
2. What official guidance is there on the Extended CJRS?
3. What key differences are there between the CJRS as it applied in the period from 1 July to 31 October 2020 and the Extended CJRS?
4. Which employers can use the Extended CJRS?
5. Which employees are eligible to be furloughed under the Extended CJRS?
6. How will furlough affect those on maternity/other statutory family leave or due to go on such leave?
7. What process should you follow to place an employee on furlough under the Extended CJRS?
8. What happens to an employee’s terms and conditions of employment and statutory employment rights during furlough?
9. Is there a minimum period for which furlough must last? Can you furlough employees multiple times?
10. Can employees work for you, or elsewhere, during furlough?
11. Can employees and apprentices undertake training while on furlough?
12. Can employees undertake voluntary work while on furlough?
13. Do employees continue to accrue holiday while on furlough?
14. Can employees who are on furlough take annual leave at the same time? And what is the position on holiday pay?
15. What is the position on bank holidays that fall while employees are on furlough?
16. Can we require furloughed employees to use their holiday entitlement while they are on furlough?
17. Our employees are currently working (normally or on flexible furlough). Can we claim in respect of them under the extended CJRS when they take holiday, or during our planned annual shutdown?
18. What if we can’t afford for furloughed employees to take holiday?
19. Can employees participate in disciplinary and grievance proceedings while on furlough?
20. What can you claim under the Extended CJRS and how do you do it? 
21. What claim period should you use?
22. Which elements of pay should you include?
23. How should you work out usual hours and furloughed hours for an employee on flexible furlough?
24. How should you work out how much furlough pay a fully or flexibly furloughed employee is entitled to under the Extended CJRS?
25. What will you need to make a claim and when must you do it?
26. What if you realise you have claimed too little, or too much?
27. What will be deducted from the furlough payment before it is paid to the employee?
28. What is the position with the apprenticeship levy and student loans?
29. What is the interplay between furlough leave and the National Living Wage / National Minimum Wage?
30. What happens at the end of furlough?
31. What is the position in relation to notice periods from 1 December 2020 if a furloughed employee’s employment is terminating?
32. What if we need to make furloughed employees redundant?
33. How do you calculate statutory redundancy pay for employees who are made redundant during (or shortly after) a period of furlough?

1. What is the Coronavirus Job Retention Scheme and how is it being extended? (Last updated 09/04/2021)

The concept of furlough was first introduced by the Government via the Coronavirus Job Retention Scheme (the ‘CJRS’) in March 2020 as part of a package of “temporary, timely and targeted measures to support public services, people and businesses through this period of disruption caused by Covid-19”. Employees furloughed under the CJRS remained employed but could not perform any work for their employer. They were entitled to receive 80% of their regular pay, up to a cap of £2,500 per month, which employers could claim from the Government together with employer National Insurance Contributions and the minimum level of employer automatic enrolment pension contributions on the furlough pay. Employers could choose to fund the difference (or some of the difference) between the 80% / £2,500 payment and an employee’s full salary, but there was no requirement to do so.

The original CJRS was designed to support employers who could not maintain their current workforce because their operations had been severely affected by coronavirus (Covid-19). In the absence of any detailed explanation as to the meaning of ‘severely affected’, it was not always straightforward for companies to determine whether they were eligible to access the CJRS. 

The CJRS was originally intended to run for at least 3 months from 1 March 2020, but was later extended to the end of October. For the period from 1 July to the end of October 2020, the CJRS was subject to various rules that differed from those that applied between 1 March and 30 June 2020. These changes included: the closure of the scheme to new entrants (i.e. employees who had not previously been furloughed); a cap on the number of employees an employer could claim for in any claim period; the removal of the 3 week minimum furlough period that applied under the original scheme; the introduction of ‘flexible’ furlough whereby employees could be furloughed for part of their hours; and a gradual tapering of the level of financial support provided by the Government.  

The CJRS was due to end on 31 October 2020. It was to be replaced with the Job Support Scheme – which had different iterations for businesses that remain open (the JSS Open) and those that are required to close (the JSS Closed) – from 1 November. However, on 31 October 2020, the Government announced that the CJRS would be extended for a month to coincide with the introduction of a second lockdown in England.

On 5 November 2020, the Government announced a further extension of the CJRS to 31 March 2021, which we refer to as ‘the ‘Extended CJRS’. The Extended CJRS is applicable UK wide and the Government stated at the time that the purpose of the extension was to enable support to be in place for long enough to help businesses recover and get back on their feet – as well as giving them the certainty they needed in coming months.

The Extended CJRS was initially intended to remain open until 31 March 2021, with the Government saying it would review the terms of the scheme in January 2021. However, on 17 December 2020, the Government announced that the Extended CJRS would be continued for an additional month, until 30 April 2021. It also conducted its planned review early and committed to maintaining the level of its contributions towards employees’ furlough pay (at 80% of pay for hours not worked, up to the applicable cap) for the duration of the scheme. 

In the Spring Budget on 3 March 2021, the Government announced that there would be a further extension of the Extended CJRS, until the end of September 2021, in order to protect the livelihoods of those hardest hit, in line with the Government’s cautious easing of social distancing rules over the next months. The level of Government support under the Extended CJRS will remain the same until 30 June 2021. However, over the summer months there will be a gradual tapering down of the amount that the Government will pay, to 70% of employees’ pay for furloughed hours in July and 60% in August and September, with employers being expected to make up the difference so that employees continue to receive 80% of their pay (subject to the applicable cap) for their furloughed hours.

2. What official guidance is there on the Extended CJRS? (Last updated 18/06/2021)

Following its announcement of the Extended CJRS on 5 November 2020, detailed guidance was published on 10 November. The guidance is split across multiple webpages, which are accessible via a central hub page. There is also a Policy Paper explaining the changes to the Extended CJRS which take effect from 1 July 2021.

The Government guidance tends to be updated on a piecemeal but frequent basis. While we endeavour to keep these FAQs up to date, we do encourage employers to check the Government guidance for the very latest information.

Technical details of the furlough scheme have been set out in a series of Treasury Directions. The Extended CJRS is underpinned by the following:

• for the period 1 November 2020 to 31 January 2021, a Treasury Direction dated 12 November 2020 (the ‘November Treasury Direction’);
• for the period 1 February to 30 April 2021, a Treasury Direction dated 26 January 2021 (the ‘January Treasury Direction’); and
• for the period 1 May to 30 September 2021, a Treasury Direction dated 15 April 2021 (the ‘April Treasury Direction’).

Together, we refer to these three Treasury Directions as the ‘Extended CJRS Treasury Directions’. Their provisions are very similar, although the January and April Treasury Directions provide for some modifications to the calculation of employees’ reference salary and usual hours (which usually involves looking back at pay and hours the previous year) to ensure that employees who are furloughed at any time between March and September 2021 do not lose out by having their furlough pay calculated using their hours and pay from the equivalent period in 2020, since it is likely that many employees were furloughed and therefore on reduced pay during that time – see further questions 23 and 24, below. The April Treasury Direction also includes provision for the tapering of Government support in July and August, as well as details on how to calculate usual hours and reference salary for employees who only commenced employment after 30 October 2020 (who are not eligible to be furloughed for the period up to 30 April 2021, but who became eligible to be furloughed for claim periods from 1 May, provided they were employed on 2 March 2021 and included in an RTI submission by that date). Treasury Directions are not legislation, but are an exercise of ministerial authority conferred by an Act of Parliament and are legislative in nature. Accordingly, in the event of any inconsistencies between the Government guidance and a Treasury Direction, from a legal perspective, we would expect that the Treasury Direction would be accorded more weight. That said, it has sometimes been the case in the past that updates to the Government guidance have appeared to conflict with an existing Treasury Direction and we have taken this to suggest that, where there are inconsistencies, HMRC may not have been intending strictly to enforce the requirements of the Treasury Direction. Should future Government guidance on the Extended CJRS appear to contradict the Extended CJRS Treasury Directions, it is possible that this may indicate a similar intention on the part of HMRC.

3. What key differences are there between the CJRS as it applied in the period from 1 July to 31 October 2020 and the Extended CJRS? (Last updated 18/06/2021)

The rules of the Extended CJRS are largely the same as those that applied to the CJRS in the period between 1 July and 31 October 2020, but there are some important differences.

Level of Government support

Under the Extended CJRS, the Government initially committed to funding the full 80% of employees’ pay (up to the applicable cap) for furloughed hours, with employers having to cover only the employer National Insurance and employer pension contributions. This provided more generous support for employers than that which was available under the CJRS in September and October 2020; effectively, it marked a return to the level of support that employers received under the CJRS in August 2020. In the Spring Budget on 3 March 2021, when it  announced the further extension of the Extended CJRS to the end of September 2021, the Government also announced a gradual tapering down of the amount that the Government will pay over the summer months, to 70% of employees’ pay for furloughed hours in July and 60% in August and September, with employers being expected to make up the difference so that employees continue to receive 80% of their pay (subject to the applicable cap) for their furloughed hours. Details of this tapering are set out in the Government’s Policy Paper. 

Broader eligibility criteria and no maximum claim numbers

Another key difference between the Extended CJRS and the CJRS as it applied from July to October 2020 is that the Extended CJRS is open to employers that have not previously used the CJRS and to employees who have not previously been furloughed, provided they meet the other eligibility criteria. – see questions 4 and 5, below. By contrast, an employee was only eligible to be furloughed under the CJRS as it applied between 1 July and 31 October 2020 if they had previously been furloughed for at least three consecutive weeks in the period from 1 March to 30 June 2020. In addition, the limit on the number of employees an employer could claim for in the period between 1 July and 31 October (namely, the maximum number of employees it had claimed for in any single claim before 30 June) no longer applies. There is now no maximum number of employees an employer can claim for.

Curtailing employer’s ability to claim during notice periods (in respect of both redundancy and other terminations)

The Government guidance for employees states that an employer can make an employee redundant while they are on furlough or afterwards. However, whereas previously the guidance on the CJRS made clear that employers could continue to claim for a furloughed employee who was serving their notice, the guidance on the Extended CJRS (as amended at 13 November) states that this is no longer permitted for claim periods starting on or after 1 December 2020. This is also stated in the Extended CJRS Treasury Directions, which together provide that a claim under the Extended CJRS must not be made in respect of a day on which an employee is on notice of termination of employment.

This change of approach is not entirely unexpected, given that the Job Support Scheme which was previously due to replace furlough would not have permitted employers to make claims during the notice period where employees had been dismissed as redundant. Since one of the Government’s aims in extending furlough was to protect jobs, it is perhaps unsurprising that it would seek to prevent employers using the scheme to subsidise the cost of notice pay where jobs are being lost. 

Based on the wording of the updated guidance and the Extended CJRS Treasury Directions, it is only during an employee’s notice period that employers cannot claim under the Extended CJRS. Accordingly, our current view is that employers can continue to claim for affected employees during a redundancy consultation process, before redundancy is confirmed. 

Note also that the updated guidance and Extended CJRS Treasury Directions do not just prevent claims during statutory or contractual notice where an employee has been dismissed for redundancy; they provide that claims are prohibited in all circumstances where an employee is in their statutory or contractual notice period – whether relating to dismissal, resignation, or retirement.

See question 31, below, for further information on how to deal with notice periods when a furloughed employee’s employment is to terminate.

Publication of names of companies that use the Extended CJRS

In the period before the Extended CJRS was announced, there were media reports of companies that have done better than anticipated during the pandemic taking the decision not to claim support under the furlough scheme, or to hand back grant payments they have already received. HMRC has also commented publicly on its concerns about the level of fraudulent claims that have been made, e.g. by employers that have required their employees to work while on full furlough.

As part of HMRC’s commitment to transparency and to deter fraudulent claims, HMRC now publishes the names of employers who have made claims under the furlough scheme. Lists of employer names, together with an indication of the value of the claim within a banded range in each case and the registered company number for companies and Limited Liability Partnerships can be viewed on the Gov.uk website and the lists are updated on a monthly basis. The Extended CJRS Treasury Directions make clear that it is a condition of making a claim under the Extended CJRS that the employer accepts that HMRC will publish this information online. The relevant information will remain available online for up to one year from the date that it is published. 

Note that the Government guidance and the Extended CJRS Treasury Directions provide that HMRC will not publish details of employers claiming through the scheme if they can show that publishing these would result in a serious risk of violence or intimidation to certain relevant individuals, or any individual living with them. Relevant individuals may include any employee, director or officer of the company, partner in a partnership, member of a limited liability partnership, or trustee, settlor or beneficiary of a trust.

An employer that wishes to ask HMRC to refrain from publishing their details must make an application itself (not via an agent), providing the following details:

• their employer Government Gateway user ID and password;
• their PAYE reference number;
• the business’ name;
• their contact details; and
• evidence in support of the application (which could include, for example, details of why publication would lead to the threat of violence or intimidation, a police incident number if there has already been a reported incident, documentary evidence/photos of a threat or attack, etc.) 

The employer need only make one application, to cover all claim periods for which HMRC will be publishing employer details. HMRC will refrain from publishing the employer’s details until a decision has been made and the employer has been informed of the outcome. Further information on how to make such applications is available here.

The guidance also states that, since February 2021, HMRC has included details of claims made for furloughed employees in their Personal Tax Account online for claim periods that started on or after 1 December 2020, in order to improve the information available to them. However, where an employer has fully repaid any furlough grant it received from the Government, the original claim details will no longer be visible to employees in their Personal Tax Account. 

In the FAQs that follow, we explain the rules of the Extended CJRS based on the Extended CJRS Treasury Directions and the current Government guidance. 

4. Which employers can use the Extended CJRS? (Last updated 19/04/2021)

The Extended CJRS is stated to be available to employers who cannot maintain their workforce because their operations have been affected by Covid-19. There is no explanation given in the Government guidance as to what this means in practice. This ambiguity as to whether employers’ eligibility to access the furlough scheme is limited in some way by reference to how well or badly they have been faring during the pandemic is an ongoing theme. When furlough was first introduced at the beginning of the pandemic, the guidance stated that employers had to have been ‘severely affected’ by Coronavirus in order to use the scheme. However, there was a lack of clarity on exactly what this meant and subsequent iterations of the guidance appeared to tone down this requirement, referring to the fact that different businesses will be affected in different ways. The Extended CJRS Treasury Directions do not shed any further light on this issue, but they do provide that “[n]o CJRS claim may be made in respect of an employee if it is abusive or is otherwise contrary to the exceptional purpose of CJRS”. Accordingly, eligibility seems to remain a matter of judgment for the employer based on whether it thinks it meets the criteria set out in the guidance at the relevant time. 

If a business is satisfied that it meets the above eligibility criteria, the fact that it still has work for employees to do should not, of itself, mean that it would not be able to furlough them under the Extended CJRS.

Note that employers that have large numbers of employees unable to attend work (e.g. because they are clinically extremely vulnerable, have childcare issues following school closures, or for other coronavirus-related reasons) might find that they are suffering operationally/cannot maintain a workforce because of these absences, such that they feel they do meet the relevant criteria. 

If an employer has continued to make a healthy profit notwithstanding any practical operational difficulties and could afford to continue paying employees from their own reserves, it is not clear whether they would meet the requirement that they are unable to “maintain” their workforce. In addition, there remains a moral question as to whether it would be appropriate for employers in such circumstances to rely on Government funding rather than their own resources to support these employees, since ultimately it is the taxpayer who will bear such costs going forwards.

Employers across all areas of the UK can claim, whether their businesses are open or closed and regardless of the lockdown status or Covid-19 alert level in their area. 

Significantly, the Extended CJRS is open to employers that have not previously used the CJRS. 

In order to claim for periods up to 30 April 2021, employers must have a UK, Isle of Man or Channel Island bank account, have established a UK PAYE scheme on or before 30 October 2020 and have enrolled for PAYE online. For claim periods from 1 May 2021, employers can claim if they have a UK, Isle of Man or Channel Island bank account, have established a UK PAYE scheme on or before 2 March 2021 and have enrolled for PAYE online.

Employers whose staff costs are publicly funded should not use the Extended CJRS, but should use their public funds to continue paying their employees.

Where a company goes into administration, the administrator can furlough and claim for employees. However, administrators should only use the Extended CJRS if there is a reasonable likelihood of retaining the employees, e.g. if the business will be sold.

Employers can contact HMRC if they think they do not meet the eligibility criteria due to an HMRC error, or unreasonable delays caused by HMRC. However, the Government guidance specifies that there is no right of appeal for employers that are not eligible for the Extended CJRS. Employers who are not satisfied with the way HMRC has handled their claim can use the HMRC complaints service.

5. Which employees are eligible to be furloughed under the Extended CJRS? (Last updated 18/06/2021)

In order to be furloughed under the Extended CJRS for claim periods up to 30 April 2021, employees must have been on the employer’s PAYE payroll on or before 23.59 on 30 October 2020 and have been notified to HMRC on an RTI full payment submission between 20 March 2020 and 30 October 2020.

For claim periods from 1 May 2021, employees must have been on the employer’s PAYE payroll on 2 March 2021 and have been notified to HMRC on an RTI full payment submission between 20 March 2020 and 2 March 2021.

Employees on any type of employment contract are eligible. This includes:

• full-time employees;
• part-time employees;
• employees on flexible or zero-hour contracts;
• apprentices (who can continue to train while on furlough – see question 11 below); and
• employees on fixed term contracts (and such contracts can be extended or renewed while the employee is on furlough).

In addition, the following categories of individuals are also eligible if they are paid by PAYE and were on payroll on or before 30 October 2020 (for claim periods up to 30 April 2021), or 2 March 2021 (for claim periods from 1 May 2021):

• Office holders (including company directors).
• Agency workers, whether or not they are employees of the agency, including those employed by umbrella companies. 
• Limb (b) workers (sometimes known as dependant contractors, where the individual carries out work or services for another party who is not their client or customer).
• Salaried members of Limited Liability Partnerships.
• Contractors who fall within the scope of the IR35 rules.

Government guidance on how the Extended CJRS applies for these other categories of individual is available here.  

Can foreign nationals be furloughed?

Yes. Foreign nationals are eligible to be furloughed. Grants under the scheme are not counted as ‘access to public funds’, and employers can furlough employees on all categories of visa.

What about former employees?

Earlier versions of the Government guidance highlighted that employees who were employed on 23 September 2020 (the date that the now postponed Job Support Scheme was announced), and in respect of whom an RTI submission had been made between 20 March 2020 and 30 October 2020, but who have since been made redundant or otherwise left employment, could be rehired and furloughed under the Extended CJRS.

Similarly, employers could rehire and claim for an employee who was on a fixed term contract on 23 September and in respect of whom an RTI submission had been made between 20 March and 30 October, whose contract expired after 23 September, provided that the other eligibility criteria are met.

The part of the guidance about rehiring employees who were previously made redundant or left employment appears to have now been removed. We therefore assume that, at this stage of the pandemic, the Government no longer expects employers to rehire former employees in order to furlough them.

Note that while employers could have rehired former employees in order for them to be furloughed, they were under no obligation to do so. If you did decide to rehire a former employee, you would have had to consider what approach to take to any termination payments (e.g. statutory redundancy pay) that they may have received when their employment ended. You would also have had to think about how you would end the employment relationship in the future if that was still necessary. 

What about employees who transfer under TUPE?

In employment law, the effect of TUPE is that post-transfer it is as if the transferred employee had always been employed by the new employer. 

The Government guidance specifies that the new employer will be allowed to claim under the Extended CJRS in respect of the employees of a previous business who transfer to it if either the TUPE or PAYE business succession rules apply to the change in ownership. 

For claim periods up to 30 April 2021, transferring employees must have been:

• transferred from their old employer to their new employer on or after 1 September 2020;
• employed by their old employer or their new employer on 30 October 2020; and
• on a PAYE RTI submission notifying a payment of earnings to HMRC, submitted by their old employer, between 20 March 2020 and 30 October 2020 

For claim periods from 1 May 2021, transferring employees will be eligible to be furloughed by the new employer under the normal eligibility criteria if they were included on the new employer’s PAYE RTI submission on or before 2 March 2021. If they were not, the new employer will still be able to claim for the transferring employees provided that they:

• were employed by the old employer on or before 2 March 2021;
• transferred from the old employer to the new employer on or after 1 January 2021; and
• were included on a PAYE RTI submission notifying a payment of earnings to HMRC, submitted by their old employer, between 20 March 2020 and 2 March 2021

Note that the calculation of usual hours and usual wages for variable pay employees who have transferred under TUPE may require you to take into account the employee’s period of employment with their previous employer. It is therefore important to ensure that the information needed for future claims under the Extended CJRS is passed on to the new employer by the old employer on any such transfer – see further at questions 23 and 24, below.

Can employees who have caring responsibilities be furloughed?

The guidance specifies that employees who have caring responsibilities resulting from Covid-19 that mean they are either unable to work (including from home) or unable to work their full hours can be furloughed/flexibly furloughed. With regard to the types of caring responsibilities that are covered, the guidance gives the examples of caring for children who are at home as a result of school or childcare facilities closing and caring for a vulnerable individual in the employee’s household.

Particularly in light of school closures during the third lockdown in England, the question was raised as to whether employers could furlough employees with such caring responsibilities even where they did not meet the general eligibility criteria of being unable to maintain their workforce because their operations have been affected by Covid-19 (see question 4, above). The guidance is not definitive on this point, and does not specifically exclude the general eligibility criteria for the employer. However, by including specific commentary on furlough for employees in these circumstances, and in adding an example relating to school closures, it is plausible that it may be the Government’s intention to allow this.  

That said, for any employers whose business has not suffered at all during the pandemic, there remains a moral question as to whether it would be appropriate to rely on Government funding rather than their own resources to support these employees, since ultimately it is the taxpayer who will bear these costs going forwards. For a discussion of possible alternatives, see our FAQs on ‘Employees unable or unwilling to attend work’.

Can the ‘clinically extremely vulnerable’ be furloughed?

The Government guidance on the Extended CJRS specifies that employees can be furloughed where they are unable to work because they are ‘clinically extremely vulnerable’ (or, in Scotland, ‘at the highest risk of severe illness from coronavirus’) and following public health guidance.

Shielding advice for the clinically extremely vulnerable, which recommended that they should not attend the workplace, even if they could not work from home, was relaxed with effect from 1 April 2021. Accordingly, clinically extremely vulnerable employees who cannot work from home could now potentially return to the workplace provided appropriate safety measures are in place - see our FAQs on ‘Health and safety measures’ for further information. However, it is also important to note that some clinically extremely vulnerable employees might not feel able to return to the workplace; the guidance for the clinically extremely vulnerable appears to recognise this, as it provides that they may remain eligible for furlough under the Extended CJRS throughout the period that it remains in place, provided their employer agrees. Indeed, the Government guidance on which employees can be furloughed expressly confirms that the clinically extremely vulnerable remain eligible for furlough even whilst shielding guidance is not in place. (By way of reminder, those who are considered clinically extremely vulnerable include the approximately 2.3 million individuals who were advised at the start of the pandemic that they are most at risk of severe and life-threatening illness if they contract Covid-19, plus a further 1.7 or so million individuals who were added to the list in February 2021 following an expansion of the definition of ‘clinically extremely vulnerable’, all of whom have been advised by the NHS to ‘shield’ during specified periods of the pandemic. The expansion of the definition of ‘clinically extremely vulnerable’ is based on new modelling that takes into account not just existing health conditions, but also criteria such as ethnicity, deprivation and weight, to determine a person’s risk of becoming seriously ill if they were to contract Covid-19). 

It is helpful that the furlough guidance was updated on 10 December 2020 to state that an employer “does not need to be facing a wider reduction in demand or be closed to be eligible” to furlough clinically extremely vulnerable employees. Although this wording appears in a section of the guidance that deals primarily with employees who are off sick or self-isolating, it indicates an intention on the part of the Government to allow employers to furlough their clinically extremely vulnerable employees if they are unable to work from home, even if the employer does not meet the general eligibility criteria of being unable to maintain their workforce because their operations have been affected by Covid-19 (see question 4, above).

That said, for any employers whose business has not suffered at all during the pandemic, there remains a moral question as to whether it would be appropriate to rely on Government funding rather than their own resources to support these employees, since ultimately it is the taxpayer who will bear these costs going forwards. 

Can vulnerable employees or those otherwise reluctant to attend work for a Covid-19 related reason be furloughed? 

The Government guidance does not address whether an employer can furlough employees who are considered ‘vulnerable’ as opposed to ‘clinically extremely vulnerable’ to Covid-19, or those who are simply nervous about attending work in the circumstances of the pandemic, where they would otherwise have work for those employees to do. 

In our view, whether or not you can furlough these employees would depend on the interpretation of references in the Government guidance to the purpose of the Extended CJRS and the circumstances in which employers can access it. As noted at question 4, above, the current guidance provides that the Extended CJRS is available to employers who cannot maintain their workforce because their operations have been affected by Covid-19. 

Employers wishing to furlough employees who are vulnerable or otherwise reluctant to attend work for a Covid-19 related reason would therefore need to make a judgment call based on whether they could say that they meet the criteria of being unable to maintain their workforce because their operations have been affected by Covid-19.  Note that if a business is satisfied that it meets the above eligibility criteria, the fact that it still has work for these employees to do and even needs to backfill for them should not, of itself, mean that it would not be able to furlough them under the Extended CJRS.

Can employees who live with someone who is vulnerable or clinically extremely vulnerable be furloughed? 

Employees who live with someone who is vulnerable or clinically extremely vulnerable are advised to continue to go to work if they cannot work from home. However, such employees may need to stay at home to look after the vulnerable/clinically extremely vulnerable person with whom they live and/or may feel unable to attend work because of the risk of bringing the virus home to them. 

As noted above under ‘Can employees who have caring responsibilities be furloughed?’, the Government guidance makes clear that employees who have caring responsibilities as a result of Covid-19 that mean they are unable to work (including from home), or are unable to work their full hours, can be furloughed/flexibly furloughed – and one of the specified examples of the type of caring responsibilities that are covered is where an employee is caring for a vulnerable individual in their household. This would suggest that, where the vulnerable or clinically extremely vulnerable person with whom the employee lives actually requires care, such an employee can be furloughed.

As set out under the heading ‘Can employees who have caring responsibilities be furloughed?’, above, it seems plausible that the Government may now intend that employers can furlough employees with such caring responsibilities without having to meet the general eligibility criteria of being unable to maintain their workforce because their operations have been affected by Covid-19 (see also question 4, above).

What if the vulnerable or clinically extremely vulnerable person with whom the employee lives does not require care, such that the employee would not fall within the section of the guidance on furloughing employees with caring responsibilities, but the employee is nervous of attending the workplace and bringing the virus home to them? In these circumstances, the considerations would be the same as for other employees who are reluctant to attend work due to concerns about Covid-19 – see ‘Can vulnerable employees or those otherwise reluctant to attend work for a Covid-19 related reason be furloughed?’, above. 

Can employees who are currently off sick/self-isolating, or who become ill/required to self-isolate, be furloughed? And what happens when an employee who is furloughed becomes ill or has to self-isolate?

The Government guidance states that the Extended CJRS is not intended to cover short-term sickness absences/periods of self-isolation and short-term illness/self-isolation should not be a consideration in deciding whether to furlough an employee. If, however, employers want to furlough employees for business reasons and they are currently off sick, they are able to do so. In such a case, the employee should no longer receive sick pay and would be classed as a furloughed employee.

Furloughed employees retain their statutory rights, including the right to SSP. Accordingly, furloughed employees who become ill, due to Covid-19 or any other cause, must be paid at least Statutory Sick Pay (SSP). This also applies to those who have to self-isolate (and would be unable to work) because they or someone in their household/support bubble has symptoms of or tests positive for Covid-19, they are informed that they must self-isolate under the NHS test and trace programme, or they are advised to self-isolate by a medical practitioner prior to an operation. It is up to employers to decide whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate of pay.

If a furloughed employee who becomes sick is moved onto SSP, their employer can no longer claim for them under the Extended CJRS while they are on SSP. 

Employers can claim back from both the Extended CJRS and the SSP Rebate Scheme for the same employee but not for the same period of time. When an employee is on furlough, the employer can only reclaim expenditure through the Extended CJRS, and not the SSP Rebate Scheme.

Given the above, employers may be unlikely to move employees off furlough leave and furlough pay onto SSP. 

Where a company operates a company sick pay scheme, we would recommend confirming to employees that any company sick pay payable in respect of sickness during furlough will be based on their adjusted rate of furlough pay. (Note that the practical effect of this may be to discourage employees who are on full rather than flexible furlough from telling the employer that they are sick, so that they do not use up their company sick pay entitlement.)

6. How will furlough affect those on maternity/other statutory family leave or due to go on such leave? (Last updated 17/11/2020)

The Government guidance states that the normal rules for maternity and other forms of statutory family leave and pay continue to apply.

Since maternity leave is triggered automatically on the birth of a baby, if not commenced earlier, an employee who gives birth while on furlough would begin her maternity leave and the normal rules around eligibility for Statutory Maternity Pay (SMP) or Maternity Allowance (MA) would apply. 

If an employee’s earnings have reduced because she has been on furlough leave, this may affect her SMP or MA. However, regulations in force from 25 April 2020 provide that, where an employee starts her maternity leave on or after 25 April 2020, her normal weekly earnings for the purpose of determining her entitlement to, or the amount of, SMP or MA are to be calculated as if she had not been furloughed. The Government has produced guidance to explain this altered calculation method.

Employees on maternity leave must take at least 2 weeks off work following the birth (4 weeks if they work in a factory or workshop). The Government guidance indicates that an employee can be on furlough and maternity leave at the same time. However, employers can only claim under the Extended CJRS for the enhanced contractual element of maternity pay and not for SMP. Accordingly, for an employee who is only entitled to SMP, there would be no practical benefit to remaining on furlough during her maternity leave.

Note that the ability for employers to claim back the enhanced contractual element of maternity pay under the Extended CJRS appears to apply a different rule about what furlough pay employees on maternity leave would receive when compared to other furloughed employees (as it is not based on their pay in a specified previous pay period/average previous earnings, but on their contractual maternity pay entitlement). As noted above, employers cannot claim under the Extended CJRS for the cost of SMP. Since contractual maternity pay will include an employee’s SMP, employers claiming for the cost of such contractual maternity pay will need to adjust the amount that they are claiming to exclude the SMP element.

Given that the applicable rate of SMP after the first six weeks of maternity leave is just £151.20 per week, employees who are on maternity leave and whose employer does not provide enhanced company maternity pay may well prefer to return from maternity leave early and be furloughed by their employer instead. 

The Government guidance makes clear that the normal rule – that an employee must give eight weeks’ notice of an early return from maternity leave – applies where an employee wishes to return early in order to be furloughed under the Extended CJRS. However, it does acknowledge that employees may be able to agree an early return with their employer on shorter notice in certain circumstances (although without identifying what those circumstances are). In such cases, the employee’s furlough can begin from the date that it was agreed the employee could return to work.

(The same principles apply where an employee qualifies for contractual adoption, paternity, or shared parental pay.)

7. What process should you follow to place an employee on furlough under the Extended CJRS? (Last updated 19/04/2021)

Employers should discuss with their staff and also agree any changes to employment contracts to deal with employees being furloughed. When employers are making decisions in relation to the process, including deciding to whom they should offer furlough, equality and discrimination laws will apply in the usual way.

To be eligible for the furlough grant from the Government, employers must have confirmed to the employee (or reached collective agreement with a trade union) in writing that they have been furloughed or flexibly furloughed. The guidance indicates that the employee does not have to provide a written response. In practice, however, we would still recommend that employers try to obtain employees’ written agreement to be furloughed where possible. 

The Extended CJRS Treasury Directions specify that furlough agreements must be made before the beginning of the period for which the employer wishes to claim in respect of the employee – i.e. they cannot be retrospective (subject to the below). However, they do allow for furlough agreements to be varied during a period for which the employer is claiming for the employee, to reflect any agreed variation to the terms of furlough. That could, for example, permit a variation in the number of hours that an employee working part-time on flexible furlough is required to work. 

Given the last-minute nature of the announcement regarding the Extended CJRS, the November Treasury Direction and the Government guidance permitted retrospective furlough agreements to cover the period from 1 November to 13 November 2020, provided they were consistent with employment law and were made on or before 13 November 2020 in accordance with the conditions set out in the guidance.

The Extended CJRS Treasury Directions also state that a furlough agreement must specify the main terms and conditions on which the employee will be (fully or flexibly) furloughed. In this regard, we assume that it is sufficient to cover the extent to which the employee’s normal terms and conditions (e.g. as to hours of work, pay and benefits) are varied during furlough and any provisions relating to the possibility that the employee may be required to undertake training during furlough, as well as the extent to which they are permitted to work for another employer, or to volunteer. 

Any furlough agreement must also be consistent with employment, equality and discrimination laws and the employer must:

• keep a written record of the agreement for 5 years; and 
• for flexible furlough arrangements, keep records of how many hours their employees work and the number of hours they are furloughed (i.e. not working), for 6 years.

Make UK have produced template letters that employers can use to agree with employees that they will be placed on full or flexible furlough and that cover the above points.

While the Government guidance indicates that if sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes, in our view, it should not be necessary for an employer to initiate collective consultation when first proposing to place employees on full or flexible furlough, unless the employer anticipates that 20 or more employees are likely to refuse – and the consequence for those employees who refuse would be that they are dismissed.

If employees do not agree to go onto full or flexible furlough, the first step for an employer would be to engage with employees if possible, explaining the need for the proposed arrangements, the benefits to employees and the alternatives. Given the ongoing impact of the pandemic, it is likely that many employees will ultimately agree to the employer’s proposals. If they do not, the appropriate course of action will depend on the particular circumstances. We suggest that you seek specific legal advice if you find yourself in this situation.

8. What happens to an employee’s terms and conditions of employment and statutory employment rights during furlough? (Last updated 11/11/2020) 

The Government guidance makes clear that employees on furlough will retain their rights at work, including:

• SSP;
• annual leave;
• maternity and other parental rights; 
• rights against unfair dismissal;
• redundancy payments; and 
• to be paid at least statutory National Minimum Wage for hours worked.

As to contractual terms, the starting point is that any terms that are not expressly varied by the furlough agreement would remain in force during a period of furlough. Employers may wish to agree changes to contractual benefits that would apply during the period of furlough when seeking employees’ agreement to furlough leave, for example changes to bonus schemes, or the suspension of other benefits. In addition, since the guidance indicates that it is for the employer to decide whether to move furloughed employees who fall ill or need to self-isolate onto SSP, or keep them on furlough leave and furlough pay, we suggest that employers that operate a company sick pay scheme confirm to employees that company sick pay during furlough will be payable at the furlough rate of pay (see further question 5, above).

In theory, an employer could agree any changes it wishes with the employees it places on furlough. In practice, however, the more severely the employer tries to remove or restrict benefits during furlough, the more likely it is that employees might refuse to agree to the proposed changes. On the other hand, employees may be more likely to agree to otherwise unpalatable changes where the employer is in difficult financial circumstances and can clearly explain to employees the need for particular changes in order to help the company continue as a viable business. In all cases, it is of course important for the employer to communicate with its employees so that they understand the changes the employer wishes to make and why it needs to make them.

Employers cannot place employees on furlough without their agreement, so would have to weigh up the importance of additional contractual changes against the likelihood of employees refusing to agree – and the potential complications that would cause. 

(Note that we do not think it would be appropriate for an employer seeking employees’ agreement to go on furlough to seek to make permanent changes to employees’ contractual terms that will continue to apply after furlough ends as part of that process.)

9. Is there a minimum period for which furlough must last? Can you furlough employees multiple times? (Last updated 17/11/2020)

There is no minimum furlough period. Furlough agreements can last any amount of time and it is possible to furlough employees multiple times. 

One possible alternative to bringing employees on and off furlough and entering into a new furlough agreement each time could be to use a ‘rotational’ furlough system. Under this sort of arrangement, employees can agree in advance that they will be furloughed for a specified period, then return to work for a specified period, before returning to furlough again, and so on. Such rotational furlough arrangements can also be a way to ‘share the pain’ of reduced volumes of work by ensuring that all employees rotate between working normally and receiving full pay and being furloughed and receiving furlough pay. Our template full furlough letter includes optional wording to provide for rotational furlough.

(Note that the minimum claim period is usually 7 consecutive calendar days, but employees do not have to be on furlough for the whole of a claim period – see question 21, below). 

10. Can employees work for you, or elsewhere, during furlough? (Last updated 19/04/2021)

Fully furloughed employees cannot carry out any work that makes money or provides services for you or any organisation linked or associated with you during their period on furlough. 

Flexibly furloughed employees cannot carry out any work that makes money or provides services for you or any organisation linked or associated with you during their non-working, i.e. ‘furloughed’ hours. 

During furloughed hours, employees can, however: 

• take part in training;
• volunteer for another employer or organisation; and 
• work for another employer (if permitted under their employment contract).

The Government guidance makes clear that an employee undertaking paid work for another organisation or on their own account during furlough leave (where this is allowed under their employment contract) will not affect your entitlement to claim in respect of them under the Extended CJRS. However, the guidance for employees notes that the employee needs to be able to return to work for you if you decide to stop furloughing them, or start flexibly furloughing them, and must be able to undertake any training you require them to do while on furlough.

An employee who has more than one job can continue to work for and be paid by their second employer. They can be fully or flexibly furloughed for each job; each job is separate, and the furlough pay cap applies to each employer individually.

Where the furloughed employee is a company director, note that the Extended CJRS Treasury Directions make clear that they are permitted to undertake certain work while they are fully furloughed / during their furloughed hours on flexible furlough. The work that is permitted is work that directly relates to: 

• fulfilling a statutory duty relating to the filing of company accounts or provision of other information relating to the administration of the company; 
• making a furlough claim in respect of company employees; or 
• making payments of wages to company employees.

11. Can employees and apprentices undertake training while on furlough? (Last updated 19/04/2021)

Yes. The Government guidance provides that fully or flexibly furloughed employees can undertake training during furlough so long as this does not involve providing services to or generating revenue for or on behalf of the employer or a linked or associated employer. The Extended CJRS Treasury Directions specify that study or training will be permitted if its purpose is to improve the employee’s effectiveness in the employer’s business or the performance of the employer’s business, so long as the study or training does not provide a service to the employer, contribute to business activities, generate income or profit, or significantly contribute to the production of goods or services for sale.

It is worth noting that the Government guidance states that furloughed employees should be encouraged to undertake training. However, if employees undertake training at your request during the hours which you record them as being furloughed, for instance, if they are required to complete online training courses, then they must be paid at least the National Living Wage/National Minimum Wage (NLW/NMW) for the time spent training. Time spent training is treated as working time for the purposes of the minimum wage calculations and must be paid at the appropriate minimum wage rate. As noted in the Government guidance, employers will need to ensure that the furlough payment provides sufficient monies to cover these training hours. In most cases, the furlough payment of 80% of an employee’s regular wage, up to the value of £2,500 (pro-rated where the employee is on flexible furlough) will provide sufficient monies to cover these training hours. However, where the furlough payment is less than the appropriate minimum wage entitlement for the training hours, the employer will need to pay the additional wages to ensure at least the appropriate minimum wage is paid for 100% of the training time.

Note that apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed. However, as with other employees, you must pay your apprentices at least the Apprenticeship Minimum Wage/NLW/NMW as appropriate for all the time they spend training. Government guidance on changes in apprenticeship learning arrangements due to Covid-19 is available online for England, Scotland, Wales and Northern Ireland.

12. Can employees undertake voluntary work while on furlough? (Last updated 11/11/2020)

Yes. Fully or flexibly furloughed employees can undertake voluntary work while they are on furlough, provided that this:

• does not involve providing services to or generating revenue for or on behalf of your organisation or a linked or associated organisation;
• does not involve volunteering for you in an alternative role; and
• is in accordance with applicable public health guidance (e.g. on social distancing and self-isolation).

13. Do employees continue to accrue holiday while on furlough? (Last updated 11/11/2020)

The Government guidance specifies that furloughed employees continue to accrue holiday in accordance with their employment contract and that they cannot be deprived of their minimum statutory entitlement to 5.6 weeks’ annual leave per year. This point is also reflected in the specific guidance on holiday entitlement and pay during coronavirus. (Note that this specific guidance has not been updated since it was first published on 13 May 2020.) 

The Government guidance also acknowledges that employers could potentially agree with employees a variation to any additional contractual holiday entitlement. One way to do this might be to provide that the number of days of additional contractual holiday the employee accrues over the year will be reduced in proportion to the amount of time they spend on furlough. However, it is worth noting that the more severely an employer tries to remove or restrict benefits during furlough, the more likely it is that employees might refuse to agree to the proposed changes – see questions 7 and 8, above, for further information. In addition, if employees are working part-time on flexible furlough, it would seem unfair to suspend their accrual of contractual holiday and in any event the calculation of days accrued could be administratively burdensome. 

14. Can employees who are on furlough take annual leave at the same time? And what is the position on holiday pay? (Last updated 07/06/2021)

In common with the ACAS guidance on Covid-19 and holidays, the Government guidance confirms that an employee who is on furlough can take holiday and that, if they do, the employer should top up their furlough pay (which they can still claim for under the Extended CJRS) to their usual holiday pay. This point is also reflected in the specific guidance on holiday entitlement and pay during coronavirus.

Obviously, the impact of having been on furlough will, moving forwards, affect the calculation of holiday pay for those with variable pay, which may potentially be inconsistent with the Working Time Directive and lead to challenges from employees. (Note that the Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 (discussed further at question 33 below), which are intended to ensure that an employee does not lose out as a result of having been on furlough where payments to which they are entitled are calculated on the basis of the ERA week’s pay provisions, do not apply to the calculation of holiday pay.)  

15. What is the position on bank holidays that fall while employees are on furlough? (Last updated 11/11/2020)

The Government guidance indicates that if a furloughed employee usually works on bank holidays, “the employer can agree that this is included in the grant payment”. The guidance on holiday entitlement and pay during coronavirus specifies that where a bank holiday falls during an employee’s period of furlough and the employee would have usually worked the bank holiday, their furlough will be unaffected by the bank holiday. Accordingly, a furloughed employee who usually works on a bank holiday will simply remain on furlough and in receipt of furlough pay for the bank holiday, as if it were any other normal working day.

If an employee usually takes the bank holiday as leave, the Government guidance provides that the employer will either have to top up their furlough pay to provide a day’s holiday pay, or give the employee a day of holiday in lieu. On this point, the guidance on holiday entitlement and pay during coronavirus permits either of these options. However, it slightly complicates matters by suggesting that in order for the bank holiday to be taken as leave while the employee is on furlough (with topped up pay), the parties must agree to this or the employer must give notice for the employee to take it as holiday under the WTR. In most cases where employees usually have bank holidays as leave, this is provided for in their contract of employment. The guidance could potentially be read as requiring a specific agreement that a bank holiday is to be taken as holiday while the employee is on furlough. However, if employers have provided in their furlough letter that, other than any changes in respect of pay, etc., the employee’s other contract terms will continue to apply, we assume that the existing provision in the employee’s contract would suffice as agreement for the bank holiday to be taken as leave even while the employee is on furlough.

16. Can we require furloughed employees to use their holiday entitlement while they are on furlough? (Last updated 18/06/2021)

The guidance on holiday entitlement and pay during coronavirus makes clear that employers can require furloughed employees to take specified days as annual leave while they are on furlough, provided they give notice in the usual way in accordance with the WTR and pay holiday pay at the appropriate rate, which may require them to top up the employee’s furlough pay. However, it advises that employers should engage with their workforce and explain reasons for wanting them to take leave before requiring them to do so.

It is also worth noting that the guidance cautions that if an employer requires an employee to take holiday while on furlough, the employer should consider whether any restrictions the employee is under, such as the need to socially distance or self-isolate, would prevent the worker from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday. This recommendation hints at the view (based on case law establishing that employees cannot be required to take annual leave while off sick, or on maternity leave) that being required to take annual leave while on furlough may in some cases be incompatible with the purpose of annual leave. Employers may, for example, have felt that it would be inappropriate to require employees to use much holiday during a period of full lockdown when employees’ ability to enjoy leisure activities would have been very limited. As lockdown restrictions are now easing in accordance with the Government’s roadmap, these concerns are unlikely to be an issue in most cases (notwithstanding the delay to the final stage of the roadmap that was announced on 14 June 2021). That said, employers may still need to consider the particular circumstances that apply at the time – for example, if severe restrictions are imposed at a local level to tackle a new variant of concern.

Another helpful point in the guidance on holiday entitlement and pay during coronavirus is the statement that, in most cases, employees who are on furlough will be able to take their holiday during their furlough so are unlikely to need to make use of the regulations that permit the carry forward of up to four weeks’ annual leave into the next two leave years where it has not been reasonably practicable for employees to take that leave due to Coronavirus (on which see further question 18, below). 

On balance, the guidance would seem to support the view that employers can effectively require employees on furlough to use up at least a proportionate amount of their annual leave as it accrues.

As a matter of good practice, though, we recommend that employers take a reasonable approach and avoid requiring employees to take a disproportionate amount of annual leave while on furlough. 

Employers should also take note that the ACAS guidance encourages employers and employees, as a matter of best practice, to be as flexible as they can about holiday during the coronavirus pandemic. In particular, the guidance recommends: talking about plans to use or cancel holiday as soon as possible; discussing the reasons why holiday might need to be taken or cancelled; listening to each other’s concerns and welcoming ideas for alternatives; considering everyone’s physical and mental wellbeing; and being aware that it’s a difficult time for both employers and staff. 

17. Our employees are currently working (normally or on flexible furlough). Can we claim in respect of them under the Extended CJRS when they take holiday, or during our planned annual shutdown? (Last updated 07/06/2021)

Although employees are permitted to take holiday whilst on furlough, as explained at question 14, the Government guidance includes a warning that employees should not be placed on furlough “just because they are going to be on paid leave” and that employers should only use the Extended CJRS where their operations are affected by Covid-19.  We assume that this is intended to prevent employers from claiming under the Extended CJRS where they do not otherwise need it, simply to subsidise the cost of employees’ holiday pay. 

For employees who are currently working normally, this begs the question whether it might be considered an abuse of the Extended CJRS for an employer to place them on furlough when they take holiday and/or during a planned annual shutdown. In other words, are employees being put on furlough “just because” they are on holiday? This will depend on the employer’s circumstances at this stage of the pandemic. For example, an employer who has previously furloughed employees may now have its staff back at work, but that does not necessarily mean its operations are no longer affected by the pandemic. It may be able to argue that it still needs the financial support provided by the Extended CJRS but that, in order to work towards business recovery, it needs its employees to be at work as much as possible. Accordingly, timing periods of furlough to coincide with employees’ holidays will not always mean that those employees are being furloughed “just because” they are on holiday. Employers will need to consider their particular circumstances and make their own judgement on whether placing employees on furlough when they take holiday or during a planned annual shutdown is appropriate. Employers should also bear in mind that the guidance is a little ambiguous on these issues and, additionally, we do not know where HMRC would draw the line in any given case. (See question 4, above, for a broader discussion of when an employer is eligible to claim under the Extended CJRS.) 

What if employees are not working normally, but are working part-time on flexible furlough? Could the employer then claim under the Extended CJRS for an increased number of hours during a planned annual shutdown or other period of holiday? The Extended CJRS Treasury Directions’ definition of “furloughed hours” states that: “The number of furloughed hours in a CJRS claim period relating to an employee must be determined by subtracting the number of hours the employee works in that period from the employee’s usual hours for that period.”  In addition, the Government guidance states that for employees on flexible furlough any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours. This suggests that, for employees who are on flexible furlough, an employer can include holiday taken in the amount they claim under the Extended CJRS (up to the relevant cap), whether the holiday is taken on a day that would otherwise be a work day or a day that would otherwise be a furlough day. However, again note the warning in the guidance against putting employees onto furlough ‘just because’ they are going to be on paid leave. 

18. What if we can’t afford for furloughed employees to take holiday? (Last updated 11/11/2020)

The Government guidance expressly refers to the employer’s right to restrict when annual leave can be taken if there is a business need, including while employees are on furlough, provided the correct notice is given under the WTR. This is helpful for employers whose business has been so severely affected by the pandemic that they are unable to afford to top up furlough pay to meet holiday pay requirements, and may therefore need to specify that employees cannot take holiday while they are on furlough.

In this regard, it is worth noting the existence of special regulations which provide that up to four weeks’ paid holiday can be carried over into the next two holiday years if it cannot be taken due to coronavirus. The ACAS guidance gives the following examples of why an employee may be unable to take their holiday:

• the employee was self-isolating or too sick to take holiday before the end of the leave year;
• the employee had to continue working and could not take paid holiday; or
• the employee was furloughed and could not ‘reasonably’ use their holiday in the leave year.

The guidance on holiday entitlement and pay during coronavirus expands on this, listing various factors that an employer should take into account when deciding whether an employee could reasonably take their annual leave in the current leave year. On the issue of furlough, it states that employees who are on furlough are unlikely to need to carry forward statutory annual leave, as they will be able to take it during the furlough period (in most cases at least). However, to do so they must be paid the correct holiday pay which is likely to be higher than the rate of pay that will be covered by the grant under the Extended CJRS, with the employer making up the difference. The guidance notes that if, due to the impact of Covid-19 on operations, the employer is unable to fund the difference, it is likely that this would make it not reasonably practicable for the employee to take their leave, enabling the employee to carry their annual leave forwards. In this situation, the employee must still be given the opportunity to take their annual leave, at the correct rate of holiday pay, before the carried forward annual leave is lost at the end of the next 2 leave years.

For further discussion of an employer’s ability to prevent employees from taking holiday on specified dates and the regulations that permit the carry forward of leave that an employee has been unable to take due to coronavirus, see our FAQs on ‘Managing employees during the pandemic’. Members can also access guidance on how to handle holiday that has been carried forward in the HR & Legal Resources section of our website.

19. Can employees participate in disciplinary and grievance proceedings while on furlough? (Last updated 11/11/2020)

As noted above, one of the conditions for full furlough is that an employee cannot do any work for their employer during the furlough period, and for flexible furlough that an employee cannot do any work for their employer during the hours they are recorded as being on furlough. Work is defined to include generating revenue for or providing services to the employer or an associated organisation. Accordingly, we do not think it would be possible for an HR manager or line manager to run a grievance or disciplinary process while on full furlough/during their furloughed hours on flexible furlough.  

For the aggrieved employee, or the employee who is the subject of disciplinary proceedings, we think that participating in a grievance or disciplinary hearing is unlikely to amount to ‘work’, and that such participation should therefore be possible while the employee is on full furlough/during their furloughed hours on flexible furlough. Note that, in practice, a fully furloughed employee might simply refuse to engage in the process at all. In these circumstances, the employer will need to consider whether it is possible to conduct a fair process in the employee’s absence or whether the process needs to be suspended to give the employee a chance to change their mind about participating.

As for the employee’s companion at relevant disciplinary or grievance meetings, the Government guidance confirms that employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees, so long as they do not thereby provide services to or generate revenue for or on behalf of the employer or a linked organisation. 

Given the above, provided that the relevant HR and line managers are not on full furlough, it should in most cases be possible to continue with disciplinary and grievance processes while the employees concerned are on full or flexible furlough. That said, it is also important to bear in mind the practicalities of conducting such processes remotely if your workplace remains closed and/or any of the employees involved is unable to attend the workplace for face-to-face meetings and the difficulties this may cause in relation to ensuring a full investigation and fair hearing – see the FAQs on ‘Managing employees during the pandemic’ for more information. In some cases, it may be necessary to suspend the relevant process until circumstances have changed. We recommend seeking advice on your particular situation.

20. What can you claim under the Extended CJRS and how do you do it? (Last updated 18/06/2021)

Under the Extended CJRS, for claim periods up to 30 June 2021 employers can claim a grant for the full 80% of furloughed employees’ usual pay up to a maximum of £2,500 per month (their furlough pay), per employee for the time the employee spends on furlough. 

However, the level of Government support under the Extended CJRS will reduce from 1 July 2021. Over the summer months, there will be a gradual tapering down of the amount that the Government will pay, to 70% of employees’ pay for furloughed hours in July and 60% in August and September.  Employers will be expected to make up the difference so that employees continue to receive 80% of their pay (subject to the applicable cap) for their furloughed hours. Details of the tapering of support are set out in the Government’s Policy Paper.

Where employees are on flexible furlough, the applicable cap is reduced on a pro-rata basis depending on the proportion of usual working hours that the employee is furloughed for (and employers must pay their employees in accordance with their employment contract for any time worked and in accordance with the Government grant for the time not worked).

Employers can choose to top up employees’ furlough pay above the applicable cap at their own expense, although there is no obligation to do so.

Employers must operate PAYE on behalf of their employees and pay employer National Insurance contributions (NICs) and employer pension contributions for their employees on the full amount that they pay the employee, including any pay covered by the Government grant. Employers cannot claim under the Extended CJRS for employer NICs or pension contributions.

However, the Government guidance notes that employers may be eligible to reduce the amount of employer NICs that they pay by claiming the Employment Allowance (which is an ongoing provision that is separate from the Extended CJRS). It flags that employers that used the furlough scheme during the period up to the end of July 2020, when the Government covered the cost of employer NICs, may need to adjust the amount of Employment Allowance they claim going forwards, to ensure that they do not receive relief for the same employer NICs costs twice.

Agents who are authorised to do PAYE online for employers can claim on their behalf.

The Extended CJRS operates as the previous scheme did, with businesses being able to claim either shortly before, during or after running payroll. Claims relating to each month should be submitted by day 14 of the following month, to ensure prompt claims following the end of the month which is the subject of the claim. The Government anticipates that employers will receive their grant payments 6 working days after they make their claims.

In order to claim, employers must: 

• determine the length of their claim period;
• work out which elements of pay they must include; 
• for employees who are on flexible furlough, work out the employee’s usual hours and furloughed hours; and
• work out the amount they can claim as a grant under the Extended CJRS

in accordance with the Government guidance on how to do the calculations. We have summarised key points in the questions below. However, the applicable formulae are set out in full in the Extended CJRS Treasury Directions and there is a lot more detailed information in the various pieces of Government guidance, including in-depth worked examples, and you will need to read and digest this before you make your claim. The complexity of the calculations, particularly in relation to flexible furlough, means that HR will need help from payroll to ensure that any claims are correctly calculated.

Note that the Government has produced a calculator which can be used to work out what you can claim for most employees. However, if you are claiming for an employee who is flexibly furloughed, you will need to work out their usual hours before you use the calculator. In addition, the calculator is not currently suitable for use in respect of certain employees, including but not limited to those who: have been transferred under TUPE; receive employer pension contributions outside of an auto-enrolment pension scheme; ended furlough then began again during the same claim period; were not employed continuously before their furlough started; or have an annual pay period. If any of those apply, you will need to work out manually how much you can claim. The calculator – and a full list of the circumstances in which it can and cannot be used – are available here. 

21. What claim period should you use? (Last updated 19/04/2021)

A claim period is made up of the days for which the employer is claiming a grant and the start date of the employer’s first claim period is the date their first employee was furloughed. 

Employers must report and claim for a minimum claim period of 7 consecutive calendar days and the claim period must start and end within the same calendar month. This means that if an employee’s pay period includes days in more than one month, you will need to submit separate claims covering the days that fall into each of the months.

You can only claim for a period of fewer than seven days if the period you are claiming for includes either the first or last day of the calendar month, and you have already claimed for the period ending immediately before it. The Extended CJRS Treasury Directions refer to these shorter periods at the start or end of a month as ‘orphan’ periods. They specify that an employee can only be included in a claim for an orphan period if they were included in a claim for the claim period immediately before that orphan period.  

The Government guidance suggests matching your claim period to the dates you process your payroll, if you can. However, you can only make one claim for any claim period, so you must include all your employees who are furloughed (whether flexibly or fully) in one claim, even if you pay them at different times. 

If you make more than one claim, your subsequent claim cannot overlap with any other claim that you have made. This may cause difficulties for employers who have furloughed some employees and have put in a claim for them, but then find that they need to furlough a further group of employees in an overlapping period. 

Where employees have been furloughed continuously (whether on full or flexible furlough, or a combination of the two), the claim periods must follow on from each other with no gaps between the dates.

Note that, when claiming for employees who are flexibly furloughed, you can only claim for furloughed hours (i.e. the number of their usual hours for which the employee does not work during the claim period). In order to avoid any errors, the Government guidance therefore recommends that you do not claim until you are sure of the exact number of hours they will have worked during the claim period. If you claim in advance and your employee works for more hours than you have told HMRC about, then you will have to pay some of the grant back. There is specific guidance on how to repay a grant if you have claimed too much. See also question 26, below. 

As noted at question 9, above, there is no minimum furlough period. The Government guidance makes clear that an employee does not need to be on furlough for the whole of a claim period. It provides diagrammatic examples, which include both employees who were put on furlough part way through a claim period and also others who return to work before the end of the claim period.

22. Which elements of pay should you include? (Last updated 19/04/2021)

The Government guidance provides that the amount you should use when calculating 80% of your employees’ wages for hours not worked should be based on “regular payments you are obliged to make”. This includes regular wages, non-discretionary payments for hours worked (including overtime), non-discretionary fees, non-discretionary commission payments and piece rate payments.

As to what is meant by ‘non-discretionary’, the Government guidance explains that payments should be included where the employer has a contractual obligation to pay them and the employee has an enforceable right to receive them. ‘Variable’ payments that are identified in a contract and are always made may thereby become non-discretionary. 

The guidance refers to payments for overtime worked being non-discretionary when you are contractually obliged to pay the employee at a set and defined rate for the overtime that they have worked. This reflects the position in the Extended CJRS Treasury Directions, which acknowledge that variable payments such as overtime and payments made in recognition of employees undertaking additional duties, or undertaking duties at particular times or in particular circumstances, are non-discretionary if the method of calculating their amount is set out in a legally enforceable agreement, understanding, scheme, transaction or series of transactions. It is also consistent with our view that, whatever the position regarding overtime in an employee’s contract before it is worked (e.g. whether it is compulsory, guaranteed, or voluntary), the reference salary calculation (i.e. the pay on which an employee’s 80% furlough pay is based) is based on past pay for past work. Once the employee has worked the overtime, there is nothing discretionary about the employer’s obligation to pay them for that time.

This effectively means that overtime, commission, shift premium payments and allowances such as dirty work allowance, working at height allowance, etc. should all be included in the calculation of furlough pay, so long as the method of calculating those payments is prescribed by contract.

The Government guidance also expressly states that payments made at your discretion, or that of a client, where there is no contractual obligation to pay (such as tips (including those distributed through troncs), discretionary bonus, or discretionary commission) should be excluded, as should non-cash payments and non-monetary benefits/benefits in kind (such as a company car), employer pension contributions (including those received under a salary sacrifice scheme) and other  salary sacrifice scheme benefits that reduce an employee’s taxable pay.

When the furlough scheme was first introduced, there was quite a lot of uncertainty as to which elements of pay should and should not be included when calculating furlough pay, but most of these questions were settled following the publication of the second Treasury Direction in May 2020. The Extended CJRS Treasury Directions take the same approach to the elements of pay that should be included in furlough pay calculations. Accordingly, while there may still be some scope for dispute as to the correct interpretation of the rules in this area, it is likely that any remaining ambiguities will be left for the courts to determine at a much later date. We therefore suggest that, in all cases, employers keep a detailed record of how they have calculated their claims and retain this for at least 6 years.

When deciding what to include in a claim, employers also need to be aware that they may not be able to claim for all payments that they have promised to employees; depending on what has been agreed, employers may need to pay employees more than they are able to recover under the Extended CJRS.

It is also worth pointing out that some of these difficult decisions as to what elements of pay should be claimed for are not questions for HR; decisions need to be made by an employer’s finance department with support from their accountants and payroll provider.

As noted above, reference salary should not include the cost of benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay. Accordingly, the salary used to calculate furlough pay is the post-salary-sacrifice amount. Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC has confirmed that Covid-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the employment contract is updated accordingly, but note that their reference salary for claiming furlough pay is based on the employee’s past pay. Employers thinking of agreeing a change to salary sacrifice arrangements with employees should also be aware that proposing a reduction in pension contributions could trigger pension consultation obligations.

Where you provide benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Extended CJRS.

23. How should you work out usual hours and furloughed hours for an employee on flexible furlough? (Last updated 19/04/2021)

You do not need to work out usual and furloughed hours for employees who are fully furloughed, because the basis of their full furlough is that they do no work at all.

If your employee is flexibly furloughed, you will need to work out their usual working hours and record the actual hours they work as well as their ‘furloughed hours’ (i.e. the number of their usual hours that were not worked in a given claim period and in respect of which you can therefore claim under the Extended CJRS). The Extended CJRS Treasury Directions include detailed formulae setting out how to do this.

You can calculate the usual hours for the entire claim period or for each pay period, or part of a pay period, that falls within that claim period. The guidance assumes that you will calculate on a pay period basis but either method is acceptable. If you calculate the usual hours for the entire claim period and the result is not a whole number, you should round it up to the next whole number. If you calculate the usual hours on a pay period basis, you should round the result up or down to the nearest whole number.

How you work out your employee’s usual hours will depend on whether the employee works ‘fixed’ or ‘variable’ hours and the employee's 'reference date'.

According to the Government guidance for working out usual hours, you should follow the instructions for ‘variable hours’ employees, if either:

• your employee is not contracted for a fixed number of hours; or
• your employee’s pay depends on the number of hours they work.

If neither of these apply, you should follow the instructions for ‘fixed hours’ employees. Helpfully, the guidance notes that HMRC will not decline or seek repayment of any grant based solely on the particular choice between the fixed hours or variable hours approach to calculating usual hours, as long as the choice you made was reasonable.

Identifying the employee’s ‘reference date’

The way in which you calculate employees’ usual hours for the purposes of furlough pay depends, in part, on their ‘reference date’. There are three different potential reference dates – 19 March 2020, 30 October 2020 and 2 March 2021. The Government guidance explains how to identify which is the applicable reference date for your employees.
An employee’s reference date is 19 March 2020 if:

• you made a payment of earnings to the employee in the 2019 – 20 tax year and reported this to HMRC on an RTI full payment submission on or before 19 March 2020
• you made a valid furlough claim for the employee in a claim period ending on or before 31 October 2020
• the employee was on their previous employer’s payroll on 28 February 2020 and transferred to you after that date under TUPE or the business succession rules.

We assume that each of the above criteria stands alone, so the employee’s reference date will be 19 March 2020 if any one of them applies – but this is not explicit in the Government guidance.

An employee whose reference date is not 19 March 2020 will have a reference date of 30 October 2020 if:

• you made a payment of earnings to the employee which was reported to HMRC on an RTI full payment submission between 20 March 2020 and 30 October 2020 (inclusive)
• you made a valid furlough claim for the employee in a claim period between 1 November 2020 and 30 April 2021
• the employee was on their previous employer’s payroll on or before 30 October 2020 and transferred to you after 31 August 2020 under TUPE or the business succession rules.

We assume that each of the above criteria stands alone, so the employee’s reference date will be 30 October 2020 if any one of them applies – but this is not explicit in the Government guidance.

Where the employee’s reference date is neither 19 March 2020 nor 30 October 2020, the employee will only become eligible for furlough for claim periods starting on or after 1 May 2021. They may be eligible for furlough from that date and will have a reference date of 2 March 2021, provided that you made a payment of earnings to them that was reported to HMRC on an RTI full payment submission between 31 October 2020 and 2 March 2021 (inclusive).  

The guidance flags that if an employee with variable pay has a reference date of 19 March 2020 or 30 October 2020 because they transferred to you under the TUPE or business succession rules, you may have to take into account their period of employment with their previous employer in your calculations.

For these ‘fixed hours’ employees, usual hours are determined by reference to contracted hours in the last pay period ending on or before the employee's reference date (see above). 

To calculate the number of usual hours in a pay period (or partial pay period):

• start with the hours the employee was contracted for at the end of last pay period ending on or before the employee's reference date;
• divide by the number of calendar days in their repeating working pattern, including non-working days; 
• multiply by the number of calendar days in the pay period (or partial pay period) you are claiming for; and
• round up or down if the result is not a whole number.

If a fixed hours employee was on annual leave, off work sick, or on statutory family leave at any time during the last pay period ending on or before the employee's reference, the usual hours should be calculated as if the employee had not taken that leave.

Usual hours for employees with variable hours (i.e. who are not contracted for a fixed number of hours, or whose pay varies based on hours worked)

For these ‘variable hours’ employees, the payslips should show the number of hours they have worked in a given period. These pay records can be used to identify the hours worked in the relevant period for the purposes of working out the employee’s usual hours. Time sheets, rotas and work diaries can also be used. 

For variable hours employees whose reference date is 19 March 2020, usual hours are calculated based on the higher of either the average number of hours the employee worked in the tax year 2019 – 20 before they were furloughed, or the number of hours worked in the corresponding calendar period in a previous year. For other employees, usual hours are calculated based on the average number of hours worked in the period they worked for you from 6 April 2020 up to (and including) the day before the employee’s first day spent on furlough on or after either 1 November 2020 (for those with a reference date of 30 October 2020), or 1 May 2021 (for those with a reference date of 2 March 2021).

When calculating usual hours for employees who are furloughed at any time between March and September 2021 based on the number of hours worked in the corresponding calendar period, the Government guidance provides that you should not look at hours worked in the corresponding calendar period in 2020, but should instead look back to the corresponding calendar period in 2019, as applicable. This is in recognition of the fact that many employees are likely to have been furloughed and not working during 2020. If the employee was not working for you in the relevant period in 2019, you will have to calculate their usual hours based on the averaging method. 

The Government guidance sets out step by step instructions to calculate usual hours in each case. 

When calculating usual hours, note that you should include any hours of leave for which the employee was paid their full contractual rate (e.g. annual leave) and any hours worked as overtime for which pay was not discretionary.

Working out the furloughed hours

Once you have worked out the employee’s usual hours for a claim period (or for the part of a claim period for which the employee is flexibly furloughed), you will need to identify how many hours in that period are furloughed hours (and in respect of which you can therefore claim the grant for furlough pay under the Extended CJRS).

You are likely to have agreed how many hours you intend an employee on flexible furlough to work in any given claim period (see question 7, above). The employee will be furloughed and eligible for furlough pay under the Extended CJRS for the rest of their usual hours.

However, note that the instructions given in the Government guidance indicate that to calculate the number of furloughed hours, you should subtract from the employee’s usual hours the number of hours they actually worked in the claim period – even if this is different from what you had agreed.

If you claim in advance based on the number of hours you had agreed that the employee would work, and your employee in fact works for more hours than this, then you will have to pay some of the grant back to HMRC. The Government guidance therefore advises against claiming until you have certainty about the number of hours your employees are working during the claim period. There is specific guidance on how to repay a grant if you have claimed too much.

The Government guidance acknowledges that some employees may only be fully or flexibly furloughed for part of a claim period. In these circumstances, the guidance specifies that, when calculating the number of furloughed hours you can claim for, you must:

• only calculate the employee’s usual hours for the days covered by the furlough agreement; and
• not include any working hours on days not covered by a furlough agreement.

This applies even if your claim period includes days before or after the period covered by the employee’s furlough agreement (for example, because you’re claiming for multiple employees and some of them are furloughed for a different period).

24. How should you work out how much furlough pay a fully or flexibly furloughed employee is entitled to under the Extended CJRS? (Last updated 19/04/2021)

As explained above, furlough pay is 80% of an employee’s usual wages for the time that they are furloughed, subject to the applicable cap. 

The way you should work out 80% of an employee’s usual wages differs depending on the way they are paid – i.e. whether they receive a fixed salary (referred to as ‘salaried/fixed-rate’ employees) or variable pay (referred to as ‘variable pay’ employees). It also depends, in part, on the employee’s ‘reference date’. There are three different potential reference dates – 19 March 2020, 30 October 2020 and 2 March 2021. See question 23, above, for information on how to identify an employee’s reference date.

Note that if a salaried/fixed-rate employee has worked enough overtime for this to have a significant effect on the amount you need to claim, you should calculate 80% of their pay using the method for variable pay employees. The calculation method for employees with an annual pay period (including company directors) is said to be the same as for other employees; most employees with annual pay will be treated as salaried/fixed-rate employees. The Government guidance indicates that HMRC will not decline or seek repayment of any grant based solely on the particular choice of pay calculation, as long as your approach is reasonable.

Where a claim covers multiple pay periods, this calculation should be done for each period and then added together.

Note that since the calculation of an employee’s usual wages is based on the amount they were paid in a particular period in the past, if their pay or working arrangements have recently changed then the amount you can claim (and the amount you must pay them for the hours not worked) may not reflect their current pay or working arrangements. Take the example of a salaried/fixed-rate employee who has been employed with you since January 2019 and is paid monthly. They were initially furloughed in March 2020, but returned to work in September 2020. In January 2021, they received an annual pay increase, to which they were contractually entitled. In February 2021, you placed them on furlough again. Their furlough pay would be calculated on the basis of the pay they received in their February 2020 pay period (see below), so would not take into account their 2021 pay increase.

Salaried/fixed-rate employees 

To work out 80% of your employee’s pay, the guidance explains that you should:

• Start with the wages payable to the employee in the last pay period ending on or before the employee's reference date (if you’re claiming for a full pay period, skip to the fourth step).
• Divide by the total number of days in the pay period you're claiming for.
• Multiply by the number of furlough days in the pay period (or partial pay period) you're claiming.
• Multiply by 80%. 

There are different instructions included in the guidance for situations where the last pay period ending on or before the employee's reference is not a full pay period, or the frequency with which the employee is paid has changed between the last pay period ending on or before the employee's reference date and the pay period for which you are calculating the employee’s furlough pay. The guidance also includes specific instructions for if you are claiming for a fixed hours employee whose first pay period ended after their reference date (which is possible provided that HMRC received the details of their wages on an RTI full payment submission on or before their reference date and the other eligibility conditions are met).

Variable pay employees

For variable pay employees who have a reference date 19 March 2020, their usual wages for the purposes of calculating furlough pay are based on the higher of either the wages earned in the corresponding period in a previous year (referred to in the Government guidance as the ‘lookback period’) or the average wages payable in the tax year 2019 – 20 before they were furloughed. 

For variable pay employees with a reference of 30 October 2020, usual wages are calculated based on the average wages payable between 6 April 2020 and the day before the employee’s first day on furlough on or after 1 November 2020.

For variable pay employees with a reference date of 2 March 2021, usual wages are calculated based on the average wages payable between 6 April 2020 and the day before the employee's first day on furlough on or after 1 May 2021.

The Government guidance notes that, for a flexibly furloughed employee, you will have completed a similar comparison to work out the employee’s usual hours (see question 23, above), but the outcome may be different.

The guidance describes the method of calculation based on the same calendar period’s wages from a previous year as follows:

• Start with the amount they earned in the corresponding part of the ‘lookback period’ 
• Divide by the total number of days in this pay period, including non-working days
• Multiply by the number of furlough days in this pay period
• Multiply by 80%

Note that when calculating furlough pay for variable pay employees who are furloughed at any time between March and September 2021 based on the wages earned in the corresponding calendar period in a previous year, the Government guidance provides that you should not look at hours worked in the corresponding calendar period in 2020, but should instead look back to the corresponding calendar period in 2019, as applicable. For example, when calculating furlough pay for an employee who is on furlough during June 2021, the applicable lookback period would be June 2019. This is in recognition of the fact that many employees are likely to have been furloughed and not working during 2020. The Government guidance clarifies that if the employee was not working for you in the relevant lookback period for the month you're claiming for, you will have to calculate their furlough pay based the averaging method instead.

The Government guidance notes that the corresponding calendar period for the lookback could be the same calendar days in the lookback period, or the corresponding pay period. The guidance assumes that employers will use the same calendar days, but confirms that either method is acceptable provided it is used consistently.

If you are claiming for an employee who is furloughed for the whole month of February 2021, the Government guidance flags that you may wish to make an adjustment to the employee’s pay to reflect the fact that February 2020 had 29 days. When you calculate 80% of the wages from the corresponding calendar period in February 2020, you may use the full amount earned in that month or 28/29ths of that amount to reflect the leap year. HMRC will not challenge either approach.

The averaging method for variable pay employees with a reference date of 19 March 2020 uses a calculation based on average monthly/other pay period amount for the 2019 – 20 tax year. It is described in the Government guidance as:

• Start with the amount they earned in the 2019-20 tax year up to (and including) the day before they were furloughed
• Divide it by the number of days from the start of the 2019-20 tax year, including non-working days (up to and including the day before they were furloughed, or 5 April 2020 – whichever is earlier)
• Multiply by the number of furlough days in the pay period (or partial pay period) you are claiming for
• Multiply by 80%

The guidance flags that if an employee started working for you on or after 6 April 2019, you should not include the days before their employment started in your calculation. However, each day after the employee commenced employment with you should be counted, including non-working days. There are specific instructions for what should and should not be included where an employee has been on statutory family-related leave or sick leave – see further below, under the heading ‘Employees returning from statutory leave, or from unpaid sabbatical/unpaid leave’.

Finally, the averaging method for a variable pay employee whose reference date is 30 October 2020 or 2 March 2021 uses a calculation of average wages based on the period between 6 April 2020 and the day before the employee’s first day on furlough on or after 1 November 2020, or 1 May 2021 respectively ('the date to calculate up to'). This is described as follows:

• Start with the amount of wages that were payable to the employee from 6 April 2020 up to (and including) date to calculate up to.
• Divide it by the number of days the employee has been employed since 6 April 2020, including non-working days, up to (and including) the date to calculate up to.
• Multiply by the number of furlough days in the pay period (or partial pay period) you are claiming for.
• Multiply by 80%.

The guidance emphasises that every day after the employee commenced employment with you should be counted, including non-working days. There are specific instructions for what should and should not be included where an employee has been on statutory family-related leave or sick leave – see further below, under the heading ‘Employees returning from statutory leave, or from unpaid sabbatical/unpaid leave’.

The guidance also includes specific instructions for if you are claiming for a variable pay employee with a reference date of 30 October 2020 or 2 March 2021 whose first wages are not payable until after they begin furlough (which is possible provided that HMRC received the details of their wages on an RTI full payment submission on or before their reference date and the other eligibility conditions are met).

In addition, there are separate instructions in the guidance to calculate furlough pay for variable pay employees who transferred to you under TUPE or the business succession rules. These instructions highlight that for claim periods from 1 May 2021, you may need to take into account the employee’s period of employment with their previous employer when calculating their usual wages. It is therefore important to ensure that the information needed for future claims under the Extended CJRS is passed on to the new employer by the old employer on any such transfer.

Calculating minimum furlough pay and identifying how much you can claim

The minimum furlough pay to which a fully furloughed employee is entitled is the lower of either:

• 80% of their usual wage; or
• the maximum wage amount (i.e. the applicable cap).

If an employee is flexibly furloughed, their minimum furlough pay entitlement depends on their working and furloughed hours. To work out their minimum furlough pay entitlement, you should start with the lower of 80% of their usual wages and the maximum wage amount. Multiply this by the employee’s furloughed hours and divide the resulting figure by the employee’s usual hours. This is the minimum amount you must pay your employee for the time they are recorded as being on furlough. 

The Government guidance indicates that employers can choose to pay more than the minimum furlough pay entitlement, but do not have to.

If an employee takes any furlough hours as paid holiday/annual leave, you need to top up the pay for these hours to the employee’s full contractual rate.

It is important to remember that the amount you can claim for any employee for claim periods up to 30 June 2021 will always be subject to the specified maximum of £2,500 per month, or £576.92 per week, for fully furloughed employees. This cap is pro-rated for flexibly furloughed employees, depending on the proportion of usual hours worked.

The Government guidance also sets out daily maximum wage amounts that you can use to work out the maximum entitlement for an employee where the length of time you’re claiming for is not one or more weeks or one month. To work out the maximum allowable wage amount, you will need to multiply the daily maximum amount by the number of days the employee is furloughed. The daily maximum amount differs depending on the number of days in the month:

• November 2020 - £83.34 per day
• December 2020 - £80.65 per day
• January 2021 - £80.65 per day
• February 2021 - £89.29 per day
• March 2021 - £80.65 per day
• April 2021 - £83.34 per day
• May 2021 - £80.65 per day
• June 2021 - £83.34 per day
• July 2021 - £80.65
• August 2021 - £80.65
• September 2021 - £83.34

For claim periods from November 2020 to June 2021 the above daily amounts represent the maximum amount you can claim for wages under the Extended CJRS. For claim periods from 1 July 2021, the level of grant will be reduced and you will be asked to contribute towards the cost of your furloughed employees’ wages. This means you will not be able to claim the whole maximum wage amount but you’ll still need to work it out to allow you to calculate how much your employee should be paid.

For claim periods from 1 July 2021, although you will need to ensure that the employee continues to receive the minimum furlough pay entitlement of 80% of their usual wage or £2,500 per month / the relevant daily maximum wage amount (pro-rated for flexibly furloughed employees), you will not be able to claim the full amount from the Government. To work out how much you can claim, you will need to divide the minimum furlough pay entitlement by 80 and then multiply it by 70 for July 2021, or 60 for August and September 2021.

Employees who receive a statutory payment in the claim period

The Government guidance notes that if an employee receives a ‘statutory payment’ (i.e. a payment of statutory maternity pay, statutory adoption pay, statutory paternity pay, statutory shared parental pay, or statutory parental bereavement pay) during the claim period, you cannot claim in respect of such a payment under the Extended CJRS, so you will need to subtract it from the amount you are claiming. 

This will be relevant, for example, where an employee who is on furlough goes on maternity leave and receives enhanced company maternity pay during that period. As noted at question 6, above, you can claim under the Extended CJRS in respect of the enhanced element of maternity pay, but not for statutory maternity pay.

Employees returning from statutory leave, or from unpaid sabbatical/unpaid leave

Where a salaried/fixed-rate employee is furloughed after returning from a period of statutory leave (i.e. sick leave, or family-related statutory leave such as maternity, paternity, shared parental, adoption, or parental bereavement leave, or unpaid parental leave), the Government guidance specifies that their furlough pay should be calculated based on 80% of their salary, before tax, not the pay they received while on statutory leave. 

The Extended CJRS Treasury Directions introduce some potential confusion in this regard, as they appear to indicate that rather than their salary, before tax, as stated in the Government guidance, furlough pay for salaried/fixed-rate employees returning from a period of statutory leave should be determined based on what the employee would have received had they been on paid annual leave under the Working Time Regulations rather than statutory leave at the relevant time. It may be that the confusion is linguistic only, however, since in practice a salaried/fixed-rate employee on annual leave will typically receive their normal salary – i.e. what the Government guidance says their furlough pay should be based on.

For claim periods up to 30 April, the Government guidance is silent on the position for variable pay employees who are furloughed after returning from a period of statutory family-related leave. However, it states that variable pay employees returning to work after time off sick should have their furlough pay for claim periods up to 30 April 2021 calculated using the normal rules. The November and January Treasury Directions do not make specific provision for either scenario. However, the definitions used in the November and January Treasury Directions count both sickness absence and statutory family-related leave as ‘statutory leave’ and treat both in the same way. Accordingly, based on the position taken in the Government guidance in respect of furlough pay for variable pay employees returning from a period of sick leave in claim periods up to 30 April 2021, we assume the Government intends that furlough pay for variable pay employees returning from statutory family-related leave is also calculated based on the normal rules. However, the consequence of this would be that the furlough pay for a variable pay employee who was on maternity leave and in receipt of SMP for the better part of the relevant reference period could be impacted by their period of statutory leave – i.e. they could be at a disadvantage compared to salaried/fixed-rate employees who are furloughed on return from statutory leave, for whom the guidance and November and January Treasury Directions provide a more generous calculation method.

For claim periods starting on or after 1 May 2021, the Government guidance and April Treasury Direction take a different approach, stating that when calculating average wages for variable pay employees who are furloughed following a period of statutory family-related leave or sick leave, employers should not include days during that leave, or wages related to that leave – unless the employee was on statutory family-related leave or sick leave throughout the entire period used to calculate their average wages. In that case, days of leave and wages related to the period of leave need to be included, in order to avoid the reference salary being calculated as zero. Where the calendar look back method is used to work out variable pay employees’ wages, the Government guidance specifies that this is based on the amount they actually earned, even if they were on a period of statutory leave.

When calculating 80% of wages for salaried/fixed-rate employees who are furloughed having been on an unpaid sabbatical or other unpaid leave during the reference period, the Government guidance states that “you’ll need to use the amount they would have been paid if they were on paid leave”. This is reflected in the Extended CJRS Treasury Directions. However, no specific provision is made for variable pay employees who are furloughed following a return from unpaid sabbatical or other unpaid leave. 

25. What will you need to make a claim and when must you do it? (Last updated 28/06/2021)

Claims should be made via the online portal. You will need to log in using the Government Gateway user ID and password you use to access PAYE online. You should try to have all necessary information to hand before you begin so that you can complete your application in a single session. If you do not finish your claim in one session, you can save a draft, but you must complete your claim within 7 days of starting it.

The Government guidance on making a claim states that you will need:

• to be registered for PAYE online 
• your UK, Channel Islands or Isle of Man bank account number and sort code (only provide bank account details where a BACS payment can be accepted)
• the billing address on your bank account (this is the address on your bank statements)
• your employer PAYE scheme reference number
• the number of employees being furloughed
• the name and NI number for each employee being furloughed (if you do not have it, you will need to search for it online – and if one or more of your employees has a temporary NI number or has never had a NI number at all, you should contact HMRC)  
• the payroll/employee number of each employee being furloughed (optional)
• the start date and end date of the claim
• the full amount you’re claiming for
• your phone number and contact name
• where applicable, your Self Assessment unique taxpayer reference, Corporation Tax unique taxpayer reference, and/or company registration number

If you’re claiming for employees who are on flexible furlough, you will need to provide the following additional information for the claim period:

• the number of usual hours the flexibly furloughed employee would work in the claim period; 
• the number of hours the flexibly furloughed employee has worked or will work in the claim period; and
• the number of hours the flexibly furloughed employee has been furloughed in the claim period (i.e. their usual hours minus the hours worked), which you will have to keep a record of.

HMRC has created template spreadsheets to assist employers who are claiming for:

16 to 99 employees; or

100 or more employees.

The Government guidance recommends using these templates to help ensure that your claim is processed quickly and successfully and flags that your claim may be rejected if you do not give the information in the right format. It notes that you should:

• provide only the information requested;
• submit one line per employee for the whole period;
• avoid breaking up the calculation into multiple periods within the claim; 
• avoid splitting data by contract type (for example, those paid weekly and monthly should be claimed for together);
• not provide more or fewer columns than needed; and
• upload your file in an accepted format (.xlsx or .csv only – .xls and .ods files are no longer accepted).

The guidance flags that you must keep a copy of all records for six years, including: 

• the amount claimed and claim period for each employee;
• your claim reference number for your records; 
• your calculations in case HMRC need any more information about your claim;
• for employees on flexible furlough, usual hours worked (including your calculations) and actual hours worked. 

It also specifies that you should tell your employees you have made a claim and that they do not need to take any action, and pay your employees their wages if you have not done so already. 

When must claims be made?

Claims must be submitted by 11.59pm 14 calendar days after the month in respect of which you are claiming. If this time falls on the weekend or a bank holiday, then claims should be submitted on the next working day. 

The guidance indicates that HMRC may accept a claim made after the relevant deadline if an employer can show all of the following:

• that it had a reasonable excuse;
• that it had taken reasonable care to try to claim on time; and 
• that it then claimed without delay as soon as it was able to do so.

However, it is important to note that HMRC will not consider reasonable excuses in advance of a claim deadline, so employers cannot plan in advance to submit their claims late. The guidance gives various examples of circumstances that might be considered to amount to a reasonable excuse, including: computer or software failures while preparing a claim; postal delays that could not have been predicted; issues with HMRC’s online service; and the employer suffering a serious illness or having to self-isolate and nobody else being able to make the claim for them. Employers that need to make a late claim and have a reasonable excuse should contact submit their claim via the online portal as normal, as soon as they are ready to do so.

Note also that the guidance specifies that you cannot submit your claim more than 14 days before your claim period end date, but you do not need to wait until the end date of the previous claim period before making your next claim and you can make your claim more than 14 days in advance of your employees’ pay date (e.g. if you pay your employees in arrears). For example, the earliest date that an employer could make a claim for May 2021 was 19 April 2021.

26. What if you realise you have claimed too little, or too much? (Last updated 27/01/2021)

Employers who realise that they have claimed too little will still have to make sure they pay their employees the correct amount. They will only be able to increase the amount of their claim if they amend the claim within 28 calendar days after the month to which the claim relates (or the next working day if the relevant date falls on a weekend or bank holiday). For example, if you wished to amend a claim for November 2020, you would need to have done so by 11.59pm on 29 December 2020.

Employers who realise that they have claimed too much, or who would like to make a voluntary repayment because they do not want or need the grant, can either:

• correct it in their next claim (the new claim will be reduced and the employer will need to keep a record of the adjustment for 6 years); or
• get a payment reference number and pay HMRC back within 30 days (only if the employer is not making another claim).

This Government webpage provides instructions on how to pay back overclaimed amounts to HMRC. 

Note that HMRC has the power to recover overclaimed grant amounts through the tax system where employers have not repaid them. Under these provisions, if you have overclaimed a grant and have not repaid it, you must notify HMRC of the overclaim by the latest of:

• 90 days after the date you received the grant you were not entitled to; or
• 90 days after the date you ceased to be entitled to retain the amount you were paid, e.g. because of a change in your circumstances.

If you fail to notify HMRC within the applicable timeframe, in addition to repaying the overclaimed amount via the tax system, you may have to pay a penalty. When determining the amount of any penalty, HMRC will take account of whether you knew you were not entitled to the grant when you received it, or you knew when it became repayable or chargeable to tax because your circumstances changed. If you knew you were not entitled to your grant when you received it or knew when you had stopped being entitled to it because of a change of circumstances and didn’t tell HMRC in the notification period, then your failure to notify will be treated as deliberate and concealed. This means that you could be charged a penalty of up to 100% on the amount of the grant that you were not entitled to receive or keep and had not repaid by the last day of the notification period. The Government has produced further guidance on penalties, which includes information on how HMRC decides on the amount of a penalty, when a penalty may be payable and how to appeal against a penalty. 

The guidance on penalties highlights that HMRC will not charge a penalty if: 

• an employer has a reasonable excuse for its failure to notify HMRC of the overpayment;
• the failure to notify was not deliberate; and 
• the employer notified HMRC without unreasonable delay after the reasonable excuse ended. 

A reasonable excuse in this context is something that stopped the employer from meeting a tax obligation even though the employer took reasonable care to make sure that it did so – for example, due to circumstances outside the employer’s control or a combination of events. Whether HMRC will consider an excuse to be reasonable will depend on the particular circumstances in which the failure to notify occurred and the employer’s own particular circumstances and abilities.

It is also worth noting that HMRC may reduce the amount of a penalty depending on the extent to which an employer cooperates with and assists HMRC in its investigation of the overpayment. Further detail on how such reductions work is included in the guidance on penalties.

As we have highlighted elsewhere in these FAQs, there are areas of ambiguity in the Government guidance on what you can claim for. Some employers may therefore be concerned that they might innocently have overclaimed based on an erroneous but good faith interpretation of the guidance. It is thus reassuring to note that HMRC has indicated that its priority is to address deliberate non-compliance and criminal attacks, and that it will use its powers to assess overpayments accordingly, but will not actively be looking for innocent errors as part of its compliance approach. 

27. What will be deducted from the furlough payment before it is paid to the employee? (Last updated 11/11/2020)

While on furlough, the employee’s pay will be subject to usual tax and other deductions. Employers must therefore deduct and pay to HMRC Income Tax and employee NICs on the full amount that they pay the employee, including any pay covered by the Government grant. Employers that do not do this may be required to repay the grant to HMRC.

Employees will also continue to pay any employee automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.

Note that the Government guidance specifies that employers cannot enter into any transaction with employees which reduces their wages below the amount the employer has claimed for them under the Extended CJRS. This includes any administration charge, fees or other costs in connection with the employment. Where an employee had authorised their employer to make deductions from their salary, these deductions can continue while the employee is furloughed, provided that these deductions are not administration charges, fees or other costs in connection with the employment.

What about employer NICs and employer pension contributions? The employer remains liable for these costs. It cannot deduct them from the employee’s pay and will not receive any subsidy for them from the Government under the Extended CJRS.  

28. What is the position with the apprenticeship levy and student loans? (Last updated 11/11/2020)

Both the apprenticeship levy and student loans should continue to be paid as usual. Grants from the scheme do not cover these.

29. What is the interplay between furlough leave and the National Living Wage / National Minimum Wage? (Last updated 11/11/2020)  

The Government guidance confirms that furloughed workers must be paid the lower of 80% of their salary or £2,500 (pro-rated for flexibly furloughed employees) even if, based on their usual working hours, this would be below National Living Wage (NLW)/National Minimum Wage (NMW). This is because employees are only entitled to the NLW/ NMW for the hours they are working.

However, if workers (including apprentices) are required to or undertake training, whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training (see question 11, above).

30. What happens at the end of furlough? (Last updated 17/11/2020)

Furlough may end for a number of reasons, e.g. because the Extended CJRS has ended, because you have enough work for the employee to do to fill their usual working hours and so ask them to return to work (whether or not at home), or because the employee’s employment terminates (whether due to resignation or dismissal for any reason). The Government guidance does not specify the amount of notice required to end furlough, but we suggest employers give as much notice as they can. In the case of dismissal, employers must give notice in accordance with the employee’s contract (or statutory minimum notice, if greater), or make a payment in lieu of notice, unless the employer is dismissing summarily for gross misconduct. (Note that, from 1 December 2020, employers cannot claim under the Extended CJRS in respect of an employee who is in a statutory or contractual notice period. This may affect how you decide to deal with notice for furloughed employees whose employment is terminating – see question 31, below).

Since terms and conditions other than those relating to pay and hours of work subsist during furlough, employees will be entitled to return to the same job on the same terms and conditions as before they started furlough – unless the Government provides any guidance to the contrary or unless the employee agreed to changes to terms and conditions at the same time as agreeing to furlough. (However, as noted at question 7, above, we do not think it would be appropriate for an employer seeking employees’ agreement to go on furlough to seek to make permanent changes to employees’ contractual terms that will continue to apply after furlough ends as part of that process.)

If you are bringing employees’ furlough arrangements to an end because you now have enough work for them to do to return to their usual working hours, e.g. if you had closed your business but are now reopening, or if you remained open with a skeleton staff but have now seen an increase in demand, you will need to consider what approach you wish to take to an employee who says that they are unable to return. This could be for a variety of reasons, e.g. they are clinically extremely vulnerable and cannot work from home, they have issues with childcare, or they are not willing to return due to concerns about the safety of the workplace. All of these issues are discussed in the FAQs on 'Employees unable or unwilling to attend work’.

31. What is the position in relation to notice periods from 1 December 2020 if a furloughed employee’s employment is terminating? (Last updated 09/04/2021)

If an employer wishes to dismiss an employee who is currently on furlough (full or flexible), in circumstances other than summary dismissal for gross misconduct, the employee remains entitled to notice of termination (in accordance with their contract, or statutory minimum notice, if greater). Similarly, an employee who resigns when they are on furlough will have to give notice of resignation as required by their contract, unless they are resigning in response to a repudiatory breach of contract by the employer. 

For notice periods prior to 1 December 2020, employers were able to claim under the Extended CJRS – for information on pay during the notice period for furloughed employees until 30 November, you can refer to questions 29, 29(a) and 29(b) of our FAQs on Furlough under the Revised Coronavirus Job Retention Scheme. However, from 1 December 2020, employers cannot claim under the Extended CJRS in respect of an employee who is in a statutory or contractual notice period. This applies to terminations by dismissal (for any reason), resignation and retirement. This is likely to affect how employers deal with notice periods and notice payments. 

Whereas previously it would have been advantageous for the employer to keep the furloughed employee employed during notice in order to recover some of the notice pay under the furlough scheme, this benefit no longer applies. Therefore, where an employee has been on furlough (full or flexible) up to the point that notice of termination of employment is given and the employer does not need them to carry out any work during the notice period, the most straightforward approach is likely to be to make a payment in lieu of notice (PILON) rather than have the employee serve out their notice period. (However, bear in mind that if you pay in lieu of notice where there is no clause in the employment contract, permitting you to make a PILON (a PILON clause), you will not be able to enforce post-termination restrictive covenants that are contained in that contract.)

We consider below whether you would be required to make notice payments based on ‘normal’ rates of pay (i.e. full salary without the reduction for furlough) or furlough rates of pay, with regard to both PILONs and also notice periods that are served.
Note that where we refer to notice periods that are being ‘served’, we are assuming that the employee will not be working or will be working part-time only, continuing (or mirroring where the furlough agreement ends), the arrangements during furlough. Where an employee returns to work as normal during the notice period, they will of course be paid as normal.

Where the employee is serving out their notice (even though they are not working or they are working only part-time), in most circumstances, employers will have to pay notice pay based on the normal pay rate – either: 

• because the furlough arrangement has ended (i.e. if the furlough agreement operates automatically to bring the arrangement to an end where the employer can no longer claim under the Extended CJRS) and the employee has returned to their underlying terms and conditions of employment; or 
• because, even though the furlough arrangement remains in place notwithstanding that the employer can no longer claim under the Extended CJRS, the special notice pay provisions in the Employment Rights Act (ERA) together with the Employment Rights Act 1996 (Coronavirus, Calculations of a Week's Pay) Regulations 2020 (the Coronavirus Week's Pay Regulations) entitle employees with notice periods less than a week longer than the statutory minimum to normal pay during notice.

PILONs which are made under PILON clauses are, we think, based on normal pay rates. Where PILONs are not made under PILON clauses, and are instead made as compensation for breach of contract, they will usually - for the same reasons as above in respect of ‘served’ notice periods - have to be based on normal pay rates.

Note, however, that even where the above circumstances do not apply and it is arguable that the notice pay or PILON could be based on the furlough pay rate, employers may anyway decide, as a matter of good practice and because there is some uncertainty in the intentions of the law, to base notice payments on normal pay.

The background to the above advice, including the relevant statutory provisions on notice pay, is complex. We have set out below an explanation of the law behind the above summary, which will be particularly relevant if you want to explore whether you can pay less than normal pay during the notice period/as a PILON. (Note, this will only be worth exploring if the wording of your furlough agreement does not operate automatically to bring furlough to an end for the notice period (i.e. because you can no longer claim for the employee during notice) and the employee’s contractual notice period is at least a week more than the statutory minimum.)

Explanation of legal position where notice is being served

The first thing to consider is whether the giving of notice operates to bring the employee’s furlough arrangements (i.e. contractual variation to working hours and pay) to an end. This will be the case if the furlough agreement provided for furlough arrangements automatically to come to an end in the event that the employer is no longer claiming under the Extended CJRS in respect of the employee. In other cases, we think it is possible that the furlough arrangements could continue notwithstanding the fact that the employer is no longer claiming under the Extended CJRS. 

Where the furlough arrangements come to an end

If the furlough arrangements come to an end, the employee would return to their underlying terms and conditions of employment. The employee would therefore expect to be paid during notice at their normal rate of pay, even if the employer was not providing them with any work, or was providing them with part-time work only.

Where the furlough arrangements do not come to an end

If the furlough arrangements do not come to an end, then you may think that the employer should be able to pay the employee during the notice period at the rate specified in their furlough agreement (with normal pay for hours worked and furlough pay for non-worked hours in the case of flexible furlough).

However, if the employee’s notice period is not at least one week more than the statutory minimum notice period, they should benefit from special provisions in the ERA entitling them to a 'week's pay' for each week of the statutory notice period for which the employer does not provide work, so long as they are in fact ready and willing to work. (Most employees who have been given notice of termination while furloughed would be considered ready and willing to work.)

For the purposes of the ERA special notice pay provisions, 'a week’s pay' is determined in accordance with the ERA 'week's pay' provisions and the Coronavirus Week’s Pay Regulations. (These Regulations are intended to ensure that the employee does not lose out as a result of having been on furlough where payments to which they are entitled are calculated on the basis of the ERA week’s pay provisions. Their effect is that any reduction in pay the employee has been subject to as a result of being furloughed is ignored when conducting the relevant calculations.) We discuss their operation in detail in relation to the calculation of statutory redundancy pay at question 33, below, but the principles would be essentially the same for the calculation of notice pay.

If the employee’s contractual notice period is at least a week more than the statutory minimum, then the ERA special notice pay provisions would not apply. In theory, therefore, an employer could seek to pay notice pay at the furlough rate for any hours that the employee is not working. However, note that it appeared from the 2020 press release announcing the Coronavirus Week’s Pay Regulations that the Government had intended for all furloughed employees to be entitled to normal pay during their notice period and we are aware that HMRC representatives have been advising that this should be the case. Accordingly, although it is not required on the face of the legislation, we would recommend that employers treat these employees in the same way as those who are covered by the ERA special notice pay provisions (and do so for the whole notice period, even though the special provisions apply to the statutory notice period only). This would mean paying these employee normal pay during the notice period.

Explanation of legal position on PILON 

As noted above, where an employee has been on full furlough up to the point that notice of termination of employment is given, the employer is unlikely to need them to carry out any work during the notice period and paying a PILON is likely to be the most straightforward approach to termination. An employer may also choose to pay a PILON to an employee who has been on flexible furlough up to the point that notice of termination of employment is given, if they do not need the employee to continue to work part-time during the notice period. 

PILON clause

Where there is a PILON clause, we understand that any PILONs made under it would be based on the employee's normal rate of pay and not the furlough rate of pay. The amount of notice pay will be governed by the PILON clause. For example, it is relatively common for PILON clauses to limit payment to the basic pay the employee would have been entitled to had they been working during the notice period, but expressly exclude any bonuses and other benefits. (In these circumstances, the basic pay would, of course, be based on normal pay and not furlough pay.)  

No PILON clause

If there is no PILON clause, then paying in lieu of notice is technically a breach of contract and the employer would have to pay the employee in respect of all pay and benefits to which they would have been entitled had they been at work throughout their notice period. The principles as to what rate of pay the PILON should be paid at are therefore the same as above in respect of notice periods that are ‘served’.

If the giving of notice would have brought the employee’s furlough arrangements to an end as explained above, then the pay the employee would have been entitled to during notice would be their normal rate of pay.

If the giving of notice would not have had that effect and the furlough arrangements could have continued had the employee served out their notice, then the length of the employee's notice period is relevant.

As set out above, if the notice period is not at least one week more than the statutory minimum then the ERA special notice pay provisions and the Coronavirus Week’s Pay Regulations would have effectively entitled the employee to notice pay based on normal pay. Accordingly, to compensate the employee for its breach of contract, the employer would have to pay the PILON at the employee’s normal rate of pay. 

If, on the other hand, the notice period is at least one week more than the statutory minimum, then the ERA special notice pay provisions would not have applied and it is arguable that the PILON would only have to compensate the employee at the furlough rate of pay. However, for the same reasons as set out above in respect of served notice periods, we recommend that employers treat PILONs for these employees in the same way as those benefiting from the ERA special notice pay provisions.

In summary, for employees without a PILON clause, whose contractual notice period is at least a week more than the statutory minimum, and whose furlough arrangements would not have been brought to an end by the giving of notice, it may be possible for the employer to argue that the PILON need only be paid at the employee’s furlough rate of pay. However, we expect that employment tribunals would find this technical argument unattractive and, as for a served notice period, we would recommend that employers make all PILONs at the normal rate of pay.

32. What if we need to make furloughed employees redundant? (Last updated 19/04/2021)

Although the Extended CJRS is intended to support employers to maintain jobs during the pandemic, it may become clear to an employer that has accessed the scheme (and even before the scheme ceases to be available) that its business will continue to experience reduced work and/or that closure of the workplace is necessary.

In such circumstances, the redundancy option will be open to employers, or will continue to be open to them, if they have already started a redundancy process. The Government guidance seems to acknowledge this, flagging that employers who need to make furloughed employees redundant must follow the normal rules on redundancies, e.g. in relation to consultation and notice periods. However, as noted at questions 3, 30 and 31, above, for claim periods starting on or after 1 December 2020, employers can no longer claim in respect of employees who are serving a statutory or contractual notice period (whether due to dismissal for redundancy or any other reason, or resignation or retirement). 

Our view is that you can consult with employees about redundancy whilst employees are on furlough. We do not think that engaging in a consultation process will count as ‘work’ and the Government guidance confirms that union and employee representatives may undertake duties and activities for the purpose of individual or collective representation of employees, so long as they do not provide services to or generate revenue for or on behalf of the employer or a linked organisation. That said, managers and HR who are running the consultation process will be working and so cannot be on full furlough. In addition, employers must bear in mind that consulting remotely clearly poses practical difficulties and they will have to ensure that the process they adopt for such remote consultation is thorough and fair. While, as set out above, the Government has now prohibited (from 1 December 2020) claiming for an employee who is working out a notice period, based on the wording of the guidance and the Extended CJRS Treasury Directions, our view is that employers can continue to claim for affected employees during a redundancy consultation process before redundancy is confirmed.

Note that if you are proposing to dismiss 20 or more employees at a single establishment within a 90 day period, you will need to carry out collective, as well as individual, consultation. The minimum statutory collective consultation periods are 30 days where 20 to 99 redundancies are proposed, or 45 days where 100 or more redundancies are proposed. Employers can shorten the timeframe of their statutory collective consultation if the “special circumstances” defence applies, i.e. where it is not reasonably practicable to comply with the collective consultation requirements in full and that the circumstances behind this are “special”. It is possible that an employment tribunal would agree that the impact of the Covid-19 crisis on a business amounted to “special circumstances” and that it was not reasonably practicable to comply with collective consultation requirements, but this is certainly not guaranteed. It is also important to be aware that the special circumstances defence does not remove the requirement to consult entirely – you will still be expected to complete as much consultation as is practicable in your circumstances and you could be liable for protective awards if you fail to do so. We suggest you consult your Make UK adviser if you are considering relying on the special circumstances defence to reduce the amount of collective consultation you carry out.

Employees whom you dismiss as redundant during or after furlough will, if they have at least two years’ service, have the right to bring a claim for unfair dismissal. The fairness of the dismissal would be determined by the employment tribunal in accordance with the normal principles that apply under the ERA. In the event that an employee succeeds in such a claim, their basic award would be calculated in accordance with the Coronavirus Week’s Pay Regulations. As noted at question 31, above, these Regulations are intended to ensure that the employee does not lose out as a result of having been on furlough where payments to which they are entitled are calculated on the basis of the ERA week’s pay provisions – the basic award in an unfair dismissal claim is one such payment. We discuss the operation of these Regulations at question 33, below, in relation to the calculation of statutory redundancy pay.

33. How do you calculate statutory redundancy pay for employees who are made redundant during (or shortly after) a period of furlough? (Last updated 04/03/2021)

Statutory redundancy payments for employees who are made redundant during or shortly after a period of furlough will be calculated in accordance with the Coronavirus Week’s Pay Regulations. The intention is that any reduction in pay the employee has been subject to as a result of being furloughed is ignored when conducting the relevant calculations, so the amount of redundancy pay the employee is entitled to will not be affected by them having been on full or flexible furlough. The Coronavirus Week’s Pay Regulations specify a different method of calculation for ‘a week’s pay’ (on which the statutory redundancy pay calculation is based) depending on whether or not the employee has normal working hours and whether or not their pay varies, as explained below. 

Employees who have normal working hours and whose pay does not vary with the amount of work done or the time of work (salaried employees)

A week’s pay is the employee’s basic pay for their normal working hours. Arguably, an employee’s normal working hours have not changed just because they are on furlough (and we think this would remain the case even if an employee has been working for the employer part-time on flexible furlough); a week’s pay for the purposes of the statutory redundancy pay calculation would be their normal week’s pay rate and not their temporary furlough pay rate. 

The Coronavirus Week’s Pay Regulations reinforced this by deeming normal working hours to include any furloughed hours and providing that the amount payable should be calculated disregarding any reduction in pay as a result of the employee being fully or flexibly furloughed. The Coronavirus Week’s Pay Regulations provided that they would apply to salaried employees wherever the calculation date was on or before 31 October 2020 (i.e. when the CJRS was due to end). They were later amended to reflect the original Extended CJRS end date (31 March 2021) and again to reflect the continuation of the Extended CJRS to 30 April 2021. We anticipate that they will be amended once more to ensure that they apply to salaried employees if the calculation date is on or before 30 September 2021, when the Extended CJRS is now due to end. 

Employees who have normal working hours but whose pay varies with the time of work (shift workers)

A week’s pay is based on the employee’s pay over the 12 week reference period prior to the calculation date, divided by hours worked during that period and multiplied by an average week’s hours. However, whole weeks of no work are excluded from the calculation, even where the employee received some pay. Accordingly, whole weeks of full furlough are not counted and a week’s pay is in any event based on the relevant reference period before the employee went on furlough. The amount of the employee’s redundancy pay therefore wouldn’t have been affected by full furlough (or any impact would have been very minor, e.g. if the employee had been furloughed for part of one of the weeks that was included in the 12 week reference period) even in the absence of the Coronavirus Week’s Pay Regulations. However, if an employee had been working for the employer part-time on flexible furlough, those weeks would have been counted, so the amount of redundancy pay the employee was entitled to may have been impacted by them having been on flexible furlough, unless the employer had been topping up furlough pay to full pay.

Under the Coronavirus Week’s Pay Regulations, however, if the employee was furloughed during any part of the reference period, normal working hours are deemed to include furloughed hours and the hourly rate of remuneration for that part of the reference period is the amount payable under the employee’s contract, disregarding any reduction in pay as a result of the employee being furloughed. Effectively, this means that the amount of redundancy pay the employee is entitled to will not be affected by them having been on full or flexible furlough.

Employees who have no normal working hours

A week’s pay is based on all pay received over the 12 week reference period prior to the calculation date, divided by all hours worked over that period. Weeks of no work are still counted, provided that the employee received some remuneration during those weeks. Assuming that furlough pay counts as ‘remuneration’ for these purposes, then weeks spent on full furlough would be counted. This means that, prior to the introduction of the Coronavirus Week’s Pay Regulations, statutory redundancy pay for employees with no normal working hours may have been reduced as a result of the time spent on furlough, unless the employer had been topping up furlough pay to full pay. Note that the reduction may have been lower where an employee had been working for the employer part-time on flexible furlough, since they would have been paid their normal rate for the working hours plus furlough pay for the non-working hours. 

Under the Coronavirus Week’s Pay Regulations, however, if the employee was furloughed during any part of the reference period, their weekly pay attributable to being furloughed is the amount they would have been paid under the Extended CJRS if calculated in accordance with their reference salary (see question 24, above), but using their full reference salary (i.e. not the 80% they get under the Extended CJRS) and not applying the cap. Effectively, this means that the amount of redundancy pay the employee is entitled to will not be affected by them having been on full or flexible furlough.

What about enhanced redundancy payments?

The Coronavirus Week’s Pay Regulations do not directly address the issue of enhanced redundancy payments and they are unlikely to impact many enhanced redundancy schemes.

However, if the calculation of your enhanced redundancy pay is based on the statutory calculation of a week’s pay or the amount of an employee’s statutory redundancy payment, then whether or not the Coronavirus Week’s Pay Regulations will affect your enhanced redundancy pay calculations will be a question of contractual interpretation. Accordingly, if you have an enhanced redundancy pay scheme under which redundancy pay is calculated based on the statutory payments, we suggest that you seek advice on how the Coronavirus Week’s Pay Regulations may affect you.