On 20 March 2020, the UK government announced the Coronavirus Job Retention Scheme (“JRS”) to support employers who cannot maintain their current workforce because their operations have been affected by coronavirus (“COVID-19”).

Last updated: 10 July 2020 

Employers can “furlough” employees (ie. place them on leave of absence), in which case the employees are entitled to 80% of their usual monthly wage costs for unworked hours, up to a cap of £2,500 a month (“Furlough Pay”).  

Employers can apply for a grant that covers a percentage of furloughed employees’ usual monthly wage costs for unworked hours, up to a monthly cap, plus from 1 March to 31 July 2020 the associated employer national insurance contributions and pension contributions (up to the level of the minimum automatic enrolment employer pension contribution) on that pay (“JRS Grants”).  The percentage of furloughed employees’ usual monthly wage costs for unworked hours that can be reclaimed by way of JRS Grants and the monthly cap will change during the course of the JRS.

Initially, employees were not able to complete revenue generating work for their employer while on furlough. However, from 1 July 2020 furloughed employees can carry out work for their employer in conjunction with furlough leave (“Flexible Furloughing”).  

The government’s guidance on the JRS has been updated a number of times since the scheme was announced.  On 15 April 2020, the Treasury also issued a direction to Her Majesty’s Revenue and Customs (“HMRC”) providing formal details of the JRS (the “Direction”) (which has also been amended over time, including on 25 June 2020 to deal with Flexible Furlough).

The JRS portal opened on 20 April 2020 and it appears there has been a high level of uptake among employers.

On 29 May 2020, the government provided details of material amendments to the scheme, affecting (1) the amount of the JRS Grants payable from 1 August 2020; and (2) introducing Flexible Furloughing.  The JRS is expected to be available until 31 October 2020 but will effectively be closed to new entrants from 10 June 2020 (save for certain employees returning from certain types of leave).

Certain aspects of the JRS remain unclear and the scheme remains subject to change and further guidance.

ELIGIBILITY

Which employers can use the JRS?

Prior to 1 July 2020

The JRS is open to all UK employers who created and started a PAYE payroll scheme on or before 19 March 2020, are enrolled for PAYE online and have a UK bank account. However, from 1 July 2020, the JRS will only be available to employers that have previously used the scheme in respect of employees they have previously furloughed.

The guidance states that the JRS is designed to help employers that cannot maintain their workforce because their operations have been affected by COVID-19.  It appears that this covers employers who would otherwise be required to make redundancies as well as those who are affected in other ways by COVID-19 or the measures taken to prevent or limit its further transmission.

Public sector organisations and administrators are eligible to use the JRS in limited circumstances.

Which employees are eligible for the JRS?

Employers can claim JRS Grants in respect of employees who were on their PAYE payroll on or before 19 March 2020 and which were notified to HMRC on a Real Time Information (RTI) submission on or before 19 March 2020.

The JRS initially covered employees who were on the employer’s PAYE payroll on or before 28 February 2020, although the cut off date was extended to 19 March 2020 on 15 April 2020.  At the same time, the government added the requirement that employees needed to be notified to HMRC on an RTI submission, which depending on the employer’s payroll practice potentially makes some new joiners ineligible for the JRS.

On 23 April 2020, the government published the below table to clarify which employees are eligible for the JRS:

Was the employee employed by the employer as of this date? Date RTI submission notifying payment was made to HMRC Eligible for JRS? 
 28 February 2020  On or before 28 February 2020  Yes
 28 February 2020  On or before 19 March 2020  Yes
 28 February 2020  On or after 20 March 2020  No
 19 March 2020  On or before 19 March 2020  Yes
 19 March 2020  On or after 20 March 2020  No
 On or after 20 March 2020  On or after 20 March 2020  No

From 1 July 2020

From 1 July 2020, employees are only eligible to be furloughed if they have previously been furloughed for a full three-week period prior to 30 June 2020 (ie. employees would need to have been placed on furlough leave no later than 10 June 2020 to qualify). 

An exception applies to employees who are returning from statutory parental leave or military mobilisation as an armed forces reservist after 10 June 2020, provided (1) the leave started before 10 June 2020; (2) the employer previously furloughed other employees prior to 30 June 2020; and (3) the employee meets the relevant payroll eligibility criteria (“Returning Employees”).

Additionally, the number of employees an employer can claim JRS Grants for in any claim period cannot exceed the number they have claimed for under any previous claim between 1 March 2020 and 30 June 2020  (the “High Watermark Number”), save that the High Watermark Number is increased by the number of any employees who: (1) are Returning Employees; or (2) transfer to the employer via Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) after 10 June 2020 and who were furloughed by the transferor under the original (ie. pre-1 July 2020) JRS.  

The JRS covers a wide range of categories of employees, further details of which are covered below (see Employee Eligibility).

Can employers re-hire and furlough employees who had been made redundant or stopped working?

Yes, provided in the case of:

  • an employee who was made redundant or stopped working after 28 February 2020, they were on the employer’s payroll as at 28 February 2020, which means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 28 February 2020;
  • an employee who was made redundant or stopped working after 19 March 2020, they were employed on 19 March 2020 and on the employer’s payroll on or before 19 March 2020.  This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020.
  • in respect of employees furloughed from 1 July 2020, the employee was previously furloughed for a 3 week period.

In each case, employees who were made redundant or stopped working for the employer can qualify for the scheme if the employer re-employs them and puts them on furlough leave by 10 June 2020 or re-employs them after 10 June 2020 but previously placed the employee on furlough for a 3 week period.  

The JRS Grants will apply from the date on which the employee was placed on furlough leave.  This applies even if employees were re-hired and furloughed after 19 March 2020.  

The re-hiring of employees whose fixed term contract has expired for the purpose of placing them on furlough leave is dealt with below (see Employee Eligibility). 

JRS BASICS

How much Furlough Pay are furloughed employees entitled to?

Furloughed employees are entitled to be paid Furlough Pay of no less than 80% of their usual monthly wage costs, up to £2,500 a month.

Employees’ entitlement to this amount of Furlough Pay will not be affected by the reduction in the JRS Grants payable by HMRC from 1 August 2020 to 31 October 2020 (see below).

How much of the Furlough Pay and related costs can employers claim by way of JRS Grants?

The amount of JRS Grants that employers can claim from HMRC to cover:

  • Furlough Pay;
  • employer national insurance contributions on Furlough Pay (“Employer NICs”); and 
  • minimum automatic enrolment employer pension contributions on Furlough Pay (“Employer Pension Contributions”),
varies over the course of the JRS as follows.  Where applicable, employers are required to cover the remaining amount of the minimum Furlough Pay and related employee costs.

 

Period HMRC contribution Employer contribution
1 Mar 2020 to 31 Jul 2020
  • 80% of wages for unworked hours up to a cap of £2,500
  • Employer NICs
  • Employer Pension Contributions
None
1 Aug 2020 to 30 Aug 2020
  • 80% of wages for unworked hours up to a cap of £2,500
  • Employer NICs
  • Employer Pension Contributions
1 Sep 2020 to 30 Sep 2020
  • 70% of wages up to a cap of £2,187.50
  • 10% of wages for unworked hours to make up 80% total up to a cap of £2,500
  • Employer NICs
  • Employer Pension Contributions
1 Oct 2020 to 31 Oct 2020
  • 60% of wages for unworked hours up to a cap of £1,875
  • 20% of wages for unworked hours to make up 80% total up to a cap of £2,500
  • Employer NICs
  • Employer Pension Contributions


How long will the JRS be available for?

As of date of writing, the JRS is expected to end 31 October 2020.

The JRS was initially due to last for a period of three months, from 1 March 2020 to 31 May 2020.

On 17 April 2020, the JRS was extended for an additional month until 30 June 2020.

On 12 May 2020, the government announced that the JRS would be extended for a further four months until 31 October 2020, subject to the changes applying from 1 July 2020 as detailed in this note.

When will the JRS close to new entrants?

The JRS will close to new entrants from 30 June 2020. From this point onwards, employers will only be able to furlough employees that they have furloughed for a full 3 week period prior to 30 June 2020 (ie. employees would need to have been placed on furlough leave no later than 10 June 2020 to qualify).

An exception applies to employees who are returning from statutory parental leave or military mobilisation as an armed forces reservist after 10 June 2020, provided (1) the statutory parental leave started before 10 June 2020; (2) the employer previously furloughed other employees prior to 30 June 2020; and (3) the employee meets the relevant payroll eligibility criteria.

Can employers claim back payment under the scheme?

It appears that employers can claim back payment under the scheme until 1 March 2020, even though this predates the announcement of the scheme and would therefore predate any furlough agreements being in place with employees.

Employers would however need to show that the conditions of the JRS were met to claim back payment, including that the employees being claimed for carried out no work for the employer during that period due to COVID-19, which could be difficult to evidence in practice and may be subject to HMRC scrutiny.

It is not clear from the guidance whether claims in respect of employees who are re-employed and put on furlough leave, after being made redundant or stopping work for the employer after 28 February 2020 but before 19 March 2020, can be backdated to the date of termination or only to the date on which the employee is re-hired and placed on furlough leave.

Under the changes to the JRS commencing 1 July 2020, employers can continue to make claims in anticipation of an imminent payroll run, at the point payroll is run or after payroll has been run.

How does an employer place employees on furlough leave prior to 30 June 2020?

To place an employee on furlough leave, employers must instruct them in writing to cease work for at least three consecutive weeks “by reason of circumstances arising as a result of coronavirus or coronavirus disease or measures taken to prevent or limit its further transmission”.

  • The Direction states that that the agreement to furlough an employee (which may be made by collective agreement) must be: made before the beginning of the period to which the JRS claim relates (although it may subsequently be varied to reflect any variation agreed between the employer and employee during the period to which the JRS claim relates);
  • made in writing or confirmed in writing by the employer (such agreement or confirmation may be in an electronic form such as an email; and
  • incorporatd (expressly or impliedly) in the employee's contract. 

In the circumstances, it appears that it is acceptable to rely on oral or implied consent to furlough leave so long as confirmation of the agreement is provided in writing. However, we consider that it would be best practice to obtain employees’ express written consent to furlough leave.   

A record of the furlough communication must be kept until at least 30 June 2025.

Collective agreement reached between an employer and a trade union is acceptable for the purpose of evidencing an employee’s furloughed status to claim under the JRS.

How should an employer agree Flexible Furloughing arrangements after 1 July 2020?

The method of placing an employee on furlough leave after 1 July 2020 broadly follow the pre-1 July 2020 requirements, ie. the agreement must be made in writing or confirmed in writing by the employer.  This means an oral or implied agreement for furlough leave may be acceptable so long as it is confirmed in writing.  However, we would recommend seeking express written agreement where possible.

From 1 July 2020 the parties may agree that the employee does no work in relation to their employment or does not work the full amount of their usual hours in relation to their employment.  At all times, the furlough leave (including Flexible Furlough) must be “by reason of circumstances arising as a result of coronavirus or coronavirus disease or measures taken to prevent or limit its further transmission”.

Do employers need to “top up” the Furlough pay?

No, to claim a JRS Grant employers do not need to “top up” any gap between the Furlough Pay (ie. 80% of the employee's usual wages for unworked hours, capped at £2,500) and the employee’s normal pay, although they may choose to do so if they wish.  Note however that where the employer does not top up the difference, the employee must agree to the change in their pay.

As stated above, from 1 August 2020, the employer will have to make financial contributions towards the employee's Furlough Pay and related costs (ie. the JRS Grant will not cover the full 80%, Employer NICs and Employer Pension Contributions).

An exception applies to periods of annual leave during furlough leave (see Annual Leave below).

Is there a minimum period of furlough?

Between 1 March 2020 and 30 June 2020, any period of furlough leave is subject to a minimum duration of 3 consecutive weeks.This can be extended by any amount of time whilst the employee is on furlough, however the JRS end date is the last day employers can claim. This minimum period of furlough applies to any furlough leave commencing before 1 July 2020, even if this means the three week period lasts into July 2020.

For periods of furlough leave commencing on or after 1 July 2020 the minimum furlough period will no longer apply, as businesses will be given the flexibility to bring furloughed employees back part time.  However, employees would need to have been furloughed for a full 3 week period prior to 30 June 2020 to be furloughed after that date.

Can employees be rotated in and out of furlough leave?

While rotation is not expressly covered by the guidance, the guidance applying between 1 March and 30 June 2020 states that employees “can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks”.  This suggests that between 1 March 2020 and 30 June 2020 employers can rotate employees in and out of furlough leave, subject to the usual JRS conditions being met for each instance of furlough leave.

From 1 July 2020, employees will be able to work part time during furlough leave under Flexible Furlough arrangements (provided eligibility criteria are met).

How will Flexible Furloughing work from 1 July 2020?

From 1 July 2020, employers can bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim JRS Grants for their normal hours not worked.  Employers will have flexibility to agree any working arrangements with previously furloughed employees.

For hours that an employee works under Flexible Furlough arrangements, employers will need to pay employees in accordance with their employment contract and employers will be responsible for deducting the tax and national insurance contributions due on those amounts.

Do employees have to work part time under Flexible Furlough from 1 July 2020?

 No. There is no obligation to offer Flexible Furlough (ie. part time work) to any employees after 1 July 2020.  Employers may keep employees on full time furlough (subject to the rules of the JRS). 

Nor is it necessary for employees to actually be on furlough leave as at 30 June 2020 for them to participate in Flexible Furlough arrangements (provided they were previously furloughed for a 3 week period between 1 March 2020 and 30 June 2020).

Do the employees need to be at risk of redundancy to be furloughed?

The government’s messaging regarding the purpose and intention of the JRS set out in the Direction and the guidance has changed a number of times since the JRS was announced. The Direction currently states that the purpose of the JRS is to provide payments to employers to “continue the employment of employees whose employment activities have been adversely affected by the coronavirus and coronavirus disease or the measures taken to prevent or limit its further transmission”. The guidance currently states that the JRS is intended to help employers maintain their workforce where their operations have been affected by COVID-19.

Based on all of the information to date, we understand that the JRS is intended to cover a broader range of scenarios rather than only being an alternative to redundancy, but employers should ensure their reasons for placing any employees on a period of furlough leave are compatible with the government’s messaging around the purpose of the scheme.  As a minimum, any period of furlough leave must relate to circumstances arising as a result of coronavirus or coronavirus disease or measures taken to prevent or limit its further transmission.

More generally, the Direction states that no claim may be made under the JRS if it is abusive or is otherwise contrary to its exceptional purpose.

Can an employer claim JRS Grants for notice periods where furloughed employees are dismissed for redundancy?

Until 25 June 2020 we understood that it was almost certainly possible to effect redundancies of furloughed employees and claim JRS Grants to cover their notice periods. However, the position seems less unclear in the latest iteration of the Direction, which states that JRS Grants should be used to “continue the employment” of furloughed employees. This could be interpreted as suggesting that JRS Grants will not be available where the decision has been made to dismiss employees as redundant (eg. to cover notice periods) as their employment will not continue.

On balance, we feel that it is still likely that employers can claim JRS Grants to cover periods of notice following dismissal by reason of redundancy, particularly where the employees have been on furlough leave for a longer period prior to the dismissal decision. However, until the position is clarified, employers should keep in mind that claims covering notice pay could be scrutinised and (as always) should avoid making any claims that could be viewed as abusive or otherwise contrary to the purpose of the JRS.

On the other hand, it does seem clear that JRS Grants cannot be used to fund payments in lieu of notice (PILONs) and/or statutory/enhanced redundancy pay.

Can employees carry out any work for their employer during furlough leave?

Prior to 1 July 2020

Between 1 March 2020 and 30 June 2020, employees placed on furlough leave must cease all work in relation to that employer to qualify for JRS Grants.  They cannot work reduced hours and may not carry out work for any other organisation that is linked or associated with the employer.

Furloughed employees can engage in training or take part in volunteer work, so long as in undertaking the training or volunteer work the employee does not provide services to or generate revenue for the employer or a linked or associated organisation.  Employees must be paid at least the relevant rate of national minimum wage for time spent training (even if this exceeds JRS grants). The Direction states that such training should be disregarded for the purposes of the JRS where it is directly related to the employee's employment and agreed between the employer and employee before being undertaken. It may therefore be advisable for employers to include reference to any such training in any furlough agreement with the employee. 

Employees must be paid at least the relevant rate of national minimum wage for time spent training (even if this exceeds their Furlough Pay).  

From 1 July 2020

From 1 July 2020, businesses will be given the flexibility to bring furloughed employees back part time under Flexible Furlough arrangements. Broadly the same restrictions will apply to periods spent on Flexible Furlough, ie. employees cannot carry out any revenue generating work or provide services to or for the employer or any linked or associated organisation.  However, employers may take part in training, volunteer for another employer or organisation or work for another employer (if permitted by their contract)

Can employees carry out work for other employers during furlough leave?

Subject to the terms of their contract with the employer who placed them on furlough leave, employees are able to work for another employer whilst on furlough leave. This also applies during Flexible Furlough, although we anticipate this may be more difficult to manage in practice (depending on the agreed working pattern).

Similarly, an employee with more than one job may be placed on furlough leave by each employer and claim Furlough Pay up to the maximum amount from each employer (subject to the usual eligibility criteria).

Will undertaking union and non-union representative activities disqualify furloughed employees from the JRS?

No. Employees on furlough leave who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers.  However, this is subject to the general JRS requirement that such duties and activities must not generate revenue for the employer or a linked or associated organisation.

Will collective consultation obligations arise when seeking to place 20 or more employees on furlough leave or to agree a Flexible Furlough agreement?

Where an employer is asking 20 or more employees to agree changes to their terms of employment as a condition of furlough leave or Flexible Furlough, such as reducing their pay to the level of the maximum Furlough Pay, the employer will need to consider whether it needs to engage in collective consultation to procure agreement to the changes to the terms.

We consider that collective consultation obligations may not arise if the employer is confident that most employees will accept the changes to their terms of employment (eg. because they are temporary and more attractive than redundancy) such that the threshold for collective consultation is not therefore met.  However, employers should keep the matter under review as it moves through the process, particularly if there are a large number of affected employees or if it becomes aware of significant pushback.

Are employers obliged to use the JRS?

The JRS is voluntary and employers are not under an obligation to use it.  Note however that, where an employer decides to make redundancies rather than placing employees on furlough leave, this could potentially give rise to claims for unfair dismissal unless the employer has a good reason for not using the JRS or the redundancy is otherwise entirely unrelated to COVID-19.

Can an employee demand to be placed on furlough leave?

No. Furlough leave is subject to agreement between the employer and the employee.

Do employees continue to accrue statutory rights during furlough leave?

Yes. Employees remain employed during furlough leave and will continue to accrue statutory rights, including annual leave and continuous service for statutory purposes.

Can an employer make furloughed employees redundant following furlough leave?

Yes.  If following the expiry of the JRS employers are still facing a redundancy situation affecting previously furloughed employees they may still effect redundancies (subject to the usual legal requirements).

CALCULATION OF JRS GRANTS

What elements can employers claim by way of JRS Grants?

Employers can apply for a grant that covers a percentage of furloughed employees’ usual monthly wage costs for unworked hours, up to the relevant monthly cap. Details of the limits that apply during the course of the JRS are set out above (see How much of the Furlough Pay and related costs can employers claim by way of JRS Grants?).

 “Usual monthly wage costs” broadly covers regular payments employees are obliged to make, including:

  • Regular wages
  • Non-discretionary overtime
  • Non-discretionary fees
  • Non-discretionary commission payments
  • Piece rate payments

From 1 March 2020 to 31 July 2020, employers can also claim the associated Employer NICs and Employer Pension Contributions on the maximum Furlough Pay.

The government has made available an online calculator to assist employers to work out what costs they can claim via the JRS until 31 July 2020.

What elements are excluded from JRS Grants?

Employers cannot take into account any payments that are discretionary or that are paid without any contractual obligation to pay, including:

  • Tips (including those distributed through tronc systems)
  • Discretionary bonuses
  • Discretionary commission payments
  • Non-cash payments
  • Non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay.

The Direction also refers to the exclusion of payments that are "conditional on any matter" but it is not yet clear what this is intended to capture, especially in view of the payments expressly stated to be included as above. 

How are JRS Grants calculated for full/part-time employees, zero hours workers or other workers with variable pay?

For full or part time employees who are salaried, the employer can claim for the relevant percentage of the employee's wages, from their last pay period before 19 March 2020, up to the relevant monthly cap. Where an employer has already calculated a claim based on the employee’s wages as of 28 February 2020, and this differs from their wages in their last pay period prior to 19 March 2020, it can elect to use this calculation for the first claim.

If a variable pay worker has been employed continuously from the start of the 2019/2020 tax year, their employer can claim the higher of:

  • the relevant percentage of the same month’s wages from the previous year (up to the relevant monthly cap)
  • 80% of the average monthly wages for the 2019/2020 tax year (up to the relevant monthly cap).

If a variable pay worker started their employment after 6 April 2019, their employer can claim the relevant percentage of their average monthly wages since they started work until the date they are furloughed, up to the relevant monthly cap.

How do I calculate pay on Flexible Furlough?

From 1 July 2020, if an employee is flexibly furloughed the minimum Furlough Pay the employer must pay to the employee for the hours they are on furlough depends on: (1) their usual hours; and (2) their working and furloughed hours under the Flexible Furlough arrangements, and is broadly calculated as follows:

  • Start with the lesser of:
    • 80% of their usual wages; or
    • the maximum wage amount; then
  • Multiply by the employee’s furloughed hours.
  • Divide by the employee’s usual hours.

The method of calculation can be complicated and government guidance on how to complete this calculation can be found here.
If any of the furlough hours are taken as paid holiday or annual leave, employers need to top up the pay for these hours to the employee’s full contracted rate (see below).

Are JRS Grants taxable?

Yes.  Employers are required to make the usual PAYE payroll deductions (ie. income tax and national insurance contributions) from Furlough Pay payable to furloughed employees (including the pay covered by JRS Grants).  This means the employees will only receive the net amount of the maximum JRS Grant from time to time.

Are JRS Grants calculated on pre or post-salary sacrifice wages?

JRS Grants are calculated on post-salary sacrifice wages. The guidance states that normally an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. It is noted that the HMRC agrees that COVID-19 counts as a life event for the purpose of any salary sacrifice scheme which could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.

ANNUAL LEAVE DURING FURLOUGH LEAVE

Can employees take annual leave during furlough leave?

Employees are able to take annual leave during furlough leave without breaking the period of furlough leave.  This includes bank holidays that arise during furlough leave, where such days are usually worked by the employee.

What are employees entitled to be paid during annual leave taken while on furlough leave?

Employers are required to pay employees their “usual holiday pay” for any annual leave taken during furlough leave, ie. broadly speaking they would need to be paid their full rate of pay prior to furlough leave rather than at any lower rate agreed for the period of furlough leave. 

This means employers are required to “top-up” employees’ pay for periods of annual leave taken during furlough leave, even if they are not topping-up their pay during furlough leave itself.

Can employers claim JRS Grants covering periods of annual leave during furlough leave?

It seems that employers can claim JRS Grants covering periods of annual leave during furlough leave. The JRS Grants will only cover the relevant percentage of the employees’ usual monthly wage costs, up to the relevant monthly cap, notwithstanding the fact that employers are required to pay employees at their full rate of pay during annual leave.

Do employers have any say over employees’ annual leave during furlough leave?

While not expressly dealt with in the guidance, save for a reference to employers' flexibility to restrict when holiday is taken if there is a business need, we consider it likely that employers’ usual rights to direct the timing of employees’ annual leave are unaffected by furlough leave, ie. broadly speaking employers are able to require employees to take and/or not take annual leave at particular times during furlough leave (subject to statutory notice requirements). 

However, some commentators have asserted that travel and/or social distancing restrictions could preclude employees from enjoying a period of leisure, rest and relaxation with the effect that holiday taken in this way may be invalid.

Do employees continue to accrue annual leave during furlough leave?

Yes, employees will continue to accrue annual leave during furlough leave in the usual way.

Subject to employee agreement, it would be possible to reduce employees’ annual leave entitlement to statutory minimum levels when implementing the furlough leave, ie. remove any entitlement to contractual holiday allowance in excess of statutory holiday. In such cases, employers may need to stipulate the order in which contractual and statutory leave is deemed to be taken.    

EMPLOYEE ELIGIBILITY

Can an employer furlough employees on fixed term contracts?

Yes, provided an RTI payment submission notifying payment in respect of that employee to HMRC was made on or before 19 March 2020, and the employee completes a full three-week period of furlough prior to 30 June 2020.  

Employers may renew or extend a fixed term employee’s contract to keep them on furlough leave during the COVID-19 crisis. Employers cannot claim under the JRS in respect of employees who started and ended the same contract between 28 February 2020 and 19 March 2020. 

Can an employer re-hire and furlough employees whose fixed term contract has expired?

Yes, an employee on a fixed term contract can be re-employed, furloughed and claimed for if either:

  • their contract expired after 28 February 2020 and an RTI submission notifying payment in respect of that employee to HMRC was made on or before 28 February 2020; or
  • their contract expired after 19 March 2020 and an RTI payment submission notifying payment in respect of that employee to HMRC was made on or before 19 March 2020.

The JRS Grants will apply from the date on which the employee was placed on furlough leave.

Can employees on sickness absence be placed on furlough leave?

The position regarding the interaction between sickness absence and furlough leave is currently unclear.

The government guidance states that the JRS is not intended for short-term absences from work due to sickness, and practically speaking employers could not use it in this way given the minimum period of furlough leave is three weeks. However, provided the minimum furlough leave period is met, the guidance appears to give employers flexibility to decide whether to furlough or keep furloughed for business reasons employees who would are or otherwise become eligible for statutory sick pay (“SSP”) because they are sick, self-isolating or shielding in accordance with Public Health guidance.

However, the Direction seems to suggest that an employer can only furlough an employee eligible to receive SSP once any initial entitlement to SSP ends and they take a subsequent period of sick leave.  There is a risk therefore that an employer may only be able to recoup furlough pay once an employee’s entitlement to SSP has ended (whether or not the employee is actually receiving SSP or any claim to SSP is made by the employer). 

We hope that the situation will be clarified in due course.

If any employees are furloughed or kept furloughed in such circumstances and a claim is made under the JRS, the guidance is clear that SSP cannot also be recovered under the SSP Rebate Scheme for which small or medium size businesses may otherwise be eligible. The guidance also confirms that any claim under the JRS for an employee returning from sick leave should be based on normal salary (or the salary for a variable pay worker as above), not the pay received while on sick leave. 

For details on the changes to the SSP regime in light of COVID-19 and the SSP Rebate Scheme, see our Employer FAQ here.

Can employees who are “shielding” due to COVID-19 be placed on furlough leave?

The guidance states that employees who are shielding (or need to stay home with someone who is shielding) can be furloughed like other employees.

Employees who are “shielding” due to COVID-19 have since 16 April 2020 been eligible for SSP.  Given that most individuals that are shielding have been asked to do so for a minimum of 12 weeks, it is difficult to see how the terms of the Direction referred to above can apply to such employees without substantially reducing (or possibly eliminating) the period of time for which the employer can claim under the JRS. We await clarification in this respect. 

Can employees with caring responsibilities be placed on furlough leave?

Employees who are unable to work because they have caring responsibilities resulting from COVID-19 can be furloughed.

Can employees on maternity or other forms of parental leave be placed on furlough leave?

The guidance states that the normal rules for maternity and other forms of parental leave and pay apply.

For furloughed employees on maternity leave, employers should therefore reclaim statutory maternity pay ("SMP") in the normal way up to the permitted amount. The Direction makes clear that any balance of SMP that is not reclaimable cannot be recovered under the JRS.  

However, employers can claim through the JRS for enhanced (earnings related) contractual pay for employees on maternity leave and other forms of parental leave, which suggests that employees may be furloughed simultaneously with their maternity or other parental leave.

For employees who are furloughed on return from maternity and other forms of parental leave, any claim should be calculated against their normal salary (or the salary for a variable pay worker as above), not the pay they received while on leave.

Further to a Coronavirus amendment, the various regulations relating to statutory pay for family leave have been amended such that where a person's earnings are lower than they otherwise would have been as a result of their being furloughed, any statutory pay entitlements for leave taken on or after 25 April 2020 are to be calculated based on their usual, full earnings rather than their furlough pay.

It is possible that deliberately bringing maternity leave and other forms of parental leave to an end earlier than planned, in order to furlough employees and claim under the JRS could be considered a possible abuse of the scheme. Further, where such employees are on unpaid statutory leave, the following may apply.

Employees returning from statutory parental leave after 10 June 2020 are excluded from the prohibition on furloughing employees after 1 July 2020 who have not previously been furloughed for a 3 week period prior to that date, provided (1) the statutory parental leave started before 10 June 2020; (2) the employer previously furloughed other employees prior to 30 June 2020; and (3) the employee meets the relevant payroll eligibility criteria.

Can employees on unpaid leave be placed on furlough leave?

Where an employee went on unpaid leave on or before 28 February 2020 (eg. a sabbatical), they cannot be furloughed until the date on which it was agreed they would return from such leave (or where the date is unspecified, until completion of the purpose for which the leave was taken).

Where an employee went on unpaid leave after 28 February 2020 but before 1 July 2020, the guidance states that they can be furloughed instead and should be paid at least 80% of their regular wages, up to the monthly cap of £2,500. The Direction has cast some doubt on this as it refers to the fact that no claim may be made for unpaid leave of an employee beginning "before or after 19 March 2020 (whether agreed or otherwise arranged conditionally or unconditionally on, before or after that day)". It is not clear what is intended by this provision and whether it in fact restricts the employer's ability to furlough employees on unpaid leave, at least where such leave began after 19 March 2020. We hope for further clarification in this respect. 

Where, during the period beginning 1 July 2020 and 31 October 2020, a period of unpaid sabbatical or other period of unpaid leave is taken by an employee, no JRS claim may be made in respect of the period of unpaid leave.

Can foreign nationals be placed on furlough leave?

Foreign nationals are eligible to be furloughed.

The guidance further states that JRS Grants are not counted as “access to public funds” for immigration purposes and that employers can furlough employees on all categories of visa.

Can employees who transferred to an employer via TUPE after 19 March 2020 be placed on furlough leave?

Yes.  The guidance states that a new employer is eligible to claim under the JRS for employees of a previous business who transferred after 28 February 2020 pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), notwithstanding that they may not have been employed by the new employer on 19 March 2020.

The number of any employees who transfer to the employer via TUPE after 10 June 2020 may be added to the transferee employer’s High Watermark Number for post-1 July 2020 JRS claims (see above), provided they were furloughed by the transferor under the original (ie. pre-1 July 2020) JRS.

Can workers engaged via umbrella companies be placed on furlough leave?

Yes. Workers engaged via umbrella companies (including agency workers and “limb (b) workers”) can be placed on furlough leave by the umbrella company.

Can company directors be placed on furlough leave?

Yes. Company directors can be placed on furlough leave. This includes individuals who provide services through a personal services company of which they are a director.

Directors who are paid annually can qualify for the JRS provided they were notified to HMRC on an RTI submission on or before 19 March 2020, which relates to a payment of earnings in the 19/20 tax year.

Company directors who are furloughed may carry out duties to fulfil their statutory obligations during furlough leave.  However, they may do no more than reasonably necessary for that purpose, ie. they should not carry out their normal work to generate commercial revenue or provide services to or on behalf of the company.

Furlough of a director should be formally adopted as a decision of the company and noted in the company records.

Can apprentices be placed on furlough leave?

As apprentices have employee status, they can be furloughed along with other employee, provided they meet the requirements of the JRS.

Apprentices cannot carry out employment duties but can continue to train during furlough leave.  Apprentices should be paid at least the relevant national minimum wage rate for periods of training during furlough leave (even if this exceeds the amount of their Furlough Pay).

PRACTICAL POINTS

When did JRS Grants become available?

The JRS portal opened for claims on 20 April 2020.  The guidance states that eligible claims will be paid within six working days.

Should employers wait to receive JRS Grants before paying furloughed employees?

Unless employers have agreed with employees to defer payment of their wages, they should continue to pay employees’ Furlough Pay at the usual times. Employers can make claims in anticipation of an imminent payroll run, at the point payroll is run or after payroll has been run. 

Note that the entirety of the JRS Grant received must be paid to employees in the form of money and no part of it can be netted off to pay for the provision of benefits or a salary sacrifice scheme. 

The guidance and Direction are clear that any grant must be returned to HMRC immediately should an employer become unable or unwilling to use it to pay its employees' Furlough Pay, the Employer NICs and Employer Pension Contributions (so far as they are claimed as part of the JRS Grant).

Can employers make more than one claim for a particular claim period? 

No.  The guidance states that employers cannot make more than one claim for a particular claim period and so should claim at the same time for all of the employees furloughed in that claim period.  Employers will not be able to make another claim for the same period or one that overlaps.  This suggests that employers should give detailed consideration to the timing of furlough leave periods and JRS claims to ensure that they can claim for all furloughed employees and for the entire duration of the period for which they are furloughed.

Is there cut-off point for claiming JRS Grants for the period 1 March 2020 to 30 June 2020?

Employers will have until 31 July 2020 to make any claims for claim periods up to 30 June 2020.

When can employers claim JRS Grants for the period after 1 July 2020?

Employers will be able to make claims for JRS Grants covering days in July 2020 from 1 July 2020. However, employers should only claim for employees on Flexible Furlough once they have certainty about the number of hours the employees are working during the claim period.  If they claim in advance and then the employee works for more hours than the employer has included in the claim, then the employer will need to repay the appropriate amount to HMRC.

How do employers claim for periods worked under Flexible Furlough arrangements from 1 July 2020?

When claiming the JRS Grants for furloughed hours under Flexible Furlough arrangements from 1 July 2020:

  • employers will need to report and claim for a minimum period of 7 days, unless the employer is claiming for the first few days or the last few days in a month.  Employers can only claim for a period of fewer than 7 days if the period they are claiming for includes either the first or last day of the calendar month, and they have already claimed for the period ending immediately before it. This is a minimum period and those making claims for longer periods such as those on monthly or two weekly cycles will be able to do so; and
  • claim periods must start and end within the same calendar month (ie. claims cannot straddle two calendar months).  This allows for the monthly changes to the HMRC contributions set out above.

Employers will need to report hours worked and the usual hours an employee would have been expected to work (if not furloughed) in the claim period. Detailed worked examples are included in the government guidance (see further below).

As mentioned above, employers should only claim for employees on Flexible Furlough once they have certainty about the number of hours the employees are working during the claim period.  If they claim in advance and then the employee works for more hours than the employer has included in the claim, then the employer will need to repay the appropriate amount to HMRC. 

Can employers amend their claim for JRS Grants once submitted?

If an employer made an error in a claim that has resulted in an overclaimed amount, they must pay this back to HMRC.

Employers will able to inform the HMRC of any overclaimed amount as part of their next claim. They will be asked when making a claim whether they need to adjust the amount down to take account of a previous error. The employer's new claim amount will be reduced to reflect this. Employers do not need to take further action but should keep a record of this adjustment for six years.

If an employer makes an error that has resulted in an underclaimed amount, they should contact HMRC to amend their claim. HMRC may conduct additional checks.

If an employer has made an error in a claim and does not plan to submit further claims, HMRC are working on a process to inform them about the error and pay back any amounts that may have been overclaimed. We will update guidance when this is available.

Is the payment of JRS Grants subject to retrospective scrutiny?

Yes. The government has retained the right to retrospectively audit all aspects of the JRS with scope to withhold or claw back payment of fraudulent or erroneous claims. HMRC has put in place an online portal for employees and the public to report suspected fraud with respect to the JRS. The Direction also suggests that HMRC can ask for more information from employers at any time, including after a claim or payment of the claim is made.

Particular areas of concern include employers not passing JRS Grants on to employees, asking employees to work while furloughed and/or backdating claims to include periods when the employee was in fact working.

Following submission for a JRS Grant, employers must keep a copy of all records for 6 years, including:

  • the amount claimed and claim period for each employee;
  • the claim reference number;
  • their calculations;
  • usual hours worked, including any calculations that were required, for employees they flexibly furloughed; and
  • actual hours worked for employees they flexibly furloughed.

How can I access the JRS portal?

The JRS portal is available HERE.

Will any support be provided to employers after the termination of the JRS?

On 8 July 2020, the government unveiled a ‘Plan for Jobs’ to assist the UK’s recovery from the COVID-19 outbreak. Amongst others, the following measures were announced:

  • A Job Retention Bonus will be introduced to help employers retain furloughed workers after the expiry of the JRS. Employers will receive a one-off bonus of £1,000 for each previously furloughed employee who is still employed as of 31 January 2021, provided they receive at least the lower earning limit for national insurance (£520 per month) between November 2020 and January 2021.

  • A new Kickstart Scheme will also be launched to create new, fully subsidised jobs for young people aged 16-24. Funding will be available for each six-month job placement and will cover 100% of the National Minimum Wage (for up to 25 hours a week).

  • Businesses will be granted a one-off subsidy of £2,000 for each new apprentice they hire under the age of 25.

Further information

The government has created a number of guidance pages and other materials regarding the JRS, which include the following:

  • A general JRS guidance page for employers, which is available HERE.
  • A guidance page on employee eligibility, which is available HERE.
  • Guidance on calculating claims, which is available HERE and HERE.
  • Worked examples of Flexible Furlough claims where are available HERE and HERE.

The Treasury Direction to HMRC in relation to the JRS prior to 1 July is available HERE and post 1 July is available HERE.