Updated 29th Jan 2021

What is Furlough?

It’s a classification of employee/worker status as part of the Government Job Retention Scheme which sits along with temporary layoff. This means that from the 1 st November 2020 an employer can claim a grant from the Government to cover 80% of the employees’ wages for hours not worked up to £2,500.

The Government have extended the furlough scheme until the end of April 2021.


What happened to the Job Support Scheme that was announced?

This scheme has been placed on hold and cannot be utilised whilst the furlough scheme has been
extended. It is unsure if the scheme will go ahead after the extended furlough period ending in April


What is the difference between a flexible furlough employee and furlough employee?

  • Flexible furlough means that an employee can carry out work for their employer for any work pattern and any period of time. The employer will have to pay the employee for the hours worked at their normal rate of pay, the employer will not be able to claim this time back. The employer will then claim 80% of hours not worked from the Government and this is paid to the employee.


  • Furlough means that an employee will not work any hours for the employer during the
    period of furlough. The employer can claim back 80% of the pay capped at £2,500 for the
    hours not worked.


Who qualifies for Furlough?

  • Employees who you made an RTI submission for between 20 th March 2020 and 30 th October
  • TUPE employees (additional criteria must be met)
  • Employees that stopped working for you or has been made redundant on or after 23rd September 2020
  • Employees on zero hour or flexible contracts
  • Part time employees
  • Agency workers


Do Directors qualify for furlough?

Salaried Directors that are on RTI and PAYE on or before 30 th October are eligible for furlough and can carry out duties which are set out in the Companies Act 2006. Where a Director is required to carry out duties, they must not do no more than would be judged as reasonably necessary for the purposes as defined in the Companies Act 2006.

A furloughed Director must not do any other work of a kind they would normally do “to generate commercial revenue or provide services to or on behalf of their company”.

Where a Director carries out work that is deemed as more than reasonably necessary then this will be deemed as hours worked for which you will not be able to claim for.

The cap of £2,500 still applies and the Director will receive 80% of their normal wages for hours
carried out in excess of the Companies Act 2006. The scheme does not extend to dividends.


Can I furlough employees that were not originally furloughed back in March?

Yes, you can utilise the extended furlough scheme for employees that have not previously been furloughed providing that they are on the RTI and PAYE payroll on or before 30 th October 2020.


Can we furlough a TUPE employee that has recently transferred to the company?

Yes, you can furlough the employee/s providing that either the TUPE or PAYE business succession
rule apply to the change in ownership.

The employees being claimed for should have been:

  • transferred from their old employer to their new employer on or after 1 September 2020
  • employed by either their old employer or new employer on 30 October 2020
  • on a PAYE Real Time Information (RTI) submission to HMRC, by their old or new employer
    between 20 March 2020 and 30 October 2020


How long has the furlough scheme been extended for?

The Government have extended the Coronavirus Job Retention scheme until the end of April 2021.

The Government have confirmed their percentage contribution will remain at 80% for the duration of the extended furlough scheme.


Can an employee work during furlough?

Yes, this is called flexible furlough. During the hours that are being recorded as furlough the employee will not be able to carry out work for you. However, for hours not recorded as furlough you can agree with the employee to work short days/hours. You must pay them for any hours worked which you will not be able to claim back.

The Government will only pay the 80% for hours not worked up to a maximum of £2,500 per month.


Can an employee work for another company whilst on furlough?

An employee can work for another employee during furlough without it affecting their eligibility for the furlough scheme. However, you may want to think about your company policies at this time, such as requesting the employee to seek permission before seeking second employment and ensuring they are not working for a competitor or a partner company.

You should express to the employee that they must be available to return to work immediately should the company request. They should also be informed that their new role must not interfere with the company.


Do we have to contribute to the Government’s 80% for hours not worked?

No, this is at the complete discretion of the employer and you are under no obligation to top up an employees wages.


What do we have to pay?

The employer must pay the employee for hours worked but this cannot be claimed back from the Government.

The employer must also pay National Insurance and pensions contributions, this is calculated on the full pay the employee will receive including the grant payment.


Do we have to get the employees agreement to be placed on furlough?

You will need to obtain the employees agreement, and this must be done in writing. If the employee doesn’t agree to being placed on furlough and you have no/minimum work available for them, you can place them on lay off or short time working providing this is within their contract of employment.


Why do we need to obtain the employees agreement?

This is a temporary change to their terms and conditions so normal legislation applies. This is also because HMRC may want you to prove that this agreement was in place, preventing furlough fraud.

Any agreement for furlough or flexible furlough is only valid providing it has met the eligibility criteria set out above. Retrospective agreements up to 13 th November may be relied upon for the purpose of the claim.

You must keep a record of the agreement on file for 5 years.


Does the company have to seek permission to pay 80% of the employees’ wages?

Whilst an employee is not required to provide a written response to your agreement, the usual employment legislation applies and we would advise that you obtain their agreement to pay 80% of their basic salary as this is a temporary change to their terms and conditions of employment.


Do we need to keep a record of the amount of hours worked and number of hours furloughed?

All employers must keep a record of the number of hours worked and the number of hours spent on furlough for each employee. This must be kept on record for 6 years and be made available to HMRC should they request it.


Do we have to furlough all our employees to be eligible for the scheme?

No, you do not need to place all of you employees on furlough to be eligible for the scheme. However, if you are only selecting a few employees then you must take into consideration protected characteristics as equality and discrimination laws apply. You should follow a fair selection process. If an employee feels they have been unfairly selected this could lead to discrimination claims.


How long can an employee be on furlough?

There is no minimum furlough period for flexible furlough or furlough however the claim period must be a minimum of 7 calendar days.


Can an employee currently on sick leave be furloughed?

If an employee is on sick leave or is self-isolating due to Coronavirus, then they shouldn’t be placed on furlough as the scheme is not intended for short-term absences from work due to sickness.

If an employee is on sick leave and there is little or no work available, then you can place the employee on furlough. You must still get this agreement in writing.

However, employees who are on long term sick or shielding themselves in line with public health guidance can be placed on furlough. This means employees who are clinically extremely vulnerable (for example, due to organ transplants, lung cancer, going through radiotherapy, severe chest conditions or immunosuppressed conditions (full list on NHS website) and those who have been notified by the NHS to isolate).

It is likely this correspondence will be sent from the NHS to the employee via email. Employees that were notified of being clinically extremely vulnerable during the first lockdown will be notified again, you should consider allowing these employees to work from home even if they haven’t received notification from the NHS just yet.


An employee has become sick whilst on furlough, what should we pay them?

The employee can remain on furlough and continue to receive 80% of their wages for hours not worked, however this is up to the employer. The employee still has a statutory right to be paid Statutory Sick Pay or a contractual right to company sick pay (if applicable).

If you remove an employee from furlough and pay them SSP, you will no longer be able to claim for their furloughed salary.


When is sick pay payable to an employee that absent from work due to self-isolation?

For periods of self-isolation or shielding Statutory Sick Pay is payable from the first qualifying day providing that the employee is absent from work for at least four days.

The qualifying day is a day the employee usually works.

You may be able to claim back two weeks of SSP from the Governments SSP rebate scheme for employees that go on sick leave due to Covid-19. You should check your eligibility on the Government website.


Can an employee that is staying home due to caring responsibilities caused by COVID-19 be placed on furlough?

Yes, the employee can be placed on furlough. This includes employees that are experiencing childcare issues as a result of a school closure due to Covid-19 or local restrictions imposed.


Can an employee returning from statutory leave be furloughed?

If the employee is on statutory leave such as maternity, paternity, shared parental, adoption leave unpaid leave, bereavement leave which started before 10th June 2020 and they returned after 10 th June 2020 they can be furlough providing:

  • You have submitted a claim for any other employee between 1 st March to 30 th June for at least 3 consecutive weeks.
  • They were on the PAYE payroll on or before 19 th March 2020 and an RTI submission was made on or before 19 th March.


Can an employee end their maternity leave early to be furloughed?

An employee can end her maternity leave early providing she has taken the compulsory two weeks
[or 4 weeks if they work in a factory] straight after the birth of the baby and she must provide you
with at least 8 weeks’ notice to return to work.


Can an employee volunteer during furlough?

A furloughed employee can take part in volunteer work providing that it’s not for their employer. You may want to consider writing to the employee confirming they need to gain permission before they start volunteering.


The company cannot afford to pay 80% of the employee wages before receiving the funding. What can we do?

The company could think about changing the pay date to reflect the first furlough payment; however, this should be done by seeking employees’ permission in writing prior to implementing this. Be honest with your employees, inform them of the situation and that this is only a temporary measure.


How do we calculate 80% of pay for employees not previously on furlough?

Were an employee has not previously been on furlough their wages should be calculated in the
following way:

  • Employees on a fixed salary (annual salary) will be paid 80% of their wages from the last pay period ending on or before 30 th October 2020.
  • Employees whose pay varies will be paid 80% of their average pay between 6 th April 2020 and the day before the extension of the Coronavirus Job Retention Scheme begins being 1st November 2020.


How do we calculate 80% of pay for employees previously placed on furlough?

Were an employee has previously been placed on furlough their wages should be calculated in the
following way:

  • Employees on a fixed salary (annual salary) will be paid 80% of their wages from the last pay
    period ending on or before 19 th March 2020.
  • Employees whose pay varies will be paid 80% of the higher of:
    • their average wages payable pay between 2019 to 2020 tax year
    • Their wages earned in the corresponding calendar tax year 2019 to 2020


Do we have to pay Minimum Wage employees 100% of their wages during furlough?

You can pay 80% of their wages during furlough even though this will bring them below minimum wage. This is because the employee must be paid minimum wage for the hours they work and during furlough they’re not working. When the employee returns to work, they must be paid their usual pay.


How will annual leave be affected - eg if someone has leave booked in December, should this be cancelled?

If an employee has annual leave booked and are placed on furlough, you can ask them to take this leave. The employee can ask to cancel their annual leave, but they should give you notice at least the same length of their holiday request. For example, they have 1 week booked for they should give you one weeks’ notice.

The employee can remain fully furloughed during a period of annual leave and you will be able to claim 80% of this back but you must top up their wages to 100% whilst on holiday.

Where an employees’ wages vary their holiday pay must continue to be calculated on an employees’ average wage over the last 52 weeks.

An employee should not just be placed on furlough for a period of annual leave.


Can we enforce a period of annual leave whilst the employee is on furlough?

An employer can enforce a period of annual leave for their employees that are already on furlough, you must give twice as much notice as the length of the holiday. For example, you want them to take one week, you will need to provide two weeks’ notice.

The Government have stated you will not be able to utilise the scheme if your employee is not already on furlough and you intend on enforcing a period of annual leave in order to claim 80% of this period back from the furlough scheme.

You must pay your employees 100% of their pay during annual leave but you can claim back 80% of their pay as it is deemed as hours not worked.


Can an employee carry over annual leave to the next holiday year?

Due to changes in the Working Time Directive regulations 1998, (amended to The Working Time (Coronavirus) (Amendment) Regulations 2020) all employees are entitled to carry over their annual leave for the following:

  • A maximum of 4 weeks leave can be carried over to the following two leave years.
  • A maximum of 1.6 weeks can be carried over to the following leave year.

The usual rule of ‘don’t use it you lose it’ does not apply.


An employee’s fixed term contract is coming to an end can we extend their contract and place them on furlough?

The employer can extend the employment contract and place the employee on furlough. You should discuss this with the employee prior to committing to this. Should the contract be extended to allow the employee to go on furlough then this should only be done for as long as necessary.


Can an employee that has been made redundant be brought back and placed on the furlough scheme?

Yes, providing they were on the payroll and RTI by 23 rd September and their employment ended after this date.

You must have made and RTI submission between 20 th March and 23 rd September to qualify.

You will need to write to the employee and confirm that their length of service hasn’t continued, and they will remain on the PAYE for the purposes of utilising the furlough scheme and they won’t be required to carry out any work for the employer and their employment will end once the scheme comes to an end.

If you do not have this agreement in writing it could complicate matters once the scheme comes to an end.

If you have made an employee redundant and you place them on flexible furlough and request that they carry out work for you during this period they could argue that the redundancy process wasn’t genuine or fair and potentially make a claim to the tribunal.


Can we use the furlough scheme to pay notice?

For any notice period carried out prior to the 1 st December 2020 you can utilise the furlough scheme to pay contractual or statutory notice.

You cannot utilise the scheme to claim for any notice periods on or after 1 st December 2020.


Will HMRC publish employer names for those that have utilised the furlough scheme?

Yes, for those that have made a claim under the CJRS from December onwards will have the
employer name and employer registration number made public on HMRC website.


This information is dated 22/01/2021. Please be aware there are regular Government updates on this topic and guidance is constantly changing which may render information given invalid. This guidance is provided without prejudice or liability.



The team at Honest Employment Law Practice are happy to help if you require further information on furlough and the Coronavirus Job Retention Scheme - please contact the team us via our website our call us on 01543 431050.