25 September 2020

Please note, the Coronavirus Job Retention (Furlough) Scheme has been extended until September 2021 and this note is no longer being updated. Please refer to our new note for guidance on the extended scheme from November onwards.

The Coronavirus Job Retention Bonus will not be paid in February 2021. However the Government has announced that a ‘retention incentive’ will be ‘deployed’ at an appropriate time.

Due to the extension, the Coronavirus Job Support Scheme has been postponed until further notice.

The Coronavirus Job Retention Scheme was introduced in March 2020 to help employers avoid the need to make immediate mass redundancies as a result of the impact of COVID-19. Since then we have seen new announcements in relation to the operation of the scheme and have been inundated with guidance and updates to guidance as well as a series of Treasury Directions.

The Directions were issued on 15 April, 20 May and 25 June respectively. Each Direction issued updates the previous version. The Directions set out the legal framework for the scheme and are intended to have legislative effect. It is therefore likely that, where there is ambiguity between the Directions and the various pieces of employer guidance, the Directions will take precedence. That said, HMRC has stated in open correspondence that whilst it will act in accordance with the Directions, its interpretation of the Directions is set out in its guidance and that it expects employers to look to the guidance in the first instance when seeking to understand the operation of the scheme. This should give employers some comfort when relying on the guidance. Links to all key pieces of guidance and the Directions can be found at the end of this briefing.

As the scheme is now closed to new joiners (bar a few exceptions – see below), this note focuses on key points for employers using the scheme from 1 July until its closure on 31 October 2020. If you wish to refer to our previous guidance note which contains information which was relevant for employers at the start of the scheme, for example, on who was eligible for furlough, you can access it here although please note that our original note is no longer being updated.

Restrictions on who can be furloughed from 1 July 2020

The scheme is now closed to new entrants. This means the scheme is only be available to employers who have previously used the scheme and in respect of employees who have already been furloughed for a period of at least three consecutive weeks ending on or before 30 June. One key exception is that employers may furlough employees for the first time if they are returning from a period of family leave, for example, maternity or shared parental leave, after 10 June. Similar provisions apply to military reservists returning from a period of active duty and employees who TUPE-transferred to a new employer after 10 June. Where an employee who falls into one of these exceptions is being furloughed for the first time you will need to agree this with them and record the agreement in writing – please refer to our original guidance note available here for information as to how to do this.

An additional point to note is that the number of employees an employer can claim for in any claim period post 1 July cannot exceed the maximum number it has claimed for under any previous claim under the existing scheme, although this may differ if you have any employee returning from statutory family leave or a returning military reservist (see below).

Overview of how the scheme is operating from 1 July

When the scheme was first introduced, one of the main eligibility requirements was that employees could not carry out any work for their employer whilst on furlough. Furlough periods were for a minimum of three consecutive weeks and work was widely defined and meant that any employee on furlough was prohibited from providing any services or generating any revenue for their employer or for a linked or associated organisation. The Directions arguably went further stating that the employee must cease ‘all work’ in relation to their employment.

Exceptions to the ‘no work’ rule

The guidance makes it clear that employee and union representatives can carry out their duties and activities in relation to individual and collective representation of employees and workers whilst they are furloughed, as long as they do not provide services to or generate revenue for their employer. This will be particularly relevant to employers considering the need to commence or continue TUPE or redundancy consultations. In addition, any statutory duties that furloughed company directors are required to undertake by virtue of their office will not count as work for the purposes of the scheme.

Furloughed employees can also take up work for another employer whilst on furlough provided their contract of employment allows them to do so. If you anticipate that furloughed employees will take up work elsewhere, make sure you address this in your furlough agreement with the employee so that any new role does not hinder you when asking an employee to return to work.

Employees can also take part in volunteer work (although they cannot volunteer for their employer in the same or a different role) and engage in training whilst on furlough. The guidance states that the purpose of any training must be to improve an employee’s effectiveness in the employer’s business, or to improve the performance of the employer’s business. The Directions confirm that any such training must not provide a service to the employer or the employer’s business activities or contribute to the business activities of the employer or anything generating income or profit for the employer. Further, the training should not (to a ‘significant degree’) directly contribute to the production of any goods the employer intends to supply (as part of the making of such goods or services) or to the supply of services for which any form of consideration is received by the employer. If the training is compulsory employers will need to make sure the employee is paid at least the National Living/Minimum Wage for time spent undertaking it.

From 1 July, the scheme was changed and, in addition to the above, employers are now able to bring furloughed employees back to work for any amount of time and on any shift pattern, whilst still being able to claim under the scheme for the balance of the employee’s normal hours which are unworked (with the employer paying for hours that are worked). This is known as ‘flexible furloughing’. Please see below for further details about how flexible furlough works.

How does flexible furloughing work?

The government recognised that employers were finding the total ban on work for furloughed employees overly restrictive as employers often had some work for an employee to do but not enough to allow them to fulfil their normal contracted hours. The scheme was therefore changed to allow employers to bring a furloughed employee back to work for any amount of time and on any shift pattern, whilst still allowing them to remain on furlough for the balance of their normal hours which they do not work. This means employees may work some full days or part days and be furloughed the remainder of the time. It will still be possible to fully furlough employees (i.e. have employees performing no work at all) and/or have a mix of employees on full furlough and flexible furlough.

There is no minimum or maximum number of hours that can be worked but employers will need to agree arrangements with the employee (or in certain circumstances reach a collective agreement with a trade union), and keep a written record confirming the new furlough arrangements. As such, if changes to existing arrangements for those staff currently on full furlough are to be made, these will need to be confirmed in writing. Flexible furlough agreements can last any amount of time (subject to furlough leave ending on or prior to the scheme’s closure date of 31 October 2020) and employees are free to enter into flexible furlough agreements more than once. This gives employers significantly more options in terms of rotating staff on and off of furlough.

The employee’s consent will still be required to vary their terms of employment as part of any furlough arrangements, or employers risk claims for unlawful deductions from wages, unfair dismissal, breach of contract and/or redundancy payments. Any commitments made by the employer in the flexible furlough agreement should be made subject to future changes in guidance. Employers should reserve the right to revisit levels of payment and benefits preserved if the terms of the scheme or the circumstances in general change as well as reserving the right to require employees to return to work or to work additional and/ or fewer hours on a temporary or permanent basis in line with business needs. 

The rules summarised above as to what an employee is and isn’t permitted to do during furlough will continue to apply during any periods of time they are furloughed.

When claiming for a grant under the scheme, employers will need to report and claim for a minimum period of a week (other claim periods are also expressly permitted). In line with the reason behind this change to the scheme, this would appear to allow employers to potentially vary any hours worked by staff on a weekly basis.

For worked hours, employees will need to be paid by the employer as per their employment terms and conditions (which we believe, could in theory, also be varied with relevant consent).

Selecting who to keep on furlough and/or flexible furlough

It is for the employer to decide how it wishes to manage its furloughed employees on an ongoing basis until the end of the scheme. In some cases the job role will determine who is selected but, if you need to choose between employees (for example, because there is less work to do as opposed to no work to do), you should be careful not to discriminate when selecting, for example, by choosing to furlough women on the assumption that they cannot work because of childcare responsibilities. Employers may be able to justify giving preference to employees in vulnerable groups because, whilst potentially discriminatory, given the circumstances, this is likely to be objectively justifiable. When working up new work patterns, consider asking for volunteers for furlough or to return to work if that is appropriate – whilst making no guarantees that they will be selected. As you start to bring people off furlough and/or to operate flexible furlough be careful to sense-check your decisions to ensure you are not inadvertently discriminating against anyone involved.

How much will an employee receive a under the scheme and what can an employer now claim back?

Furloughed employees will be entitled to receive to receive the lower of 80 per cent of their wages or £2,500 for the duration of the scheme. As workers are only entitled to the National Minimum Wage (or equivalent) for hours they are working, furloughed workers can be paid the lower of 80 per cent of their salary or £2,500 (unless they are training – see below) even if this will take them below the appropriate minimum wage if based on their usual working hours.

Up until 31 July 2020, employers were able to claim back this sum plus employer NICs and pension contributions for employees who were on furlough. However, from 1 August, employers have had to contribute to the costs of their staff whilst they are on furlough with this contribution increasing each month until the end of the scheme. The employer’s contributions are as follows:

  • From 1 August, the government continues to pay 80 per cent of wages up to a cap of £2,500 but employers are required to pay employer NICs and pension contributions.
  • From 1 September, the government pays 70 per cent of wages up to a cap of £2,187.50 and employers need to pay 10 per cent of wages to make up the 80 per cent total up to the £2,500 cap plus employer NICs and pension contributions.
  • From 1 October, the government pays 60 per cent of wages up to a cap of £1,875 and employers need to pay 20 per cent of wages to make up the 80 per cent total up to the £2,500 cap plus employer NICs and pension contributions.

In each case the cap will be proportionate to the hours not worked as part of any flexible furlough arrangement.

Employees with more than one employer can be furloughed from one or both jobs and each employer can claim up to £2,500 per month (or any reducing cap from September onwards) for the employee.

How does an employer calculate how much they can claim for each employee?

Identifying the pay period

Claims are calculated with reference to what an employee earned in the specified pay period – this pay period does not change regardless of when the employee is furloughed. The guidance differentiates between fixed-rate employees (essentially those paid an annual salary although the definition is more nuanced see our briefing for employers on the Treasury Directions) and those whose hours of work vary. For fixed-rate employees, salary in their last pay period prior to 19 March 2020 should be used as the basis for the calculation. Employers who had already calculated their claim based on the employee’s salary as at 28 February (the date contained in the initial iteration of the guidance) can choose to still use this date for their first claim. For those with variable pay, where an employee has been employed for 12 months or more the employer can claim for the higher of:

  • the same month’s earning from the previous year; and
  • the average monthly earnings for tax year 2019/2020.

Where an employee has worked for less than a year, the employer should claim the average monthly earnings since they started work until the date they are furloughed or, if they have been employed for less than a month, a pro-rata amount for their earnings so far.

Helpfully the guidance states that employers should choose the calculation they think best fits the way an employee is paid and that HMRC will not decline or seek repayment of any grant based solely on the particular choice of pay calculation, as long as a reasonable choice of approach is made.

What payments can be included in the claim?

The amounts for which an employer may claim do not make for an easy read and the terminology in the guidance has changed on several occasions. To add to the complexity, the Treasury Directions also contain detailed information on this. What follows is an overview of the position but we suggest that specific legal advice is taken as there are some remaining uncertainties.

The guidance provides that, with reference to the pay paid in the pay period (see above), employers can claim for any regular payments the employer is obliged to pay their employees (subject to the cap). Details of what constitutes ‘regular payments’ has varied in the different iterations of the guidance. The current guidance Steps to take before calculating your claim using the CJRS includes the following information and states that when calculating 80 per cent of the employee’s wages, the employer should use ‘regular payments’ which the employer is ‘obliged’ to make including:

  • regular wages
  • non-discretionary overtime
  • non-discretionary fees
  • non-discretionary commission payments
  • piece rate payments

The same guidance stipulates that employers cannot include the following:

  • payments made at the discretion of the employer or client (where there is no contractual obligation to pay) including tips (including those distributed through troncs), discretionary bonuses and discretionary commission payments
  • non-cash payments
  • non-monetary benefits (eg benefits in kind)

Benefits provided through salary sacrifice schemes (including pension contributions) should also not be included. Employers should continue to maintain these benefits during any period of furlough, to avoid breach of contract claims, unless the employee agrees otherwise as part of the furlough arrangements. HMRC has agreed that COVID-19 counts as a ‘life event’ which could warrant changes to salary sacrifice arrangements subject to contractual arrangements between employer and employee being updated accordingly.

The Treasury Directions define ‘regular’ – please refer to our briefing for employers on the Treasury Directions for further detail on this.

The approach an employer should take towards non-discretionary payments including non-discretionary overtime payments has been clarified. When determining, for the purposes of a claim, whether a payment to an employee is non-discretionary, employers should only include payments that they are contractually obliged to pay and to which the employee has an enforceable right. If variable payments are specified in a contract and those payments are always made, then they may be non-discretionary and therefore should be included in the calculation.

Where an employee has been paid variable payments due to working overtime, the employer can include these payments in the 80 per cent calculation, as long as the overtime payments were non-discretionary. Payments will be non-discretionary if the employer is contractually obliged to pay the employee at a set and defined rate for the overtime they have worked. It appears that this would apply to voluntary overtime in a number of instances.

The Treasury Directions issued on 20 May and 25 June also include further details of non-discretionary payments, which includes payments ‘made in recognition of the employee undertaking additional or exceptional responsibilities’ and payments ‘made in recognition of the circumstances in which the employee undertakes the employee’s duties or time when they are undertaken’.

Claims should start from the date the employee starts furlough – not the date the decision is made to furlough nor the date the employee is written to confirming furlough status.

Claims for employees returning from statutory leave, for example maternity leave, should be calculated with reference to their full salary and not the pay they received whilst on leave. 

Payments made to the furloughed employees will be taxed in the usual way. Employers can top up the payments to up to 100 per cent but will not be able to recover top up amounts. Furloughed employees must receive no less than 80 per cent of their reference pay (subject to the cap of £2,500) and all of the grant received must be paid to the employee in the form of money. Employers may not net off any of the grant to pay for the provision of benefits or a salary sacrifice scheme nor must they reduce the wages by way of administration charges, fees or other costs.

The Apprenticeship Levy and Student Loans should continue to be paid in the usual way – the scheme does not cover these.

Employers will have to calculate the correct amounts to be claimed themselves and HMRC reserves the right to audit claims retrospectively. Claims cannot be made through HMRC’s online portal more than 14 days in advance of the claim end date. Employers must keep a copy of all records of claims made for six years, including the amount claimed and the claim period for each employee, the claim reference number, their calculations in case HMRC require more information about their claim and from 1 July, details of usual hours worked, including any calculations that were required for employees they have flexibly furloughed and actual hours worked for employees they have flexibly furloughed. Further details on how to submit a claim can be found in Claim for employees' wages through the CJRS.

Given that the guidance makes clear that HMRC will retain the right to retrospectively audit all aspects of an employer’s claim, and given that the grants made under the scheme will ultimately be funded by the tax-payer, it makes sense for employers to document the impact and challenges they were facing as a result of coronavirus when making the decision to furlough employees.

Employers are advised to keep very careful records as HMRC will be checking claims and payments may be withheld or may need to be repaid if a claim is found to be based on dishonest or inaccurate information or is found to be fraudulent. In addition, HMRC has put in place an online portal for employees and the public to report suspected fraud in the scheme and we are aware that there have been a significant number of such reports being made.

How to calculate and make a claim from 1 July onwards

From 1 July, claims must start and end within the same calendar month. This is to reflect the fact that the sums that can be claimed under the scheme will be changing each month from July onwards through to the end of October. Whilst it is possible to make more than one claim per month, each claim must be for a minimum period of seven days.

The only exception to the minimum seven day claim period is if an employer is making a claim for the first few days or the last few days in a month and they have already claimed for the period immediately preceding it or following it but in this case any such claim must include the first or last day of the month (as appropriate). The Direction issued on 25 June refers to these periods as ‘orphan periods’.

The guidance and the Direction issued on 25 June set out very detailed and complicated rules for calculating claims. There are different calculations depending on how employers have categorised their employees as working fixed or variable hours (see ‘Identifying the pay period’ section above). In each case, the calculation involves ascertaining an employee’s ‘usual hours’ to compare against the actual hours they work during any furlough claim period.

For employees who are contracted to work a fixed number of hours and whose pay does not vary according to the number of hours they work, the calculation for working out ‘usual hours’ is broadly as follows:

  • start with the hours the employee was contracted to work at the end of the last pay period ending on or before 19 March 2020 (the Direction issued on 25 June confirms that for salaried employees, their ‘usual hours’ are those set out in their contract of employment);
  • divide this number by the number of calendar days in the repeating work pattern, including non-working days (so if an employee was contracted to work 37 hours a week they would divide 37 by seven)
  • multiply this number by the number of calendar days in the pay period (or partial pay period) they are claiming for (eg 31 days for a claim period of the whole of July) (there are some helpful additional provisions set out in the Direction issued on 25 June where the first and last days of a claim period do not correspond exactly with the first and last calendar days of a single salary period); and
  • round this number up to the next whole number to get the ‘usual hours’ figure (in this example (37/7) x 31 = 163.8 rounded up to 164).

The requirement to use calendar days as opposed to working days can lead to some odd results so calculations will need to be carried out with care.

If an employee with fixed hours was on annual leave, off work sick or on statutory family leave at any time during the last pay period ending on or before 19 March, the usual hours should be calculated as if the employee had not taken that leave.

For employees with variable hours, their ‘usual hours’ will be the higher of either the average number of hours worked in the tax year 2019/2020 or the corresponding calendar period in the tax year 2019/2020. When calculating ‘usual hours’ for variable hours employees, employers should include any hours of leave for which the employee was paid their full contracted rate (such as annual leave) and any hours worked as overtime, provided pay for those hours was not discretionary.

Specific guidance is available for employers to calculate usual hours where an employee works on ‘flexi-leave’ ie is awarded time off in lieu for additional hours worked. In that instance the employer should count, as hours worked, the hours that that the employee took as paid time off (ie the hours taken as time off in lieu) and not the actual additional hours worked to accrue the paid time off.

The government has set out a number of worked examples to assist with these calculations and has also updated its calculator, see Examples of how to calculate your employees' wages, national insurance contributions and pension contributions. Whilst these examples are illustrative, the onus is very much on employers to make correct calculations, particularly as the guidance makes it clear that when claiming for employees who are flexibly furloughed, employers should not claim until they are sure of the exact number of hours they will have worked during the claim period.

As such, employers are going to need to work out and record their employees’ normal working hours and their furloughed hours very carefully before they calculate and make claims. Given the complexity of the calculations required, employers are going to need to work closely with their payroll teams/providers to ensure that any claims submitted are accurate and in line with the Direction issued on 25 June and accompanying guidance.

Whilst such calculations may be more manageable for smaller workforces, larger employers are likely to face an onerous task in correctly calculating each employee’s usual and actual hours worked. Given these significant extra complexities and the increasing employer contributions that are now required under the scheme, it remains to be seen whether more employers may now move forward more quickly with any redundancy exercises they might have been considering.

The Direction issued on 25 June makes clear that from 1 July, all employees on furlough will, in effect, be on a flexible furlough arrangement. This means that employers will need to carry out the additional calculations referred to above, save where employees are on ‘full furlough’ for the whole of a claim period. Where employees are rotated on or off furlough during a claim period (for example on a weekly basis throughout a chosen monthly claim period), an employer will still be required to carry out the new flexible furlough calculations.

The only way to avoid these calculations would be to align rotational furlough periods with claim periods – given that this is likely to mean making multiple claims per month, any administrative advantages of this approach could potentially be minimal.

Family leave and furlough

Employees on maternity and other types of family leave will remain on that leave unless the leave comes to an end in one of the usual ways. The normal rules for maternity and other forms of parental leave and pay apply. An employer can claim through the scheme for enhanced contractual pay for employees who qualify for maternity, adoption, paternity and/ or shared parental pay. This means that those on family-related leave can be furloughed but that claims for wage costs are limited to any enhancements to statutory entitlements (which will still be subject to the 80 per cent cap). The guidance provides links to assist employers with calculating an employee’s average weekly earnings in circumstances where that employee was furloughed, and then began a period of family leave on or after 25 April 2020.

New regulations, introduced separately, mean that furloughed workers who take paid family-related leave on or after 25 April 2020, will have their statutory maternity pay, paternity pay, shared parental pay, parental bereavement pay or adoption pay based on their pre-furlough normal weekly earnings during the eight week reference period used for calculating the statutory pay even if some or all of this reference period falls during a time when they were on furlough (and so on reduced pay).

Continuation of employment rights and benefits during furlough

A furloughed employee will have continuity of service preserved and they retain their statutory rights so they will continue to accrue statutory holiday. It remains open to employers to seek to agree the suspension of accrual of non-statutory holidays and other benefits as part of the furlough agreement. Some benefits, like life insurance or permanent health insurance have annual payment dates and, if payment has already been made, employers may choose to preserve these during furlough. Other benefits represent an ongoing cost which some organisations may not be able to bear at the current time, so may seek to agree with employees that they are suspended during furlough.

Sickness absence and furlough

The guidance includes provisions for those who are off sick or who are self-isolating as follows:

  • the scheme is not intended for short absences from work due to sick leave so employees who are currently working who fall sick or who need to self-isolate should go onto sick leave and receive statutory sick pay (SSP) if eligible. An employee, who has previously been furloughed and who is on short-term sick leave or who is self-isolating can be furloughed if there are business reasons to do so. In this case, the employee should no longer receive sick pay and should be classified as a furloughed employee, the employer having adhered to the usual furlough process including obtaining the employee’s agreement.
  • if an employee who was shielding cannot return to work safely and cannot work from home they can be furloughed provided they have already been furloughed previously. Please note that SSP is not available whilst shielding is paused.
  • an employee on long-term sick leave can also be re-furloughed – provided they have been furloughed previously. It is up to the employer to decide whether to furlough these employees. In our view, it may be difficult for an employer to justify a claim if you furlough an employee who is on long-term sick leave if that employee is not otherwise fit and able to return to work although you may want to seek legal advice as discrimination and other issues may arise.
  • if an employee becomes sick whilst on furlough they are entitled to be paid at least SSP (if eligible) but they would need to be moved off furlough to claim It is up to the employer to decide whether to move the employee onto SSP or to keep them on furlough at their furloughed rate of pay. If an employee who becomes sick is moved onto SSP then the employer can no longer claim for their salary through the furlough scheme. If the employer chooses to keep the sick employee on the furloughed rate then the employer remains eligible to claim for those costs through the furlough scheme. The decision the employer takes as to how to deal with an employee who becomes sick whilst on furlough is likely to depend on whether the employer is topping up the furloughed employee’s salary, whether they offer enhanced company sick pay and whether they are entitled to claim back SSP (smaller employers can claim an SSP rebate where an employee self-isolates or is unwell due to COVID-19). Further information on this rebate is available in our booklet COVID-19: a guide for employers. Again you may wish to seek specific legal advice in these circumstances.
  • The Treasury Directions issued on 20 May and 25 June, whilst not entirely clear, indicate that an employer and employee may agree to bring a period of sick leave to an end, in order to start a period of furlough. Please see our briefing for employers on the Treasury Directions for more information.

Can a furloughed employee take holiday?

The Guidance 'check if you can claim for employees' wages through the CJRS' and the Guide for employees to the CJRS confirm that employees can take holiday whilst on furlough leave. However, where an employee is on holiday during furlough leave, the employee should be paid at their normal rate of holiday pay (as required by the Working Time Regulations). The furlough grant can still be claimed whilst the employee is on holiday but you will need to top up as appropriate if you have reduced pay for furloughed employees (and you cannot claim for that top-up under the scheme).

If an employee is flexibly furloughed then any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours. However the guidance makes clear that employees should not be placed on furlough simply because they are taking holiday. That said, a previously furloughed employee who is required to quarantine following a holiday abroad, may be able to be re-furloughed under the scheme for the quarantine period, assuming they cannot work from home. Further information on the interplay between holiday and furlough (and additional information about temporary changes to the taking of holiday) can be found in our briefing on changes to holiday as a result of COVID-19.

Calculating statutory redundancy and statutory notice payments for furloughed employees

The guidance has always been clear that, whilst the purpose of the scheme was to help employers retain employees, employees can be made redundant whilst on furlough. Where furloughed employees have been given notice of termination, their employer can continue to claim under the scheme in respect of both statutory and contractual notice periods. Employers can therefore commence redundancy exercises and/or issue notices of termination of employment to employees on furlough and claim accordingly. However, the guidance is clear that employers cannot claim for redundancy payments under the scheme.

The government has also published new Regulations, The Employment Rights Act 1996 (Coronavirus, Calculation of a Week's Pay) Regulations 2020, effective from 31 July 2020, which seek to ensure that employees who are made redundant are not put at a disadvantage by virtue of the fact they have been furloughed. 

The Regulations are complex, however, in summary, they provide that where employees with normal working hours are on furlough (or have previously been furloughed) and are subsequently made redundant, any statutory redundancy payments (assuming the employee is otherwise eligible) should be calculated using their normal wages, as opposed to their reduced furlough pay. For employees who do not have normal working hours, calculations should be based on their average pay over the previous 12 weeks, albeit where the average takes into account hours when the employee was furloughed, pay for these hours should be based on the employee’s full rate of pay for such hours and not their reduced furlough pay.

The Regulations also apply to statutory notice pay. A previously furloughed employee who returns to work for their notice period should, of course, be paid at their normal rate of pay during their notice period. However the new Regulations mean that where an employee remains on furlough throughout their statutory notice period, the Regulations require that they receive their normal wages (or their normal average pay where they have variable working hours) throughout this period, as opposed to the reduced furlough pay. In the event an employee’s furlough is brought to an end and they return to work part way through their notice period, any furlough hours that fall within the relevant reference period for calculating a week’s pay will count towards their normal working hours and any reduction in pay for those furlough hours would be disregarded. 

Whilst it seems counter to the government’s intention that employees are not treated less favourably by virtue of having been furloughed, the Regulations do not appear to offer any protection in respect of notice pay for those employees with contractual notice periods of at least one week longer than the statutory minimum. This is due to an anomaly under existing provisions in the Employment Rights Act 1996 which these Regulations do not address.

This means that, subject to how the furlough agreement has been worded and to any intact provisions in the contract of employment, the weekly pay for the purposes of notice for an employee in this position would be calculated by reference to the lower furlough rate of pay. It is however worth considering potential reputational issues which may arise in this instance so you may wish to take legal advice if you are in this position. In any event employees who fall into this category would, however, still benefit from the more favourable calculations in respect of any statutory redundancy payment.

The protection under the Regulations only applies to those employees who have been receiving a reduced salary for a temporary period due to being furloughed and, to the extent any employees have agreed permanent contractual changes to their pay (or changes that last beyond any period of furlough), their statutory notice and statutory redundancy pay would be based on their contractually agreed pay. 

Job Retention Bonus

The government has announced that it will pay a one-off bonus payment of £1,000 to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021. To qualify, employees must earn above the Lower Earnings Limit of £520 per month on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021 and must not be serving contractual or statutory notice that started before 1 February 2021. The bonus will be paid from February 2021. You can read our guidance for employers on how the new scheme will work here.

The government also announced that it will make a payment to employers in England for each new apprentice they hire from 1 August 2020 to 31 January 2021. The payments of £2,000 for each new apprentice aged under 25 and £1,500 for each new apprentice aged 25 and over, will be in addition to the existing £1,000 payment the government already provides for new 16-18 year old apprentices.

Overclaiming of grants

The government has released a short guidance note to help employers who have claimed too much under the scheme to rectify the situation. Information is given as to how employers can repay HMRC if they have over-claimed and time limits for reporting errors apply.

Notification of mistakes to HMRC

HMRC has the power to recover amounts of grants that have been incorrectly claimed, and if HMRC is not notified, there could also be penalties. These are subject to the normal rules for penalties for failure to notify but where employers are aware of a problem and do not come forward the penalty could be up to 100 per cent.

Given the changes in guidance and the complexity of the rules, many employers may have made some technical mistakes in applying for grants under the scheme, particularly given the need to operate at speed. It will therefore be prudent in all but very straightforward cases to review the amounts claimed and to make sure that any problems or errors are identified and can be corrected. Reviewing this and ensuring that any points on which the operation of the rules is unclear have been properly addressed should also help to protect against penalties.   

Common problem areas include:

  • the use in the Scheme of calendar days not working days where the claim is for part of a period
  • activities undertaken by an employee while on furlough (particularly if the employee is also a shareholder or in the case of company directors)
  • holiday and bank holiday pay and arrangements
  • interplay between family/ sick leave and furlough
  • identifying which elements of pay constituted ‘regular payments’ when calculating how much to claim
  • 'hangover' problems caused by the fact that until 5 June it wasn’t possible to correct errors for a previous period’s claim in the next claim

If you have overclaimed a grant and have not repaid it, you need to tell HMRC this, ideally, within the 'notification period'. This ends on (and is the later of):

  • 90 days after the relevant grant was received (if this was in excess of the correct amount);
  • 90 days after the date circumstances changed so that you were no longer entitled to the CJRS grant; or
  • on 20 October 2020.

This can be done in the next claim if a further claim is being submitted or otherwise will need to be done separately. If you do not do this you may have to pay a penalty. Once a disclosure has been made to HMRC any overpaid amount will either be assessed directly by HMRC or need to be adjusted for in the tax return for the period. HMRC have made clear that disclosure of innocent errors should not result in penalties provided the amounts are duly repaid, but that they will seek penalties for overclaims known to be incorrect or in cases where circumstances changed and HMRC should have been notified that the grant was repayable or taxable.

Next steps

With the scheme winding down, employers need to consider their position carefully as difficult decisions around redundancies and restructures may need to be made given that the future continues to remain uncertain. To assist employers in this position we have a webinar explaining more about restructures and redundancies which you can access here.

In the meantime for as long as you continue to claim under the scheme, keep a record of how you arrived at the amounts you are claiming together with the government guidance upon which you sought to rely so you are well-prepared in the event that HMRC raises any issues in relation to your claim.

We have been advising many employers on the issues arising out of this scheme as well as advising on redundancy and other programmes of cost-savings. If we can help your organisation, please contact Luke Bowery or any other member of our employment team. 

Links to the Treasury Directions and current government guidance:


This briefing gives general information only and is not intended to be an exhaustive statement of the law. Although we have taken care over the information, you should not rely on it as legal advice. We do not accept any liability to anyone who does rely on its content.

Key contact

Luke Bowery

Luke Bowery Partner

  • Employment
  • Restructuring and Redundancy
  • Equality, Diversity and Discrimination

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