What is ‘furlough leave’ and what do businesses need to know?

Covid-19 Advice | Employment & Skills | Latest News
Laura Kearsley

In an effort to keep the economy moving and safeguard UK jobs, the government announced it would be introducing the coronavirus job retention scheme as part of a package of measures to alleviate the impact of COVID-19 on businesses across the UK.

Laura Kearsley, partner and solicitor in Nelsons’ employment law team, explains how the new government scheme will work and what actions businesses need to take.

What is the coronavirus job retention scheme and who can participate?

The scheme will enable businesses to recover 80% of wage costs for employees on ‘furlough leave’ – which is an entirely new concept and is a new class of indefinite leave where the government will reimburse the employer for wage costs.

This has been introduced as an alternative for employers who might have otherwise implemented redundancies, lay-off, unpaid leave or other measures for their employees.

All UK businesses are eligible to claim under the scheme. It seems that employees will be covered, but not other workers (such as casual staff or contractors) or the self-employed.

The government has announced that the scheme is available for at least three months from 1 March 2020 and will be extended if necessary.

What costs can employers recover?

The coronavirus job retention scheme allows for 80% of wage costs to be recovered up to £2,500 per month per employee. There is no limit on the number of employees or the duration. Wage costs are expected to include wages, pension contributions and employer national insurance (NI) contributions.

What do employers need to do?

Employers and employees will need to agree the members of staff being designated as ‘furloughed workers’. This should be straightforward because this route will no doubt be more attractive to employees than redundancy, lay off, unpaid leave or a reduction in pay.

We are recommending employers send a letter or email to each employee concerned and get them to agree to the change in status formally in writing.
Employers will then need to submit details to Her Majesty’s Revenue and Customs (HMRC) through a new online portal, which is being set up urgently.

It’s also worth noting that employees cannot elect to be a furloughed worker without their employer’s agreement.

Does the employer have to top up the employee’s pay to 100%?

No, they do not. Some employers may wish to make up the shortfall, while others may not be able to. This just needs to be made clear to all employees concerned. We do recommend that each employer adopts a consistent approach.

What about employees that have already been dismissed or taken unpaid leave?

The scheme is backdated to 1 March 2020 and employers are urged by the government to take back anyone they had already dismissed and convert them to this leave instead. Likewise, with anyone who is on unpaid leave.

What situations will this not help with?

Furlough leave is recommended for anyone that would have otherwise been laid off or made redundant due to the impact of coronavirus on the employer’s business.

It does not help with any situations where employees had agreed to reduce their hours, or to a pay cut but where they are still required to work. There is currently no option to do a mixture of reduced hours and furlough leave.

How will this affect the employment status of employees?

The employees concerned will remain on the employer’s payroll and will continue to accrue holiday and service.

It is also important for businesses to acknowledge that this scheme may create resentment between employees.

Some will still be at work getting either full or reduced pay, while others will be on furlough leave getting paid at least 80% for doing nothing, and those who are off sick – as they are ill or self-isolating – may only be getting statutory sick pay (SSP), which at around £95 per week is likely to be less than 80% of full pay.

There will be an incentive for employees not to notify their employer if they become sick or need to self-isolate during furlough leave because of these adverse pay consequences.

Likewise, the employer will also be better off as they can only reclaim 14 days of SSP as opposed to indefinite furlough leave pay.

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72 Comments

  1. How is furloughed pay going to be calculated?

    I work between 20 to 40 hours every week but am only contracted to 8 hours a week.

    If its 80% of my contracted hours, i’ll only get £55 a week. If it’s 80% of my average monthly earnings, I’ll get about £220 a week.

    That’s a big difference in pay and until we know how its calculated, how can we agree to be furloughed?

    1. The government website (as at 26.3.20) says variable hour workers will be calculated on their average pay over the last 12 months, or from when they started work if less than 12 months. Your company should write to you requesting your agreement to be furloughed.

      1. I handed my notice in in Jan had to serve 3 months notice which is up at the end of april

        The new company cannot start me due to coronavirus what can I claim as I have a home to run

  2. Dear Laura
    Does wage costs include car allowances. The salary value of £37,500 equating to £2500 take home does not equate if pension and employer NI is included

    regards

    1. I would also like to know the answer to this. I have a company car which I also use for personal use, which they now want to take back while I’m furloughed. Is this correct that they can do this? As I’m technically still an employee

    2. £2,500 is gross £30k per annum) rather than net and includes any car allowance you previously got. You will not get anything above this unless your employer decide to add the other 20%. It will be subject to income tax, NI and pension contributions if applicable.

      Recommend speaking to mortgage lender, car finance company on the subject of payment holiday if required.

      There are also petitions doing the rounds for Councils to suspend payments during this time. Councils have withdrawn / reduced some services during this time so it is only right that charges are suspended or reduced accordingly to help everyone.

    3. So, I work seasonaly. March til October and have done this for the same company for four years. As a direct result of the virus I have lost my job but I am not covered by any of the schemes because I was not on the payroll at the end of Feburary. Any ideas?

  3. What help will self employed workers get . If your a driver for Uber taxis . There is no customers so not getting any money

  4. You refer to furlough, lay off and redundancy in one sentence implying a difference. What is the difference between furlough and lay off? If lay off is redundancy then why mention both in one sentence?

    1. New UK Furlough scheme = employer/government pay your wages while you dont work but you have a job to come back too once things are sorted. (Furlough happens in USA government when budget isnt agreed, but thats unpaid and forced)

      Lay off = temporary but could become permanent if things stay bad.

      Redundancy = permanent dismissed from job.

    1. I believe that holiday entitlement would still accrue because you are still employed – still on the company’s books.

  5. My employer is saying they will backdate furloughing us to the 1 March, even though we are still working now (24/03) in the office. Can they do that?

    1. Can you work for another employer while you’ve been furloughed with your present employer?

  6. my new employee has only been with me for 3 weeks. can I furlough her and claim the 80%
    she will be paid monthly

    1. I should be starting a new role next Wednesday in a nursery, contract signed, hours and pay agreed but now they are closing until further notice.
      I have resigned from my job as per normal notice, will I get furlough ??

  7. I have 2 jobs and 1 is going to furlough their workforce but the other is not – can I still work for my 2nd employer and receive the 80% wages from the 1st? I have been with both companies for over 10 years.

  8. If an Employer has not paid tax and ni for the last 6 months how would this affect the furlough scheme and would the employees get
    any pay? could you please reply to this question.

    thanks.

    1. I don’t have a lay off agreement in my contract which means I should get 100% of wages in times of down turn, etc. My company is only offering the 80% so are they in breach of contract

  9. We have employees who are contracted for minimum of 80 hours and paid by the hour not Salaried – does the 80% cover these employees or just Salaried Staff

    1. My son started with employer on 3rd March. He was employed without a break by someone else before that. Is he entitled to the 80%

  10. I’m confused. At the beginning of the article you suggest ( and this is how I read the hmrc info) that employers continue to pay 100% of salary and then claim 80 % back .
    Later you ask whether the employer can top up the 20 % lost by the employee. This cannot be consistent with the first statement.
    Many commentators suggest the 80% is claimed somehow by the employee but that’s not how I read it

  11. I’m now on furlough leave but have holidays booked in another week and told not to cancel them, should we cancel or get these back ?

  12. Will commission or car allowance be taken into account as wage?
    And will the £2,500 be max an employer is paid or does that include pension and ni so the employer will receive less?

  13. I am the director of a Ltd company and I am the only employee. I work as a locum clinician and am no longer able to work due to clinics being cancelled. Can I claim furloughed pay through my company?

  14. I leave my current job this Friday to begin new job on the 1st but the new company has put this furlongh in place for all employees will this include me?

  15. Can I just clarify that the calculation will be on gross pay. Suggested for weekly paid staff to use average earnings of last 3 months – so would this be gross pay?

  16. i require advice, i have a hair salon and I am a self employed kitchen fitter double wammy for me. I have had to shut the hair salon down which opened in october due to this virus which is right. I have 4 staff that I will hold on and they have all said that they are willing to wait until the government pay there wages upto 80%. 2 juniors that are at home and one staff member who can wait. the thing i have a problem is I have no money in the bank to pay there wages while we are shut and they want to come back when we reopen but have told the staff they will get it when the government pay it. do I still put the staff through the payroll every Friday as norma on ther contracted hoursl then claim the money back for them. please help there is no answers anywhere about this i am waiting for this corona relief portal to open on HMRC website when the government get it done to apply for there wages to be paid..

  17. I work as an administrator in a private care home. My children’s school only had 70 spaces for keyworkers, which my children didn’t get. I’m a single parent and my employer refused to let me work from home because of GDPR even though another department are allowed. I have been informed I have to take the time off as unpaid leave but how does that pay my bills? I requested furlough and my employer refused citing the business does not fall into the category of furlough as they are not at risk of closing.

  18. Will employers need to keep paying furloughed workers while they are not working or can they just pay them (including back payments) once the government releases funds to the employer

  19. I handed my notice in before things got into this state. My new employers Offered me the job and I confirmed acceptance of the position they agreed the start date of the 10th April. I accepted.

    But I have no contract as yet and they think I will not be able to get the furlough benefits.

    Where do I stand please

  20. I have seen a sample Furlough template that lays out the terms of the Furlough which tries to address the issue of the holiday that has and will accrue, and is worded as:

    “Whilst you are in the furlough period, you are required to take any holiday entitlement which has accrued and is outstanding as at today’s date and all holiday leave that accrues during your furlough period.”

    Since the Furlough period is likely to be substantial and could be extended even further, the amount of holiday that could be accrued by each employee could be substantial and could cause a problem for any organisation at the end of the Furlough period, also some people might be Furloughed whilst the “holiday year” rolls over resulting in unused holiday entitlement being lost.

    When Furloughed, should accrued holiday be paid in full or is it subjected to the same 80% salary reduction?

    1. Been fourloughed.
      No return date given. I have no contract of employment. Agree to this during Coronavirus outbreak only. My employer as drawn up a furlough leave agreement and it states when your furlough leave ends we endeavour to provide you with work, in the event of insufficient work being available you agree we are entitled to place you on short time lay-off without any pay except for statutory guarantee payments and/ or to follow the redundancy procedure. Can they put this clause in or can I refuse to sign

  21. Hello, I am paid a small basic salary and i top my income with commission due to my job. Please can you confirm how the 80% is calculated? I would also like to know if we still accrue holidays in the meantime?

    Thank you

  22. I have 4 jobs and 2 is going to furlough their workforce but the others is not – can I still work for my others employer and receive the 80% wages from the 1st? I have been with the companies for over 6 years.

  23. I have been put on furlough leave from today and advised I am loosing 3 days holiday a month is this correct?

  24. I have a company car with fuel allowance. will the cash equivalent be deducted from the amount I am paid whilst getting the furlough? If so can I return the car as obviously it won`t be using it?

  25. What if my employer does not take part in the furlough scheme and makes me work and there is not work what rights do I have

  26. I saw a similar question to this however no clear answer. Does anyone know if the 80% should include car allowance? I was on the understanding it would be 80% of current monthly take home including this however I have been told by my employer it is just basic salary. If they were to include it, the amount would still be less than £2500. Does anyone have any info at all?

  27. My contract ends on April 24th as I have children out off school that require looking after and my husband is a Paramedic I am assuming if the schools dont go back I will now not be able to get a new job until the current situation has stabilize.

    Can I apply for a furlough payment through my current employer? if so how do I go about this and what will it mean going forward?

  28. If I am placed on Furlough by my employer, can they flip flop me on and off Furlough over the course of the months. This is due to there being around 90 staff and they want to rotate us all.

  29. The big question is what do you need to do to qualify, not claim. All uk businesses can claim, but is it only businesses forcibly shut that will qualify? Really need clarification on this otherwise mass redundancies are likely.

  30. My partner and my brother are classed as high risk and has asked their employer if they can be placed on the furlough scheme. The business they work for (manufacturing sport/ motor homes) are still working as normal. Their employer has told them that they are not entitled to be placed on furlogh and that they should take either annual leave or unpaid leave. How do i find out if they can be placed on furlough and what they need to do.

    1. I work in a private nursery full time, so i am classed as a keyworker and we are open. However the very few keyworker parents of children have made other arrangements for their children so they failed to arrive, Because it’s a six mile round trip daily on public transport and social distancing won’t be understood of young children can i request to be placed on furlough.

  31. i have been laid off work due to my employer saying they dont have the cash flow to pay out the 80% and because they dont know when the government will be reimbursement them. When will company’s have access to the funds?

    1. My partner started his new job on the 9th of March and left his previous job on the 7th March. Will he get furlough from his new company?

  32. Am I entitled to furlough as my work was due to close down anyway in June? But obviously I am being laid off now due to Coronavirus! And I am loosing 2 months pay! And being a hairdresser I can’t even carry on working due to close contact with people

    Please help

  33. Dear Laura, I have been advised that from the 1st of April I will be furlough but I have annual leave booked from the 2nd for 2 weeks. Can I still have my leave at 100% and furlough after or do I ask to take my leave later in the year. Or can they advise they are only paying 80% of my holiday pay? Thanks

  34. I started work on the 2nd of March at a new job, and finished my previous job on the 26th of February, people are going to start being furloughed from next week and my employer has told me I won’t qualify for the scheme, what do I do? Should I actually be getting this scheme?

  35. We had a new member of staff start mid March 2020.

    I read that employers can only get the 80% reimbursement via the Coronavirus Job Retention Scheme for staff who started before March.

    If that’s true, what would happen to that member of staff if they have been told they can’t come into work?

    Because if company still pays them (even only 80%), they won’t be able to claim that back. If the company doesn’t pay them, is there any other kind of help available to the new member of staff?

  36. I started a new job on 3rd March 2020… business has dropped and it looks like I’m going to be laid-off shortly HOWEVER my employer has just told me that I won’t qualify for Furlough as I started too late – of course I did not anticipateanythung like this happening when I started my job!! Even though I’ve been in continuous employment since leaving Uni I 2005 I will have no support. Any advice would be appreciated…

  37. Our staff have all been asked (basically forced) to take a 10% pay cut to 90% to cover the costs so as to allow the furloughed employees to be paid 90% also. Can this be forced, are we giving up any rights by agreeing to it now for if/when things return to some semblance of normality?

    Clearly this situation could foster ill will, no one knows who will get the paid ‘leave’ yet and volunteers for 80% pay (whom a few of which I know would jump at the chance) aren’t being considered. Clearly half of the business could be due to be made redundant were this scheme not in place, but rather than doing that for the recently employed or surplus to requirements staff who currently serve no function (their business unit is no longer sustainable), the staff who are needed will be forced not only to continue to work for less, but to have that pay redirected to their colleagues rather than protect the business for the next leg down.

    I know the above may sounds selfish but I am genuinely interested in the legality and implications of anyone agreeing to the cut, how this fits with the rules of the scheme and so on. We don’t know yet who it will be, but for myself being on either side of the table I’d rather an 80/100 spilt.

  38. They’ve cleared up a lot of your questions here:

    https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme.

    It’s £2,500 gross maximum, as if you earned £30K p.a. then minus tax, NI and pension and divide by 12. Employers will also get employer’s NI and auto-enrolled pension contributions on top of the £2,500. Voluntary pension arrangements not included.

    Each job you were working in on or before Feb 28th is treated separately. You can work for 2 and be furloughed from the other 2.

    You continue to accrue holiday pay but you may need to take it at the reduced pay rate depending on your contract before the end of your holiday year or lose it – if you don’t take it, that’s your prerogative but often it is use it or lose it. Your company cannot force you to take holiday immediately nor the holiday that accrues in the meantime except at the end of your holiday year (use it or lose it), especially if it is already booked for November, say. But, always bear in mind that you want a company to come back to work for once this is over so be reasonable.

    Theoretically, the employers portal for the grants will be up and running and tied into the PAYE system for cross checking by April 30th.

    There are several government loan options available for firms with cash flow issues in the meantime it appears.

    Yes, you must actually pay your staff by bank transfer as you have entered their pay into the HMRC PAYE system. You, the employer, cannot hold back the money until the grant money is paid. See above about, essentially, bridging loans.

    All businesses having to force people not to work, for whatever reason, qualify as long as they didn’t close the business a couple of weeks ago or earlier. They can be taking more staff on like the supermarkets but having to shut other, non-essential, business areas down. Those staff can be furloughed.

    Unless you already have multiple employers on Feb 28th, you cannot work for anyone else, nor your employer, whilst furloughed. You can volunteer and do non-profit work.

    If you work for someone else, whilst furloughed, all govt grants for your pay to your current employer will cease and be clawed back, if necessary to the start of your new employment.

    If an opportunity comes for you to not be on furlough, i.e. it’s safe to come in to work or you can work from home and there are things they need you to do then you are not on furlough for the duration of that work and are entitled to full pay by your employer but no govt grant for that period. This will be declared through the employers’ portal and confirmed through PAYE and your payslip. If you are not paid your full pay, this is fraud unless you agreed in writing to a pay cut.

    Yes, sadly, it’s just your basic salary, no bonus nor commission nor fuel allowance, I’m afraid.

    No, you are not losing 3 holiday days a month – your company is wrong. Holiday pay is accrued normally.

    Your company can only bring you out of furlough to cover sick leave or someone who leaves the company so work is now available for your skills. They cannot flip-flop you.

    No car allowance, I’m afraid, just basic salary, or, on zero hours contracts, etc., an average of what you earned in a similar period or the last 12 montsh.

    Yes, employers MUST continue to pay employees through the standard PAYE system for them to be able to claim the grant.

    “I handed my notice in before things got into this state.” Sorry. Don’t think there’s anything for you now.

    “Classed as high risk” – sadly, you cannot ask to be on furlough as it has to be a business need. However, the employer has a duty of care to ensure employees’ safety so should enable work isolation or working from home for vulnerable employees. If this is not possible then their employer’s insurance could be invalidated if they force vulnerable employees to work in unsafe conditions. If a company’s insurance is invalid, no-one can work there, at all, just like you cannot drive a car without valid insurance.

    Agency workers employed as at 28th Feb and declared furlough by the company they were working for, not the agency, are eligible.

    Think that’s most of it.

  39. Hi, frustrated web searcher here hoping I can get some clarity… I had the same job over 10 years… last day was 06/03 with new job started 16/03 and it seems I do not qualify for furlough 🙁 is that right?

  40. I wondered if I run the payroll exactly as I have been through Sage this month, I use “Sage Instant Payroll” on other forums people have suggested that some software payroll providers have added in a “furlonghed” status to select. Sage has not done this and I am scared to run my payroll and submit RTI in-case I am supposed to do something with the software first before submitting and i null and void my furlough claim.
    I have written to employees advising them they are now “Furlongh”with their agreement to this.
    I understand that HMRC will have a direct portal nearing the end of April to apply to but do they need to be “Furlloghed” now via software?

  41. Once put into furlough as I have been what’s the minimum time I can be off is it 3 weeks like government have said or my bosses boss wants a couple of us back in after 2 days and thinks it’s ok as giving me 24h notice . But I could be put on it again next week ? What’s correct answer please

  42. My wife died 4 weeks ago not virus related. I am now finding it hard to get childcare can i apply for furlough and do my work have to give me it?

  43. Hi could someone answer a simple question on the 80% my pay over a 6 day week is £1956.50 gross before any tax or ni or pension payments will the payout be 80% of that or 80% of the £1551.52 nett after tax and ni and pension. just so I know what to expect and to plan going forward if my wages are going to be short £1551.52 – 80% = £1241.21 a diff of £310.30 please could someone answer and hopefully make things a little clearer to understand

    thanks

  44. Hi Guys,

    iI was due to start my new role on the 1st April, i have resigned from my old role and basically due to start in a few days.

    I signed my new contract dated 18th Feb 2020, to start 1st April 2020. The role has now been postponed until 1st September 2020 due to this. Where do i stand re furlough?

  45. My employer has laid me off and are ‘looking into’ furloghing. In the meantime I am not earning money and can’t get a temp job as it may jepodise the 80%. The government are urging companies to furlough employees. Where do I stand?

  46. Hi, Can someone help me!

    My employer has asked the question as to whether or not i want to accept furlough. They have also stated that my existing employment contract will be suspended but my employment will remain.

    My question is i have been with the company for 9 months and after having my probation signed off in January; my notice period either way is 3 months. If i accept to be furloughed and then the company decides to terminate my employment at a later date will my 3 month notice period still stand (bearing in mind my contract has been suspended through the acceptance of furlough) or will my notice period now revert to statutory which is stated as 1 week upto 2 years of employment.

    Any help would be greatly received.

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