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  • Overview

    Following an announcement by the Chancellor on 17 December 2020, the CJRS (the scheme) has been extended until 30 April 2021.

    Since the 1 November 2020 the scheme has returned to a version of the scheme closer to its original incarnation, whereby the government will pay for any unworked hours up to 80% of all wages subject to a £2,500 limit.  Employers will only be liable for hours actually worked, along with national insurance and pension contributions on all payments made.

    The scheme

    Back on the 26 March 2020 the Government announced the details of its unprecedented Coronavirus Job Retention Scheme (the scheme/CJRS) in response to the disruption caused by COVID-19. Further information in the form of guidance was published by HMRC in order to clarify how the scheme would operate.   

    For claim periods from 1st November 2020 the Government released a treasury direction on 13th November. The scheme is broadly similar to the iterations before it, with some differences that we will explore below.

    From when and how long?

    CJRS had long been expected to close on 31 October 2020. Following the announcement by the Prime Minister on 31 October 2020 the scheme was extended until December 2020, and a few days later the Chancellor announced that the scheme was to be extended until 31 March 2021.

    The scheme was due to be reviewed at the end of January, however through an announcement made by the Chancellor on 17 December 2020 the scheme has been extended to run until the end of April 2021, with the Government having committed to paying up to 80% of wages (subject to the cap) until the end of the scheme.    

    Who can be furloughed?

    The scheme does not have to be limited to those who would otherwise be made redundant or laid off. It applies to anyone furloughed by reason of the circumstances as a result of COVID-19.

    From 1 November 2020, employers can offer furlough to employees who have not been on furlough previously.

    However if a claim is being made in respect of a period on or before the 31 October, the employee must have been furloughed for at least 3 consecutive weeks between 1 March 2020 and 30 June 2020 and a claim for such period(s) must have been  submitted no later than 31 July 2020. For those who have been furloughed until 31 October, the last date for claims to that date was 30 November 2020. 

    Employees must have been on the employer’s PAYE payroll before midnight 30 October 2020 to be eligible for furlough from 1 November 2020.

    Under the extension of the Scheme, employees that were employed as of 23 September 2020 and subsequently were made redundant  or stopped working for their employer can be rehired and put back on furlough.  We recommend that employers take our advice before considering this option.

    Employees – fixed-term and permanent, apprentices, agency workers (including those employed by umbrella companies), personal service workers and salaried members of an LLP – are all eligible under the scheme.  The guidance refers to separate guidance on this specific issue:

    Minimum periods and rolling furlough

    From 1 November 2020 each employee must be furloughed for a minimum period of seven calendar days.  Otherwise, they can be ‘rolled on’ and ‘rolled off furlough’ if needed to return to work. This differs from the original scheme, under which employees needed to be furloughed for a minimum period of 3 weeks, but that original scheme only applied to full furlough rather than flexi-furlough from July 2020.

    A claim period can be for 6 consecutive days or less, but only if it begins on the first day of a CJRS extension calendar month, or ends on the last day of a CJRS extension calendar month. This is called an ‘orphan period’ and is only available if it is immediately preceded by a full claim period of at least seven consecutive days.

    If you’ve given notice of redundancy to any employees

    Since the start of the scheme in March 2020, employers had been able to claim for a furloughed employee who was serving a statutory notice period and not working or partly working under the flexi-furlough scheme (see below). However grants cannot be used to reimburse redundancy payments.

    Fr the extension of the scheme running from 1st November 2020 this has changed, and the Government have stated that a claim cannot be made by an employer in respect of “any days on or after 1 December 2020 during which the furloughed employee was serving a contractual or statutory notice period for the employer (this includes people serving notice of retirement or resignation)” If an employee subsequently starts a notice period on a day covered by a previously submitted claim an adjustment will need to be made.

    This is an unfortunate removal of a major benefit of the previous scheme in which employers could use money claimed through the furlough scheme to pay towards an employee serving their notice period.

    Flexible furlough and impact on cap

    From 1 July 2020 the scheme became more flexible, allowing furloughed employees to return to part-time work, known as flexi-furlough.  This will continue during the post 1 November 2020 extension.

    Under flexi-furlough employers can allow furloughed employees to work part time, with maximum flexibility, for any amount of time (provided the claim period is a minimum of seven calendar days) and on any work pattern and still claim the CJRS grant in respect of unworked hours.

    For example, a full time employee could work 2 days per week and be furloughed 3 days per week. 

    Flexi-furlough means that wage caps are proportionate to the hours an employee is furloughed. For example, an employee who hits the £2,500 per month (£576.92 per week) cap, because 80% of their wage or salary per month is higher than £2,500 per month, is entitled to 60% of the £2,500 cap if they are placed on furlough for 60% of their usual hours.

    How does the cap adjustment apply to flexi-furlough? This table shows how the cap of £2,500 is adjusted once part-time furlough is introduced.

    Actual Working days each week of every month

    Actual Furlough Days  each week of every month

    Percentage of working  week each month on Furlough not working

    Furlough monthly furlough payments Cap under the CJRS (as adjusted)





















    To calculate the amount you should claim for an employee who is flexibly furloughed, visit:

    Contribution from employers

    There was a sliding scale of increased contributions from employers from August to October 2020. 

    But from 1 November 2020, the government has gone back to reimbursing up to 80% of furlough wages (subject to the £2,500 per month cap), with employers only having to contribute national insurance contributions and pension contributions on all pay for hours worked and hours not worked.

    How much?

    From 1 November 2020 employers will, once again, be able to claim:

    • 80% of furloughed employees’ usual monthly wage costs, up to a limit of £2,500 per month, for employees on full time furlough; and
    • 80% of an employee’s wages in respect of unworked hours where employees are able to be working on a part-time or flexible basis whilst also enrolled on the scheme (flexi-furlough).\

    Reimbursement can be claimed from the day that the employee finishes work and starts furlough, not when the decision is made or when they are written to confirm their furlough status; assuming that they have first given their agreement. Employers can, if they wish, top up the grant they receive from HMRC up to 100% of employees’ pay and pension contributions.

    For claim periods from 1 November 2020, for employees:

    • on fixed salaries and who have previously been furloughed, they will continue to have their reference pay and hours based on their existing furlough calculations;
    • on fixed salaries who have not previously been furloughed, their last pay period before 30 October 2020 is used to determine their normal wages; and
    • whose pay varies from week to week or month to month, according to the hours or shifts they work, the calculation will be based on their average pay between 6 April 2020 and the start of their furlough extension period.

    HMRC will not decline or seek repayment of any grant based solely on the particular choice between fixed or variable approach to calculating usual hours, as long as a reasonable choice is made by the employer.

    Reimbursement can include: wages, non-discretionary past overtime, fees, bonuses and commission payments. Compulsory commission payments will cover commission and bonuses that employees are contractually entitled to. The following will not be reimbursed under the scheme, which includes payments such as discretionary bonuses, tips, discretionary commission and non-monetary benefits (such as a company car).

    Employees will be taxed on the furlough payments and receive the payment net of employee NICs’ as well.

    Employers must ensure that they include the details of all of the employees they want to claim for in each payroll period.  They cannot later go back and amend or make another claim for the same period.

    Agreement to be furloughed

    Furlough must have been agreed between employer and employee.  This arrangement is an agreed variation of their contract of employment.

    Employers wishing to benefit from the scheme must have confirmed in writing to the employee that they have been furloughed or flexi-furloughed prior to the claim period in question, and keep a record of the written communication for at least 5 years.  The guidance states that a collective agreement reached between an employer and a trade union is acceptable as notification of furlough. The same applies to flexible furlough arrangements. If an employee has been on furlough and you wish to bring them back to work part-time, when they have been a full-time employee before being furloughed, you will need to reach a new written agreement with them.  They can enter into a flexible furlough agreement more than once.

    The employee does not have to provide a written response for the purposes of the scheme, but ideally employers would want to obtain written consent to evidence agreement to the variation to contract.

    When deciding which workers to offer furlough leave to, laws around contracts of employment, equality and discrimination will apply as they ordinarily do.

    If more than 20 staff could face redundancy if they do not agree to go on furlough, the employer will have to consult with elected employee representatives or a union where one is recognised.   

    It is important to note that any furlough or flexible furlough agreements made retrospectively, that have effect from 1 November 2020, must have been made by Friday 13 November 2020. Furlough agreements can now not be made retrospectively.

    Salary sacrifice schemes

    Employers cannot include salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay. The entirety of the grant received to cover the employees subsidised furlough pay must be paid to them. No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme. Where the employer provides benefits to furloughed employees, including through a salary sacrifice scheme, these benefits should be in addition to the wages that must be paid under CJRS. Normally, an employee cannot switch out of a salary sacrifice scheme unless there is a life event. Covid-19 is regarded as a life event by HMRC that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.   

    When the scheme ends

    When the scheme comes to a close, the employer is left with a choice to bring furloughed staff back to work or potentially make them redundant if the requirements of the business to employ them in the job that they were doing before furlough no longer exist.

    How to claim

    The on-line portal for employers to start making claims for reimbursement for furlough payments made to PAYE employees and workers is here:

    You will need to have a Government Gateway User ID.

    To use the scheme the following steps must be taken:

    1. Check if you can claim
    2. Calculate 80% of your employees’ wages –
    3. Claim for your employees’ wages on line –
    4. Report a payment in PAYE Real Time Information –

    Employers with less than 100 employees will need to enter details of each employee (name, NI number, claims amount and claim amount). Employers more than 100 staff can upload a spreadsheet, containing the above information. 

    Deadlines for Claiming

    The Government has detailed the deadlines for claiming under the extension, which are as follows:-

    • 14 December 2020 – for claims relating to November 2020;
    • 14 January 2021 – for claims relating to December 2020;
    • 15 February 2021 – for claims relating to January 2021;
    • 15 March 2021 – for claims relating to February 2021;
    • 14 April 2021 – for claims relating to March 2021; and
    • 14 May 2021 – for claims relating to April 2021.

    These deadlines must be strictly adhered to unless there is a “reasonable excuse for failing to make a claim in time”. The Government have produced a list of examples of things that ‘may’ amount to a reasonable excuse for missing the deadline, such as;

    • your partner or another close relative died shortly before the claim deadline;
    • you had an unexpected stay in hospital that prevented you from dealing with your claim;
    • you had a serious or life-threatening illness, including Coronavirus related illnesses, which prevented you from making your claim (and no one else could claim for you);
    • a period of self-isolation prevented you from making your claim (and no one else could make the claim for you);
    • your computer or software failed just before or while you were preparing your online claim service issues with HMRC online services prevented you from making your claim;
    • a fire, flood or theft prevented you them from making your claim;
    • postal delays that you could not have predicted prevented you from making your claim;
    • delays related to a disability you have prevented you from making your claim; and
    • a HMRC error prevented you from making your claim.

    HMRC will not consider reasonable excuses in advance of a claim deadline.

    Publication of Claimant details

    It should be noted that from 1 December 2020, HMRC will be making public details of all employers who claim under the scheme in December 2020 and January 2021. They will be publishing details of the employer and their company reference number, along with a ‘reasonable indication’ of the amount claimed. The information must be published within 3 months of each calendar month in question, and for a maximum period of one year.

    The only exception to this is if HMRC are satisfied that the publication of this information will expose the employer or related individuals, including employees, to a serious risk of violence or intimidation, from whom? The direction does not say but presumably from employees, or anyone else, who takes against the employer using this scheme.

    Abuse of the scheme

    HMRC have set up a hot-line for employees to report abuses of the scheme, such as where they are required to work for their employers whilst on full time furlough. However, those employees who have other jobs or wish to secure other employment having been permitted to do so by their furloughing employer stand to gain from the system, to the tune of their new pay from other employment and their furlough payments up to £2,500 per month (capped) or 80% of their pay, whichever the lower.

    Self-isolating or shielding

    If an employee is self-isolating in accordance with Government guidance because they:

    1. are showing symptoms; or
    2. live with someone who has symptoms of COVID-19; or
    3. have been informed through new the test and trace system that they have been exposed to someone with the virus;

    and therefore need to self-isolate, then the individual is entitled to receive Statutory Sick Pay (‘SSP’) from day one as opposed to day four under new amendments to the statutory sick pay regulations.  

    People who are extremely vulnerable such as those with heart conditions, respiratory problems or organ transplant beneficiaries were previously required to shield at home and were previously only entitled to SSP.

    However, in an update to the guidance released by the Government in early January 2021, it has been confirmed that people whose health has been affected by coronavirus or any other conditions are entitled to be placed on the furlough scheme. This includes individuals who are extremely vulnerable and at the highest risk of severe illness, as well as individuals who have unexpected caring responsibilities as a result of coronavirus. This update removes any confusion over whether parents with school age children who have to stay at home to provide child care are eligible for furlough.

    Employer eligibility

    The scheme is open to all UK employers that had an active, registered PAYE payroll scheme on 30 October 2020 and have a UK bank account. This includes businesses, charities, recruitment agencies and public authorities (other than those who continue to receive public funding for staff costs).

    Public sector employers

    Whilst open to public sector organisations, not many have used the scheme, except where part of their funding is privately funded, by e.g. retail sales or services. This is due to most public sector employees providing essential public services during the pandemic. The Government has confirmed that any public sector organisations who receive public funding to pay wages are expected to continue paying their staff in the usual way so long as their funding continues. However, it is recognised that a small number of organisations not entirely funded by the government will not be able to redeploy staff to assist with the pandemic response and may therefore furlough staff if appropriate.

    Tax treatment of the CJRS Grant and record keeping

    Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income and Corporation Tax purposes.  

    Records of claims made must be kept for 6 years.

    Coronavirus job retention bonus

    The £1,000 grant for every employee brought back from furlough to work and still in employment on 31 January 2021 has been abolished.

    Annual leave and furlough

    Employees who are furloughed continue to accrue holiday leave as per their contracts of employment.  

    This means that furloughed employees who take holiday must receive their normal pay for holiday days, not furlough pay. This includes bank holidays if they normally take those as leave days. 

    Legislation introduced in summer 2020 allow employees who are unable to take their leave for any reasons relating to COVID--19 to roll over that entitlement for up to two years, if it was not reasonably practicable for them to take leave.

    The CJRS guidance says that employers can restrict when holiday can be taken and the WTR say that employers can designate periods of leave by giving employees twice the amount of holiday days to be taken as prior notice.  

    The Government has produced Holiday Entitlements guidance, which:

    1. Suggests that employers can require employees to take holiday while on furlough, but notes that “the employer should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the employee from resting, relaxing and enjoying leisure time, which is fundamental purpose of holiday.” The holiday guidance does not give a clear indication on whether holiday taken during furlough meets the definition of annual leave set out in EU case law. The European Court of Justice has always followed the mantra that such leave must enable the worker to rest and to enjoy a period of relaxation and leisure.
    2. On holiday pay, it states that in addition to normal pay being paid to the holidaying furloughed employee (not at the furloughed rate), employers can claim back up to 80% or £2,500 if lower from HMRC under the CJRS.
    3. Indicates that, when considering whether it was not reasonably practicable for a worker to take leave, for the purposes of whether a worker can carry forward or roll over unused holiday for up to 2 years, an employer should consider factors such:
      1. as whether the business has faced a significant increase in demand due to coronavirus that would reasonably require the worker to continue to be at work and cannot be met through alternative practical measures;
      2. the extent to which the business’s workforce is disrupted by the coronavirus and the practical options available to the business to provide temporary cover of essential activities;
      3. the health of the worker and how soon he or she needs to take a period of rest and relaxation;
      4. the length of time remaining in the worker’s leave year, to enable the worker to take holiday at a later date within the leave year;
      5. the extent to which the worker taking leave would impact on wider society’s response to, and recovery from, the coronavirus situation; and
      6. the ability of the remainder of the available workforce to provide cover for the worker going on leave.

    It notes that employers should do everything reasonably practicable to ensure that the worker is able to take as much of his or her leave as possible in the year to which it relates and that, where leave is carried forward, it is best practice to give workers the opportunity to take holiday at the earliest practicable opportunity.

    As for furloughed workers, the holiday guidance notes that they will be unlikely to need to carry forward statutory annual leave as they will be able to take it during the furlough period, so long as the employer pays the correct rate of holiday pay. However, if, due to the impact of coronavirus on operations, the employer is unable to fund the difference between furlough pay and holiday pay, this would be likely to make it not reasonably practicable for the worker to take the leave, enabling the worker to carry it forward under the Regulations. Whilst many furloughed staff will argue that they have not been able to enjoy the full benefits of holiday during national or local restrictions, it has still been possible for them to exercise outdoors, carry out DIY and engage in other leisure activities, albeit in a restricted way.

    Miscellaneous issues

    The guidance does deal with national living/minimum wage obligations by making it clear that whilst those on the NMW/NLW can receive less than the prescribed hourly rates during furlough, if they engage in training then this is treated as working time and must be paid at the NLW/NMW relevant rates.

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