HMRC has admitted up to £3.5bn paid to employers to cover furloughed staff wages could have been a result of fraud or genuine errors.
The government has so far paid £35.4bn through the Coronavirus Job Retention Scheme (CJRS), but the Public Accounts Committee heard yesterday that between £1.75bn-£3.5bn could have been paid out wrongly.
We recently wrote about the government’s ‘furlough fraud amnesty’ encouraging employers to own up to being paid too much to avoid being hit with costly charges if they’re found to have flouted the rules.
The CJRS opened for claims on 20 April, covering furloughed workers’ salaries between March and October. Some 9.5 million workers have been protected by the scheme so far.
Employers have been able to bring employees back to work on a part-time basis under the scheme since 1 July, where employers pay for the time they work, and the government makes up the difference so that workers still receive up to 80% of their usual salary.
Employers who have signed up have had to cover NICs and pension contributions since 1 August, and since 1 September they have also had to cover 10% of workers’ salaries. The government then pays 70%.
Between March and July, the government paid for 80% of workers’ wages, up to £2,500 a month, and is reducing the amount it covers until the scheme ends at the end of October.
Here, Which? Money and Which? Legal explain what the new measures are and how your pay might be affected. You can jump to the sections that are relevant to you using the links below.
- What do employers have to pay from 1 September?
- What is the job retention bonus?
- What does the job retention scheme offer?
- How will furlough wages be paid?
- What is your furlough pay based on?
- Who is eligible for furloughing?
- When will the job retention scheme payment be available?
- Do employers have to sign up to the job retention scheme?
- What is ‘flexible furlough’?
- What are my employment rights while on furlough leave?
- Can you work or volunteer while on furlough?
- When will the furlough scheme end?
- Alternatives to furlough leave: lay off or short-time working
- What is the Coronavirus Statutory Sick Pay Rebate Scheme?
- What help is available for the self-employed?
- What benefits are available to help workers?
- Other financial help available
Read the latest coronavirus news and advice from Which?.
From 1 September, employers will have to start paying 10% of their workers’ salaries, along with employers’ National Insurance contributions and pension contributions for the employees they’ve put on furlough. This is regardless of how long the employee has been furloughed for.
The NICs and pension contributions account for roughly 5% of the overall employment costs for each worker; so, if you’re paid £2,000 a month, your employer will have to pay around £100 a month. Employers have had to pay these costs since 1 August 2020.
The government will pay up to 70% of the employees’ wages, up to a maximum of £2,187.50 a month. Combined with the 10% contribution from employers, this should still mean workers receive up to £2,500 a month.
From October, the government payment will only cover 60% of employees’ wages, meaning employers will have to continue paying NI and pension contributions, as well as 20% of workers’ salaries.
Furloughed workers should never receive less than either 80% of their salary, or £2,500 a month – whichever is lowest.
The job retention bonus is a one-off payment for employers who keep their staff in work after the CJRS ends at the end of October.
If employees are kept in continuous work, earning more than £520 a month on average (the lower earnings limit) from the end of the CJRS to the end of January 2021, the government will pay employers £1,000 per member of staff brought back. The payment will be made at the end of February 2021.
It’s hoped this will incentivise employers keep their staff in work after the furlough scheme ends.
As the CJRS has so far supported more than 9 million workers, this could equate to government payouts of more than £9bn.
More details about the scheme are due to be released towards the end of July.
What does the job retention scheme offer?
The Coronavirus Job Retention Scheme (CJRS) pays grants to any employer that furloughs its staff instead of letting them go – regardless of its size.
The grants are worth 80% of wages up to £2,500 a month for any retained workers who are furloughed, which means they are not actively in work but are still on the payroll.
Employers may choose to top up their employees’ salaries to 100%, but they’re under no obligation to do so.
The Chancellor said that the grants can be backdated to 1 March 2020. The CJRS will cover at least eight months, up until the end of October.
Until the end of July, there will be no changes to the scheme – except that employers can choose to use ‘flexible furlough’ measures, outlined below.
From August, employers will have to pay employers’ National Insurance contributions and pension contributions for furloughed workers, with the government continuing to pay 80% of the employees’ salaries.
In September, employers must pay 10% of workers’ pay, while the government pays 70%.
In October, the government will reduce its contribution to 60%, meaning employers must pay 20%.
The scheme will then close on 31 October.
Furloughed workers will continue to receive 80% of their salary throughout this time.
How will furlough wages be paid?
If your employer puts you on furlough, it will still pay you through PAYE as normal.
So for those who only receive 80% of their salary, the total you get in the bank will be reduced further by these tax payments.
However, employers will still foot the bill for some things. For instance, furloughed workers will continue to accrue holiday while they’re off work.
What is your furlough pay based on?
Your employer should include:
- Regular wages
- Overtime that’s already been worked
- Non-discretionary fees
- Compulsory commission payments
- Piece-rate payments.
Your employer won’t be allowed to include:
- Payments made at the discretion of the employer or a client including payments such as tips
- Discretionary bonuses
- Discretionary commission payments
- Non-cash payments
- Non-monetary benefits, such as benefits in kind (a company car, for example) and salary sacrifice schemes (including pension contributions) that reduces an employees’ taxable pay.
The 80% salary calculation will be worked out differently depending on the way you’re paid.
The government sets out five scenarios and offers a calculator to help employers work out how much they need to claim. Your employer will have to choose the best calculation that fits you.
For workers paid a fixed full or part-time salary, furlough pay is based on what was earned during the last paid period before 19 March 2020.
So to work out 80% of your wage, your employer will start with what you got paid in the last pay period before 19 March, divide by the total number of days in that pay period, multiply by the number of days in the furlough pay period and multiply by 80%. If applicable, the cap of £2,500 may kick in.
This works a little differently for those who started their job in March, as well as for those on zero-hours contracts, or other workers whose pay varies month to month.
What if 80% of your pay is less than National Living Wage or minimum wage?
There is no obligation for employers to top up the salaries of those who will end up earning less than the National Living Wage or minimum wage once they receive 80% of their pay.
Instead, those with low earnings might be eligible for Universal Credit payments.
In some circumstances, an employer can require staff to undergo training, for which they must pay at least the minimum wage. However, apprentices that continue their training must also be paid at least the minimum wage that applies to them.
Who is eligible for furloughing?
To be eligible to be furloughed you must have been on your employer’s PAYE payroll on or before 19 March 2020.
If you were hired after 19 March 2020, you can’t be furloughed.
Eligible workers originally had to have been on their employer’s PAYE system on 28 February 2020, but this has since been extended.
You can be on any type of contract, including a zero-hours, fixed-term or temporary contract.
Nannies and gardeners can be put on furlough if they’re paid through PAYE, and were being paid in this way on or before 19 March 2020.
Which? Legal stresses it’s important that you and your employer have agreed to you being furloughed and that the agreement is recorded in writing. This could be done by email or through a letter.
The scheme doesn’t apply if you are self-employed. You may, however, qualify for support under the self-employed income support scheme (SEISS).
Who or what is not included?
The government measures don’t help all workers in all circumstances.
The main groups of people likely to miss out include:
- Those who were not in work on 19 March 2020
- Those who earn a low basic salary that’s usually topped up with non-compulsory commission
- Those with payday loan payment obligations that had been based on their full salary and who are not being given any payment reprieve
- Limited company directors who earn a significant amount of their salary through dividends
- Employees who have not been put on furlough by 10 June 2020; while the scheme closes to new applicants on 30 June, to be eligible to stay on furlough after this point an employee must have already been on furlough for at least three weeks prior to the closing date.
What does it mean for directors of limited companies?
While those who run limited companies may consider themselves to be self-employed, the purposes of this scheme consider directors to be employees of their company.
As such, they can be furloughed provided they meet the other eligibility criteria. However, the 80% salary payment will only cover their regular pay.
As most directors in this position will usually keep their salaried pay as low as possible and top up their income with dividends, this is likely to mean they’ll receive very little from the government scheme; dividend income is not included.
What’s more, while on furlough, directors will only be allowed to carry out statutory directional duties, such as filing documents on Companies House. Any other form of work – even the maintenance of social media accounts, such as tweeting responses to customers or updating company profiles – is not allowed.
What if I have more than one job?
Jobs with different employers are treated separately. This means you could be furloughed from one or both jobs.
Those caring for someone else who is either self-isolating or suffering from coronavirus – including their own children – can also be furloughed.
Do I have to be at risk of redundancy to be furloughed?
The scheme isn’t limited to those employees who would otherwise be made redundant.
It applies to anyone who is furloughed by reason of circumstances as a result of coronavirus.
The Chancellor has confirmed that an employer can’t apply for a grant if to do so would be ‘abusive or is otherwise contrary to the exceptional purpose’ of the scheme.
Can employers take back staff who have recently left or been made redundant?
HMRC has confirmed that some employees can be rehired, and then put on furlough.
Anyone who ‘stopped working’ for their employer on or after 28 February 2020 but before 19 March can be furloughed if they are re-engaged by their former employer.
Employers can choose to do this with staff who were still on the payroll on 19 March, and the furloughed pay can be backdated to 1 March.
This is good news for those who were made redundant before the job retention scheme was announced, or whose new employment has fallen through due to coronavirus.
When will the job retention scheme payment be available?
The job retention scheme opened on 20 April. Employers can apply online, and will need their Government Gateway user ID and password.
The government has provided details online of what you’ll need before you start a claim, along with a link to begin the process.
For businesses that need cash in the interim, there’s the Coronavirus Business Interruption Loan. This separate scheme can support small and medium businesses with loans, overdrafts, and invoice and asset finance up to £5m for up to six years.
But it’s important to note that this is a loan that must be repaid with interest, whereas furloughed pay won’t need to be paid back.
Do employers have to sign up to the job retention scheme?
You can be asked to be furloughed, but ultimately it is your employer’s decision as to which people it furloughs.
Employers are under no obligation to sign up to the scheme; they are within their rights to make people redundant or dismiss them for other potentially fair reasons.
However, the scheme has been made with the aim of encouraging employers to keep as many staff as possible.
Employers don’t necessarily have to prove that their business has encountered adverse effects due to the coronavirus outbreak. However, the purpose of the scheme is to reimburse employers for costs arising from the ‘health, social and economic emergency resulting from COVID-19′, and no claim may be made if it’s contrary to this exceptional purpose.
What is ‘flexible furlough’?
From 1 July, the CJRS included an added level of flexibility to allow employers to bring employees back to work on a part-time basis, if it is safe to do so.
So, if an employee were to go back to work for two days a week, for example, their employer would pay them for the hours they’ve worked, and the furlough scheme would continue to pay them for the remaining three days a week when they’re on furlough.
This was originally going to be introduced on 1 August, but has been brought forward.
Employees must have completed the minimum furlough period of three weeks before being able to go on ‘flexible furlough’.
In order to introduce the new flexible furlough scheme, those wanting to sign up to the ‘old’ scheme must do so by 30 June.
After this date, employers will only be able to furlough employees – flexibly or fully – that have already been furloughed for at least three weeks.
This means that to continue being on furlough after 30 June, you must have been put on furlough by 10 June at the latest.
The one exception is parents returning from maternity or paternity leave after the 10 June deadline. They will still be able to be furloughed after this date if the firm they work for has other employees on furlough.
What are my employment rights while on furlough leave?
Employees still have the same protections while on furlough leave, including to SSP, parental rights and the right not to be unfairly dismissed (if they have more than two years’ service).
How does the job retention scheme work with statutory sick pay?
Employees can claim statutory sick pay (SSP) from the first day they’re off sick. This is whether they’re ill from the coronavirus or just self-isolating.
Those that are shielding for a longer period, perhaps because someone they live with is classed as vulnerable, are now also entitled to SSP.
Once they’re able to come back to work they can be furloughed.
As statutory sick pay is paid by employers, the government will introduce support for small and medium businesses with fewer than 250 employees to help their payments.
Eligible companies can be reimbursed for two weeks’ statutory sick pay per employee that claims, and will only need to maintain records of who was off sick and when. Notes from a GP will not be necessary.
Companies can also reclaim added expenditure resulting from employees claiming statutory sick pay because of COVID-19.
This reimbursement isn’t yet available, but eligible companies will be able to claim from the day the regulations come into force.
Can I be furloughed if I am currently off sick?
If you’ve not already been furloughed, but are off work and are receiving or could receive SSP, you can’t be furloughed until that period of absence has ended.
At that point you can be furloughed.
There is a suggestion from the government that if you become sick while on furlough, it’s up to your employer as to whether they keep you furloughed or whether to end furlough leave and put you on sick leave.
If you are placed on sick leave, you would be entitled to be paid SSP and/or contractual sick pay as normal.
What are my parental leave and pay rights?
On 24 April, the government announced that furloughed workers planning to take paid parental or adoption leave will be entitled to their statutory pay based on their usual earnings rather than a furloughed pay rate.
This method of calculation of earnings will apply to Maternity Pay, Paternity Pay, Shared Parental Pay, Parental Bereavement Pay and Adoption Pay, where the person is on furlough with reduced pay during part or all of the relevant period of leave.
If you’re on statutory maternity leave, you still have the right to return to work. People who are already on maternity or paternity leave or other statutory family-related leave can’t be put on furlough until their agreed period of leave is over.
What happens if I am unable to take my annual leave because of COVID-19?
The government has confirmed that anyone who has not been able to take their statutory annual leave (ie the minimum 5.6 weeks) due to COVID-19, will now be able to carry that unused leave over into the next two leave years.
Your employer can, by giving appropriate notice, require you to take your leave at or by certain times.
Can my employer still decide to make me redundant?
Yes it can, while you’re furloughed or afterwards, and your redundancy rights will not be affected.
If you’re an employee and have more than two years’ service, you will be entitled to a statutory redundancy payment.
Can you work or volunteer while on furlough?
While on furlough, employees can’t do any work for their employer – even sending emails for work purposes.
However, you can still do training if asked to do so.
Unless it’s prohibited by their employment contract, employees are free to work elsewhere while on furlough. However, you will not be able to work for any business that is associated with or linked to your employer.
You can also do volunteer work, provided this is not for your employer.
When will the furlough scheme end?
10 June was the last day for any employer to apply for the Coronavirus Job Retention scheme.
That’s because employees must have been furloughed for at least three consecutive weeks when the government ushers in changes to the scheme on 1 July.
The only exception is parents who are returning from maternity/paternity leave after this deadline.
From this date, ‘flexible furlough’ options will be introduced (see above), allowing furloughed employees to work on a part-time basis.
Chancellor Rishi Sunak announced that, from August, employers will have to start paying employers’ National Insurance and pension contributions for furloughed employees – amounting to 5% of their wages – while the taxpayer continues to pay 80% of the workers’ salaries.
Alternatives to furlough leave: lay-off or short-time working
In some situations – for example, to help avoid redundancies – your employer might ask you to stop working for a while (a ‘temporary lay-off’) or work fewer hours (‘short-time working’).
However, according to Which? Legal, your employer needs a contractual right to do either of these things.
If you’re laid off or put on short-time working, you may be entitled to a statutory minimum ‘guarantee payment’ of up to £30 a day for a maximum of five work-less days in any three-month period.
To be eligible for such a payment, you must have been employed continuously with your employer for at least one month and not have refused any reasonable alternative work.
You might be able to apply for redundancy and claim redundancy pay if you have been laid off or put on short-time working for four or more consecutive weeks, or six weeks within a 13-week period.
There are other eligibility requirements that need to be met before you can claim, so take advice to see whether you qualify.
What is the Coronavirus Statutory Sick Pay Rebate Scheme?
Chancellor Rishi Sunak first announced the Coronavirus Statutory Sick Pay Rebate Scheme at the 2020 Budget in March, and it opened for applications on 26 May.
The scheme allows employers in small and medium-sized businesses with fewer than 250 employees to apply for a rebate, reimbursing them for statutory sick pay (SSP) paid to employees for any reason related to coronavirus.
To be eligible, employees must be paid through PAYE.
Online applications can be made via HMRC. It will review the application and, if successful, pay the rebate within six working days.
What help is available for the self-employed?
For any self-employed workers who lose out on work due to being ill with coronavirus or while self-isolating, the minimum income floor will be suspended. This means that they will be able to apply for a rate of Universal Credit that is equivalent to statutory sick pay.
Additionally, self-assessment tax bill payments owed by self-employed workers are being deferred to January 2021.
This will particularly affect those who pay tax by payment on account (in which case, the next payment would be due 31 July 2021), or those with alternative tax payment arrangements.
On 27 March, the Chancellor announced an additional raft of measures to help self-employed workers – see our dedicated story that explains what’s on offer and who is eligible to claim help.
What benefits are available to help workers?
To support those on low incomes and those who have already been made redundant, several means-tested benefits payments will be increased.
The Universal Credit standard allowance and working tax credit basic element will both be increased by £1,000 for the next 12 months. The Chancellor says this will benefit four million households in the UK.
In addition, renters will benefit from increases to housing benefit and the housing element of Universal Credit, so that the Local Housing Allowance will cover at least 30% of the market rents in each area.
Claimants who can’t attend meetings with work coaches because they’re in self-isolation won’t face sanctions – as long as this is agreed by their work coach ahead of the meeting.
- Find out more: Universal Credit explained
Other financial help available
If your income has been adversely affected by the coronavirus outbreak, there are a number of other measures in place to help.
- Statutory sick pay The Prime Minister announced that all those who have to take time off sick from work, either while ill or self-isolating, will receive statutory sick pay from day one, rather than day four. Self-employed and gig economy workers can apply for Universal Credit or employment support allowance (ESA) in lieu of statutory sick pay.
- Payment holidays Homeowners and landlords can apply for three-month mortgage holidays – we’ve explained exactly how this works in our recent news story. The Financial Conduct Authority (FCA) has also ordered banks to offer payment holidays to credit card and loan customers. You can find out which providers are offering them in our what coronavirus means for your money story.
- Tax help for self-employed and businesses HMRC has set up a dedicated coronavirus helpline for self-employed workers and business owners who are concerned about making tax payments. Call 0800 015 9559; 8am to 8pm Monday to Friday; 8am to 4pm Saturday.
- Deferred VAT payments Any businesses that pay VAT will have payments for the next quarter deferred, covering VAT payments that would be due from now until the end of June. These deferred payments don’t need to be paid until the end of the next financial year (5 April 2021) but, as it stands, businesses will still have to pay the VAT bill for the next quarter at the usual time.
Have any questions about furlough leave? Take a look at Furlough leave: common questions answered and leave a comment.
This article was originally published on 20 March 2020 when the Chancellor announced the coronavirus job retention scheme. It was last updated on 8 September 2020, to detail HMRC’s assessment of CJRS payments made in error or due to fraud. Additional reporting by Kim Kaveh.