Today (14 January) marks the final day for employers to claim Coronavirus Job Retention Scheme (CJRS) payments for furlough days in December 2020.
Employers can claim for up to 80% of workers’ salaries for time they haven’t worked, worth up to £2,500 a month. However, employers must meet the cost of National Insurance payments and pension contributions.
The scheme is currently due to finish at the end of April, after the Chancellor announced an extra month’s extension on 17 December.
The next stage of financial support measures will be outlined at the Budget, due to take place on 3 March 2021
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 does the job retention scheme offer – and what will replace it?
- Who is eligible for furloughing?
- When will the job retention scheme payment be available?
- How will furlough wages be paid?
- What is your furlough pay based on?
- 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?.
What does the job retention scheme offer – and what will replace it?
The Coronavirus Job Retention Scheme (CJRS) pays grants to any employer that furloughs its staff instead of letting them go – regardless of the employer’s size. The scheme has changed a few times since it was first launched.
Between March and July, the government paid for 80% of furloughed workers’ wages (up to £2,500 a month) and it also covered employer’s National Insurance (NI) and pension contributions. Until the end of July, there were no changes to the scheme – except that employers can choose to use ‘flexible furlough’ measures, outlined below.
In August employers had to start chipping in by paying employer’s NI and pension contributions, with the government continuing to pay 80% of the employees’ salaries.
By September, bosses had to pay 10% of furloughed staff’s wages while the government put in 70%.
In October, employers paid 20% towards wages, with the government covering 60% of the total.
The scheme has now been extended to the end of April 2021. The government will cover 80% of furloughed workers’ wages, while employers will need to pay National Insurance and pension contributions; this may change when the scheme is reassessed at the end of January 2021.
Furloughed workers will continue to receive 80% of their salary throughout this time. Employers may choose to top up their employees’ salaries to 100%, but they’re under no obligation to do so.
The scheme was due to close on 31 October, to be replaced by the Job Support Scheme announced in the Winter Economy Plan. This is no longer the case, and it is not yet known whether the Job Support Scheme will come into force after the end of April.
The Chancellor had also introduced a job retention bonus as an incentive intended to encourage employers to keep their staff in work from the initial end of the CJRS on 31 October until the end of January 2021. However, as the furlough scheme has now been extended to the end of March, the job retention bonus has been scrapped. In his statement in the House of Commons on 5 November, the Chancellor said a new job retention incentive will be introduced ‘at an appropriate time’
Who is eligible for furloughing?
To be eligible for the extended CJRS from November, you must have been on your employer’s PAYE payroll on 30 October 2020.
The employer must also have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings.
Employees do not need to have been furloughed under the CJRS previously. 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 30 October 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 on the extended CJRS include:
- Those who were not in work on 30 October 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
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 doing 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.
Employers can choose to rehire any staff made redundant since 23 September 2020 and put them on furlough, as long as the employer made a PAYE Real Time Information submission to HMRC in relation to that employee between 20 March and 23 September.
This is good news for those who were made redundant before the job retention scheme extension 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 applications for November closed on 14 December. Applications for December must be made by 14 January 2021. 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.
Additionally, on 5 January 2021, Chancellor Rishi Sunak announced that the government would provide £4.6bn in new grants to support businesses during the latest national lockdown.
This includes one-off grants of up to £9,000 for retail, hospitality and leisure businesses, plus a £594m discretionary fund for other affected businesses. You can find out more about government business support on gov.uk.
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.
The government covered employers’ National Insurance contributions and pension contributions equal to the amount due under auto-enrolment rules on the reduced pay up to August, now it is the employer’s responsibility.
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. You can find out more on the government guidance page for employers.
For workers paid a fixed full or part-time salary, furlough pay is based on what was earned during their last paid period.
So to work out 80% of your wage, your employer will start with what you got paid in the last pay period, 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 recently, as well as for those on zero-hours contracts, or other workers whose pay varies month to month.
Different methods of calculation on the reference pay will be adopted for the extended CJRS for those not previously eligible.
Those on a fixed salary will get 80% of wages payable in the last pay period ending on or before 30 October 2020.
For those whose pay varies 80% is based on the average pay between the start of your employment or 6 April 2020 (whichever is later) and the day before your CJRs extension furlough period begins.
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.
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 or continue keeping people on furlough; 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.
As the scheme is voluntary, there is therefore no option to appeal an employer’s decision not to take the grant.
Furlough fraud warning
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 in September 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.
HMRC has also been encouraging individuals to report their employers where they suspect a fraudulent claim is being made, e.g. they are being asked to carry out work whilst on a period of furlough.
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.
Flexible furlough agreements can last any amount of time, however, the period claimed for must be for a minimum claim period of seven consecutive calendar days according to government guidance.
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. Once they’re able to come back to work they can be furloughed.
As statutory sick pay is paid by employers, the government has introduced 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.
You can find out more about the Coronavirus Statutory Sick Pay Rebate Scheme below.
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.
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 remain on furlough, your employer can continue to claim your salary through the furlough scheme. If you are moved onto SSP, the employer will have to pay this and can no longer claim your salary through the furlough scheme.
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?
The furlough scheme was initially due to end on 31 October 2020, and employers had to sign up by 10 June.
However, as a four-week lockdown in England was announced on 31 October, the scheme was extended for an extra month. On 5 November, another extension was announced and the scheme was set to run until the end of March; on 17 December it was announced that the scheme would be extended for another month to the end of April.
CJRS applications for November closed on 14 December; applications for December must be made by 14 January 2021. Deadlines for subsequent months have not yet been announced.
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.
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.
As part of SEISS, those who pay tax by payment on account were allowed to defer their July 2020 payment to 31 January 2021 – when they would have to pay the whole of the tax owing in one go.
Under the Winter Economy Plan, those who pay tax by self-assessment can split the payment due on their 2019-20 tax return over 12 months from January 2021. Under normal circumstances, tax would have to be paid by midnight on 31 January 2021.
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 until April 2021. 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 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 payment holiday 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 Businesses that deferred their VAT payments due to coronavirus were going to face a lump-sum bill in March 2021. However, the Chancellor announced that this deferred bill can now be spread over 11 smaller repayments – and no interest will be added.
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 14 January 2021, detailing the final date for December’s CJRS payments. Additional reporting by Kim Kaveh.