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Furlough scheme: last chance to claim for furloughed employees in August

August furlough claims include a 20% employer contribution

Furlough scheme: last chance to claim for furloughed employees in August

Employers have just a few days left to make claims for furloughed employees’ unworked hours in August – as applications close on Tuesday 14 September.

As the government’s Coronavirus Job Retention Scheme (CJRS) has started to be rolled back, claims for August will see employers contribute up to 20% of employees’ unworked hours, while the government will pay up to 60%.

This means that employees should still receive up to 80% of their pay for unworked hours up to a maximum of £2,500 per month.

The furlough scheme is due to end on 30 September 2021, so this is the penultimate payment employers will be able to claim.

Employers must also cover employees’ National Insurance payments and pension contributions.

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.

Read the latest coronavirus news and advice from Which?.

When will the job retention scheme payment be available?

Claims for furlough payments in August must be made by 14 September 2021.

Finally, claims for furlough payments in September must be made by 14 October 2021.

You can no longer submit claims for claim periods ending on or before 31 October 2020.

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.

What does the job retention scheme offer?

The CJRS pays grants to any employer that furloughs its staff instead of letting them go – regardless of the employer’s size.

From 1 August 2021 until the scheme ends on 30 September, employers will be expected to contribute 20% of employees’ unworked earnings up to £625; the government will contribute 60% up to £1,875.

The scheme has changed a few times since it was first launched.

  • Between March and July 2020 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 2020 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.
  • In September 2020 Bosses had to pay 10% of furloughed staff’s wages, while the government put in 70%.
  • In October 2020 Employers paid 20% towards wages, with the government covering 60% of the total.

The scheme was due to close on 31 October 2020 and had already been extended to the end of April 2021, but will now run to the end of September 2021. The government will cover 80% of furloughed workers’ wages, while employers will need to pay NI and pension contributions.

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.

Listen: our experts discuss travel insurance with Covid cover on the Which? Money Podcast


Who is eligible for furloughing?

The furlough rules are slightly different depending on when the claim is for.

Furlough claims on or before 30 April 2021

To be eligible for a CJRS claim on or before 30 April 2021, 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 don’t need to have been furloughed under the CJRS previously.

Furlough claims from 1 May 2021 onwards

For claims made from 1 May 2021 onwards, you must have been on your employer’s PAYE payroll on 2 March 2021.

The employer must also have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021, notifying a payment of earnings.

Employers do not need to have previously claimed for employees before 2 March 2021 to claim for periods on or after 1 May.

You can be on any type of contract, including a zero-hours, fixed-term or temporary contract.

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 for claims on or before 30 April 2021, or were not in work on 2 March 2021 for claims on or after 1 May 2021
  • 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 will 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 with 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.

For CJRS claims on or before 30 April 2021, 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 2020 and 23 September 2020.

However, for claim periods starting on or after 1 December 2020, you can’t claim for any days where a furloughed employee was serving a contractual or statutory notice period for the employer.

However, there’s no obligation on the business to re-employ you.

How are furlough wages paid?

If your employer puts you on furlough, it will still pay you through PAYE as normal.

This means that your furlough pay is subject to income tax and National Insurance contributions and will be taken automatically.

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’s your employer’s decision as to which employees 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 a large amount of money paid to employers to cover furloughed staff wages could have been a result of fraud or genuine errors.

According to the latest figures from May 2021, the government has so far paid £64bn through the CJRS, but back in September 2020 the Public Accounts Committee heard that between £1.75bn and £3.5bn could have been paid out wrongly.

We 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’re being asked to carry out work while on a period of furlough.

In the 2021 Budget, Mr Sunak announced that HMRC would be forming a special task force of 1,000 investigators aiming to crack down on fraudulent furlough and self-employed income support scheme claims.

What is ‘flexible furlough’?

From 1 July 2020, the CJRS included an added level of flexibility to allow employers to bring employees back to work on a part-time basis, if it’s 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.

someone using a calculator

What are my employment rights while on furlough leave?

Employees still have the same protections while on furlough leave, including statutory sick pay (SSP), parental rights and the right not to be unfairly dismissed (if they have more than two years’ service).

Back in March 2020, 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.

How does the job retention scheme work with statutory sick pay?

Employees can claim SSP from the first day they’re off sick. This is whether they’re ill with coronavirus or just self-isolating.

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.

What if I am sick or I am told to self-isolate?

The eligible employees government guidance is not entirely clear.

While it confirms that if you become sick while on furlough your employer can decide whether to put you onto SSP or keep you on furlough, it also says furlough is not intended to cover short-term absences due to sickness.

However, it goes on to say an employee can be furloughed for ‘business reasons’.

The issue for employers making a claim is that they can only do so if it is in respect of employees within the scope of the CJRS, i.e. as a result of the health, social and economic emergency caused by the pandemic.

Here is Which? Legal’s interpretation of the guidance:

If you are on furlough and become sick

If you become sick while on furlough, it is up to your employer to decide whether to put you onto SSP or keep you on furlough.

If you are under a flexible furlough arrangement

There is no specific guidance on how to handle a situation where a sick employee is working part of their working week and furloughed for the remainder.

If you are under a flexible furlough arrangement and you fall sick, or are told to self-isolate when you are due to be working, you should be paid SSP or company sick pay as normal.

The position is more complicated if you are sick and due to go back on furlough – you cannot be on sick leave and furloughed at the same time.

It is not entirely clear from the government guidance whether allowing you to be placed on scheduled period of furlough (even though you are still sick) would be considered an abuse of the scheme. The guidance says that short-term illness or self-isolation should not be a consideration when deciding whether to furlough an employee.

On the other hand, the guidance also says that if your employer wants to furlough you for business reasons and you are currently off sick, they may be able to do so.

It’s been reported that HMRC’s furlough helpline has said their interpretation of the guidance in these circumstances is that the employee should stay on sick leave for the whole period.

If you have been told to self-isolate

If you are self-isolating you may be eligible to receive SSP. While the guidance does not explicitly exclude the possibility of you being furloughed, it does say that self-isolation should not be a consideration when deciding whether or not to furlough someone.

As mentioned above, an employee can be furloughed for ‘business reasons’. The guidance also says employers ‘can furlough employees who are clinically extremely vulnerable or at the highest risk of severe illness from coronavirus’.

Ultimately it is up to your employer to decide whether or not to furlough you if you are told to self-isolate.

What is the Coronavirus Statutory Sick Pay Rebate Scheme?

The Chancellor first announced the Coronavirus Statutory Sick Pay Rebate Scheme at the 2020 Budget in March and it opened for applications on 26 May 2020.

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 are my parental leave and pay rights?

On 24 April 2020, 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’m unable to take my annual leave because of Covid-19?

The government has confirmed that anyone who hasn’t 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 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 won’t 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.

What happens when the furlough scheme ends?

The furlough scheme is due to end on 30 September 2021. Employers have until 14 October to make claims for furloughed employees’ unworked hours.

Once the government support comes to an end, employers will have to decide whether they want to pay for employees to remain furloughed, have them back at work or make them redundant.

The Bank of England has said that it’s expecting a small rise in redundancies once the scheme ends – but in most cases employers should have already let affected employees know if their work will be terminated at the end of the month.

If you’re at risk of redundancy, you may be eligible for certain benefits such as jobseeker’s allowance (JSA) once you’re out of work.

If your earnings drop, you may also be entitled to claim Universal Credit.

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?

The Chancellor first announced the Coronavirus Statutory Sick Pay Rebate Scheme at the 2020 Budget in March and it opened for applications on 26 May 2020.

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.

contractor at a work desk

What help is available for the self-employed?

On 27 March 2020, the Chancellor announced an additional raft of measures to help self-employed workers, known as the self-employed income support scheme. 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 until October 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.

Other financial help available

If your income has been adversely affected by the pandemic, there are a number of other measures in place to help.

These include:

  • Tailored support from your lender The deadline to apply for a payment holiday on your mortgage, credit card or personal loan has now passed, but the FCA has told lenders to continue to offer tailored financial support to customers who are struggling to make repayments due to the Covid-19 pandemic.
  • 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.

Additional help for businesses

In the Budget on 3 March 2021, Mr Sunak announced a new £5bn Restart Grant available for certain businesses once they are allowed to reopen. Non-essential retail businesses can get up to £6,000, along with up to £18,000 for businesses in the hospitality and leisure sectors, including personal care.

This is in addition to the £4.6bn in new grants announced on 5 January 2021, when the Chancellor announced support for businesses during the latest national lockdown.

This included one-off grants of up to £9,000 for retail, hospitality and leisure businesses, plus a £594m discretionary fund for other affected businesses.

The Coronavirus Business Interruption Loan closed on 31 March 2021. This separate scheme was launched to support small and medium businesses with loans, overdrafts, and invoice and asset finance up to £5m for up to six years.

You can find out more about government business support on gov.uk.

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 9 September, alerting employers about the upcoming deadline for furlough claims in August, and what to do when the scheme ends. Additional reporting by Kim Kaveh.

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