Updated 19th April 2020

On 19th April, we have updated our guidance on how to apply for the Job Retention Scheme. Click here to read our full guidance.

We have updated the section on holidays below on 5th April 2020. Scroll down to have a read.

We have also updated our guidance on how to minimum wage affect furlough and what to do if you have apprentices who are continuing to train. Have a read our advice and guidance here.

Who to furlough?

The updated guidance makes it clear that staff who are furloughed must do no work and provide no services for the organisation that furloughs them (they can volunteer for work for other organisations though).  Therefore, you can only furlough people who do no work during their period of furlough.

An added issue here is that guidance states that the minimum period of furlough must be three weeks.  That means the possibility of reducing peoples shifts, say from a five-day week to a two-day week, and furloughing them for the lost hours will not work under these rules. Not too helpful given most of the conversations we have been having where a reduction in hours seemed to be the preferred option for businesses.

When deciding who to furlough it is important to consider who is eligible.  The guidance states that only employees who were on the payroll by the 28th February are covered by the legislation. Anyone who started on the 29th Feb (did they forget it was a leap year this year?) or later will not be funded by the Job Retention Scheme if they are furloughed. In other words, any such pay is completely at the employers’ cost.  Clearly this rule was created to prevent fraud with employees being added in March and April just to get additional grant money paid but it will, and already is, disadvantaging many.  

Practically we suspect that this means HMRC will check the list of furloughed staff submitted on the forms in April to the payroll information they hold from the RTI information gathered in February 2020’s submissions.  If you had a staff member join after the February payroll submission but before the 29th February, then it would appear you can furlough them but be prepared to prove their employment start date later.  Once things settle down HMRC will start a campaign to check the accuracy and correctness of the furlough payments. 

How to pay

Up to Thursday we had been fearing the worst.  That the headline amount of £2,500 as a cap on the furlough grant per employee per month was to include Employers National Insurance and Employers Pension contributions. But the official guidance turns out to be more generous that we had feared.

If you have an employee earning £37,500 or less per year (i.e. their gross basic pay in February was £3,125 or less) then the grant will cover 80% of their normal salary while they are furloughed.  If they earned more than this then the grant will only cover the first £2,500 of what you pay them when they are furloughed.

The grant will also cover the Employers National Insurance and Employers Auto Enrolment Pension contributions, if the employee is enrolled, in addition to this.

Our advice is to write to any staff that you are furloughing confirming what they will be paid, which in most cases will either be 80% of the normal monthly pay or £2,500. You can pay them their normal rate if you want to and if cashflow will allow but the grant will not cover anything above the amounts stated above.

For example, if you have an employee earning £1,500 per month and you furlough them for a whole month then you would write to them and explain their pay will be reduced to £1,200 less taxes per month on furlough, equivalent to 80% of their normal pay.

If you have an employee earning £3,200 per month then you should write to them to confirm that they will receive £2,500 less taxes per month while furloughed. As you can see, you may need to be prepared for a harder conversation for employees earning more than £3,125 per month as the reduction in earnings for them will be bigger in percentage terms. As people naturally have monthly costs to match their income just because these are higher earners doesn’t mean that it will be easier for them to cope on a much-reduced salary.

If you have apprentices who are continuing to train while furloughed then you a few additional things to consider. See our article here with details and guidance on what you need to do.

How does minimum wage affect Furlough?

Let’s look at an example

In real life you may not end up furloughing someone for a full month.  You may actually furlough them for a period of weeks.  In which case the furlough should be pro-rated.  Let’s look at an example:

  • Member of staff is furloughed from 1 April, but you need to bring them back to work on Monday 27th April.  
  • In April there are 22 working days (if normal hours are Monday to Friday).  The 1st April to 19th April would therefore contain 18 working days in which they are furloughed. 
  • Based on earnings of £1,500 per month you would have to pay them 80% pay for 18 out of 22 days and 100% pay for the remaining 4 out of 22 days.  Therefore, their gross pay in the month would be:

Furlough pay @80%: £ 981.82 (18 days)

Normal Pay @ 100%: £272.73 (4 days)

TOTAL GROSS PAY APRIL 2020: £1,254.55 (total pay before tax)

(equivalent to 83.64% of normal monthly pay)

As the employer you would put the gross pay of £1,254.55 into the payroll processing as gross pay and pay the employee the net pay as you would on a normal payroll run.  

You would also need to note the employee and furlough pay details on a log, so you have the information to hand for the Job Retention Scheme grant. 

Once the Job Retention Scheme opens for applications you would then apply online for HMRC to pay you £981.82 plus the employers National Insurance and autoenrollment pension due on this amount (which in this case would be about £52.80 in NI and £9 for the employers pension contribution), so a total of £1,043.62 will be paid by the grant towards this.  

Cashflow will be impacted

As you can see the problem here is that as the employer you pay the employee and then must wait while HMRC process your grant. 

There is going to be a period where your cashflow is funding the wages due to this, and if you have a large number of staff on furlough then you could actually be using a lot of cash to pay the furloughed net wages. 

Government guidance suggests taking out a Coronavirus Interruption Loan to cover this period, but so far it has proved difficult to gain this finance from the banks. Over the last few days lending criteria appears to be relaxing as I am sure the Government have pointed out to the banks how the lending offered has not been in line with the intention.  This is a serious issue and we will cover this issue in future bulletins.

One added item is there is no clarity yet on the impact of time to pay for PAYE and NI in relation to this. There is a chance that although you pay the net wages based on the furloughed salary you might be able to delay payment of the PAYE and NI to a later date. The time to pay line may not allow a delay in PAYE and NI where grants are being received especially for cases where all staff are furloughed but we are yet to see what develops over the coming months.

Taking people in and out of furlough

Another common question we have been seeing is: can you furlough a member of staff, then bring them back to work for a period of time then return them to furlough?

The answer is yes, this is possible.  The guidance from 26 March states that the minimum period of furlough is three weeks.  It does not state a minimum period of work between periods of furlough.

The implications are that staff can switch as many times as needed between being furloughed and not.  

However, there is a limitation in that the employee must be furloughed for three consecutive weeks.  It therefore would not be possible to furlough someone on Monday then bring them back to work on the Friday for one day of work before returning them to furlough again.  Many clients have expressed a concern that if part of the workforce is furloughed and those that remain are having an increased workload for only 20% more pay than those at home doing no work it is difficult to keep a team motivated. 

It also puts the team who are continuing to work at increased risk of burn out.  We therefore wonder if over time the three-week rule may change but for now, we can only plan with what we are given.

Example of taking people in and out of furlough

The best recommendation we have seen is where a business wants to rotate the workforce you would need to divide your staff into four teams or shifts. Each team would have a phase of three weeks furlough followed by a week back working before returning to furlough.

For this to operate you would have to stagger the teams going onto furlough. Team A would furlough immediately. Team B would furlough a week later and so on.  Below is a diagram to help to explain the work pattern, although as you will see you do feel sorry for team D.

This is just a theory, and it may take some more detailed discussions to devise a workable plan. It does however suggest that decisions need to be made quickly if a rota like this is to work.


Many clients have been wondering about what happens at the end of all this.  Will staff return to work in September and ask to take all their accrued holiday leaving the business with a workforce shortage just as you are desperate to get the work flowing again?

Another aspect to this question is if you have staff who work throughout the crisis and other staff who are furloughed throughout the whole crisis then it doesn’t seem fair that both groups have the same holiday entitlement.

Guidance from ACAS stated that holiday will continue to accrue while a member of staff is furloughed. As frustrating as this is as an employer it lays rule that we must abide by and plan around this.

One thing that ACAS have detailed is that holiday carry over will be extended for two years, giving a little more power to employers to work with staff about holiday planning so that staff take holiday in a way that does not leave the business understaffed in the short term.

We have a more detailed article here written by our HR manager, Donna Bygrave, which gives a lot more detail on this contentious issue.

Read more details on holiday and furloughing

Our guidance on holiday

(updated 5 April 2020)

The updated guidance from ACAS does not rule out requesting staff take holiday while furloughed.  

You can therefore give notice to an employee to take time as holiday. You could put in place a policy that every 16th day (based on a five-day working week) is to be taken as a day of holiday. Holiday will be paid as part of the furlough and will be covered by the furlough grant for the employer. Not the neatest solution but hopefully something workable to solve the issues involved. As you can read in our analysis of the ACAS guidance you have to give adequate notice to a member of staff to request that they take holiday.

The possible risks are:

  • On average an employee accrues 1.3 days holiday every 3 weeks. So, if the period of furlough lasts for a protracted time the staff member will still have accrued some holiday time to take off when back at work.
  • Once the crisis is over it is possible that under legal process it could be judged that holiday taken on furlough would have to be paid at 100% salary not the reduced 80% salary, in which case the employer may have to top up for those specific days.

Other items to consider:

You may need to update employment contracts or policies so that it gives clarity to staff on issues surrounding holiday pay including the following:

  • A statement that under employment law the employer can give notice to an employee to utilise annual leave at the employers discretion
  • The employer has the right to reject applications for annual leave provided there are alternative dates of leave the employer can approve at a later date
  • That a temporary extension to holiday allowances will allow holiday unused at the year end to be carried over for two years
  • That holiday for non-furloughed workers will be prioritised for annual leave  in the interests of employee welfare

We are not employment lawyers and make the above suggestion to allow our clients to put a policy in place and move forward with decision making. It is possible that as details emerge this policy may have to be altered and updated.  We will keep you posted but hope that at least making this suggestion allows you to resolve these issues for now.

What if I get my furlough calculation wrong?

With such complex issues while trying to balance the needs of furloughed staff, working staff and the business as whole the likelihood of getting something wrong in these furlough calculations is high.

From information currently available it seems likely that HMRC will investigate after the event where they suspect something has been reported incorrectly and the grant given therefore being wrong.

At the moment there is no suggestion of penalties or fines, although one would expect that if they found clear evidence of fraud then they would impose some sort of punishment. For genuine error it appears that there is acceptance that this is all new and complicated and decision have to be made without the full facts being available therefore such errors would result in a repayment of any grant money incorrectly without any risk to penalty or a wrap on the wrist from HMRC.  

In summary it would appear they intend to be fair and not heavy handed in dealing with genuine slip ups. There is no published guidance to confirm this though but hopefully “we’re all in this together” will create a lot of goodwill on the issue.

How to apply

On your marks, get set… furlough!

On Monday 20th April, the HMRC gateway opens for applications to get the Coronavirus Job Retention Scheme (CJRS) or the furlough grants.

Over the last seven days there have been a number of updates from HMRC about how to apply for the scheme.  We won’t know exact details of the application process until it opens tomorrow but in the mean time we do at least have a draft plan to help you apply for the grant.

Click the link below to read our article outline what details you need to have ready to make the application, how this is likely to work over the coming months and key  changes recently.

How to furlough your employees

Help getting it right: The Furlough Toolbox

We have developed a number of standard letters, agreements and tools to help you help yourself get it as correct as possible.  

If you would like us to send you our “Furlough Toolbox” then we can provide this for a charge of £295 plus VAT (A4G clients get a £100 discount, reducing the cost to £195 plus VAT).

To get the toolbox please email discovery@a4g-llp.co.uk with the subject line “Furlough Toolbox” and give your full name, business name and the best telephone number to reach you.  One of the team will then call you to arrange payment and email you the tools.

The tools we have include:

  • Letter / agreement to provide to staff that you are furloughing
  • Appendix of items included in the furlough agreement
  • Calculator to confirm the value of the furlough gross pay (and estimate of net pay for the staff if needed)
  • Log for collating details for the application for the grant

If you have had some of these details from us previously, please note that these have now been updated for the new information provided by HMRC so it may be worth getting these updated copies.

Talk to us

For specific information and discussion about furloughing our Client Managers are prepped and ready to help you work out the way forward.

The next item we will cover regarding furloughing will be the options for owners / directors of limited companies who were largely forgotten by both the Job Retention Scheme and the assistance for the self-employed. If you’re not already signed up to our daily updates, sign up here

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