Originally created 26 March. Updated 14th June 2020

Who to furlough?

The guidance originally stated 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.

However, from the 1 July furloughed staff can do productive work for their employers whilst furloughed.

The hours worked must be recorded and then paid to the employee in full as gross pay on their next payslip. The amount of furlough pay is then reduced as a proportion of normal working hours in the month so that the furlough pay excludes hours worked.

This calculation is based on total “normal” working hours expected in a period of furlough less the actual hours worked. The remaining hours are then used as a proportion for furlough.

For example, if an employee who is paid the furlough cap of £2,500 per month and usually works 172.5 hours in July and is furloughed for the whole month, but they end up working one whole day of 7.5 hours then the furlough pay is calculated as: (172.5 – 7.5) / 172.5. this means the furlough pay is limited to £2,391.30 in this case.  The 7.5 hours that they actually worked is paid at their full rate or pay.

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. 

In the update on 12 June, HMRC confirmed that any staff previously furloughed can be put on furlough again from 1 July 2020. The guidance says from the 1 July employers are “only be able to claim for employees who have previously been furloughed for at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June”.

How to pay

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?

Calculating your furlough claim 

With the flexibility now being introduced to the system this means it will get very complicated in the final four months of the scheme. I recommend that payroll figures are calculated and passed to your payroll team as early as possible.

July 2020

This will be the most complicated month as employees can be on “flexible furlough” but as well as apportioning employees pay between hours furloughed and hours working during a period of furlough, an apportionment of employer’s national insurance and employers pension contributions will also need to be made.

HMRC have a calculator here you can use to help work out values. This shows that furlough claims will be worked out by the employee’s usual hours of work.

In coming weeks we hope to have a calculator that you can use for multiple employees on one report that can ten be used to aid your claim.

For the furlough claims from July onwards you will need some extra details that were not needed for previous claims where you have taken advantage of flexible working for:

  1. Normal hours the employee works in a payment period
  2. (Optional) How many hours they work per day and how many days a week they work
  3. How many hours in the period the employee was furloughed for (ignoring any flexible working they did during the furlough)
  4. How many hours work they did while furloughed?

Overall, claims for July should mean that any time a furloughed member of staff isn’t working under the flexibility of the new scheme their pay is covered by the grant in full.

August 2020

From August the grant will no longer cover the cost of employer’s national insurance or employers pension contributions. This simplifies the calculation slightly where a staff member is on flexible furlough working but overall means there will be a slight increase in cost for employers keeping staff on furlough.

For example if a staff member is furloughed for the whole of august with no flexible working and they are being paid the full £2,500 gross pay per month, under the furlough pay cap, then you as the employer will have to pay for the £243.98 of Employers national insurance and £59.40 Employers Pension (if the staff member is enrolled).

The furlough grant will no longer cover these costs, so the maximum increase in cost to you per employee on furlough is £290.14 per month.

September 2020

In September the grant available will begin to reduce.

HMRC will reduce the grant to employers, meaning that they will effectively pay 87.5% of the gross furlough pay member of staff is paid. Officially, the statement is that HMRC will now cover 70% of the employees’ wage, rather than the previous 80%, but it is for the most part easier to get practical numbers thinking of this as a grant in effective rates.

Someone being paid the maximum of £2,500 in a month, with no flexible working, would therefore result in an HMRC grant of £2,187.50, the employer being left to fund the remaining £312.50 plus National Insurance of £243.98 and Pension of £59.40.

Therefore, maximum cost to an employer of a furloughed member of staff in September is £615.88.

October 2020

October marks the last month the scheme will remain open. The grant will reduce again now being 60% rather than the original 80% of normal wages.

In effective terms HMRC will only fund 75% of the gross furlough pay member of staff. To put numbers to this for an employee being paid the cap of £2,500 per month, with no flexible working arrangements, HMRC will fund £1,875, and the employer will have to fund the remaining gross pay of £625 plus National Insurance of £243.98 and Pension of £59.40.  Therefore, maximum cost to an employer of a furloughed member of staff in October is £928.38.

On the face of it this looks like it is getting very unattractive but given that this is based on the furlough pay cap employees who are furloughed on salaries much higher than £37,500 then the furlough scheme could still be saving a lot of money compared to paying the staff member full pay while there is no work to do.

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

Originally, you could bring people in and out of furlough, but you had to furlough them for a minimum of 3 weeks before you could take them out.

However, from 1 July, the minimum period of furlough is 1 week, although in that week the employee can work for any amount of time whilst furloughed, provided the hours work are excluded from the furlough grant claim and the employee is paid full hourly rate for those hours worked.

Staff returning from maternity or shared parental leave after 1 July 2020 can be returned and furloughed even if they have not previously been furloughed, and will be able to utilise the flexible working arrangements available from July.

Example of taking people in and out of furlough (before 1 July)

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 opened for applications to get the Coronavirus Job Retention Scheme (CJRS) or the furlough grants.

Click the link below to read our article outline what details you need to have ready to make the application.

See our update here on 23 April on the flaws to the furlough system and how to overcome them if you are having issues.

How to furlough your employees

Redundancies and furlough

There have been no announcements as of yet about whether any restrictions are placed on using the Furlough Grant for staff that are on a redundancy notice.  From discussions with legal experts, this remains a viable option, provided where a furloughed member of staff is within their redundancy notice period.

Our guidance on costs and concerns of redundancy

Planning points

What are your options? For each employee you are ultimately left with four options:

  1. Return staff member to work
  2. Return to work under reduced hours*
  3. Switch staff to being “laid off”*
  4. Make staff redundant

*beware that staff on reduced hours or laid off for four continuous weeks or six out of thirteen weeks can apply for redundancy

You may benefit from talking to Donna, our head of HR, who can help with contractual and legal issues surrounding bringing staff back on reduced hours or the scarier options of layoffs and redundancies. Email her at donna.bygrave@a4g-llp.co.uk or call 01474 853 856.

Back to Business: Bringing staff out of furlough

We have been answering lots of questions recently about staffing decisions. To un-furlough, make redundant, reduce hours or bring back? Some big decisions affecting the lives of people you see as often as some members of your family are going have to be made soon.

We also have been trying to navigate through employment rules with options for bringing staff back to the business from furlough. And sadly we have also had to help businesses who need to start making redundancies or decide that they cannot afford to return to business at all.

The article at the button below provides some ideas for what to consider in preparing to get your workforce back.

Considerations of bringing staff out of furlough

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.

Final thoughts

On balance, the furlough extension announced on 15 June is more generous than we had expected. The maintaining of employees on 80% pay does cause some headaches for employers where it can be hard to motivate staff to return to the work force.

The scheme originally caused many businesses to pause plans to reduce staff levels. While the scheme continues to October future staffing levels most likely need reviewing now to make sure that the furlough scheme isn’t just delaying an inevitable crunch point for your businesses cashflow and longer-term profitability.

Our Principal Advisers and Client Managers have been working diligently to help businesses get to grips with the numbers and draw up workable projections to help make decisions.

If you need to have someone to discuss thoughts and ideas as you move forwards then please get in touch with your Client Manager or Principal Adviser, call 01474 853 856 or email discovery@a4g-llp.co.uk

As more updates are announced, we will be sifting through them and bringing you easy to understand guidance via our emails. If you’re not already signed up to our daily updates, sign up here

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