COVID-19 update:

Our offices are closed but most of our team are available to help you and your business. Free access to information that we have established for our own business or clients.

Coronavirus Job Retention Scheme

Grant to furlough employees

The main financial support for businesses is a grant to pay towards the cost of employees who you continue to pay even though they have been sent home without work. The HMRC portal to make claims is now open


The immediate effect of the lockdown was that many employees were unable to work and employers faced laying them off. As an alternative employers can claim a grant towards the salary of those who cannot work. The salary you pay is not capped but the amount reimbursed is limited to 80% of former salary or £2,500 per month - whichever is higher. Such employees are described as having been furloughed. The scheme has now been extended to end October 2020.

Furlough is a term more usual in the US. When an individual is furloughed it means that they remain an employee with all the rights and obligations attached to that under UK employment law – except that the empoyer will not give them any work to do and without special measures they would not receive any pay.

You can claim the grant for all employees "on your payroll" on or before 19 March 2020 - whether full-time or part-time. They must have been included on your RTI PAYE returns to HMRC made before 19 March to qualify. If they ceased to be employed after 28 February then you can take them back and furlough them and claim their salary. Staff on sickness can still be furloughed provided that the sickness was not the sole reason for the furlough. An employee who has been furloughed can be moved to Statutory Sick Pay if they become unwell. Employees who started between 1 and 19 March and who were first notified under RTI at the end of March will not qualify to be furloughed.

Employment law

All employers should be aware that normal employment law applies - so any change in salary or terms must be agreed with the employee - although in practice their only alternative would be to accept redundancy. If you choose to furlough some, but not all employees then your reasons must be clear and not descriminatory. You can rotate employees onto and off furlough provided that each period of working and of furloughing is at least 3 weeks long.

The employer can choose to pay full salary to the employee during the furlough even though they can only claim 80% in the grant application.

The employer should not ask the employee to undertake any work. Better guidance has now been issued on what “should not work” means.  Any training or volunteering whilst being furloughed does not count as doing work. Using the time to acquire or expand a skill or knowledge would seem a productive way of using some of the time – but it does not seem that employers can make it a requirement. 

If the employer reduces hours or the salary of all its staff as an alternative to furloughing then no grant is payable. So many will choose to furlough people in rotation to achieve the same end result but with a higher grant claim.

There appears to be a consensus that time spent on furlough does accrue holiday. The employer can require the employee to take their holiday during the period of furlough. Many employers are taking the view that days taken as annual leave should be paid at 100% of salary - even though the furlough is on 80% pay.


Initially it seemed unlikely that directors of a company - and in particular sole directors of a company could legitimately be furloughed. It is now clear that they can. Carrying out statutory duries e.g. working on the accounts will not be regarded as breaking the furlough - but any work for which an invoice might be sent will disqualify the person. The majority of Directors, who take very little salary and top up with dividends are none-the-less likely to receive very little money because of the way the rules are calculated. An annual salary of around £37,000 would be required in order for £2,500 pcm to be less than 80% of salary.

Calculation of the grant

  1. 80% of the persons stated annual salary at 28 February 2020    or
  2. Same months salary from last year    or
  3. Average so far for the 2019/20 tax year     or
  4. If only started in February 2020 - pro rata their salary paid to give a monthly equivalent and claim 80%

Include any regular payments e.g. overtime and compulsory commission but not discretionary bonus, tips or commission. Do not include benefits in kind nor any salary sacrificed.

IR35 type companies

Guidance suggests that directors of companies affected by IR35 are likely to be eligible for grants.

How to claim

HMRC released its new Portal through which a claim will be made on time on 20 April. You will need

  • your employer PAYE reference number
  • the number of employees being furloughed
  • National Insurance Numbers for the employees you want to furlough
  • Names of the employees you want to furlough
  • Payroll/works number for the employees you want to furlough
  • your Self Assessment UTR or Corporation Tax UTR or Company Registration Number
  • the claim period (start and end date)
  • amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
  • your bank account number and sort code
  • your contact name your phone number

Agents will be able to process these claims on your behalf and our payroll team will be happy to undertake this on your behalf. It is likely to be more cost effective to make the claims at the same time as the payroll is being run. 

All claims can be audited - and we anticipate that the first people to be investigated will be those where the payroll returns to HMRC differs significantly from the claims being made 

Other employments

An employee on furlough can work for another employer without affecting the employer's claim. There could be restrictions about working for a related business.

Individuals with two employments could be furloughed from both - and both employers would qualify for grant.

If you are in any doubt - please check the official government guidelines