13 August 2020

Furlough and the Coronavirus Job Retention Scheme: latest guidance for UK employers


The deadline for furloughing staff not previously furloughed under the Coronavirus Job Retention Scheme (CJRS) has now passed but new and updated guidance on important matters continues to be released. We have produced a short guide for employers to help keep track, covering four important updates:

  • New rules on calculating a week’s pay
  • Notice pay during furlough
  • CJRS Errors and Penalties Guidance
  • The Job Retention Bonus Scheme

New rules on calculating a week’s pay

If you take the difficult decision to make an employee who has been on furlough redundant, it is essential to make sure that the ‘week’s pay’ figure you use to calculate how much statutory redundancy pay they are entitled to is based on their normal wage, rather than any reduced furlough rate. This was confirmed by the Employment Rights Act 1996 (Coronavirus, Calculation of Week’s Pay) Regulations 2020, which came into force on 31 July 2020 (‘the Regulations’). The Regulations deal with how a ‘week’s pay’ is calculated for the purposes of statutory redundancy pay and some other statutory payments. The new provisions can be summarised as follows:

  • For those with normal working hours, any reduction in the amount payable as a result of the employee being furloughed and receiving a lower wage than usual whilst on furlough must be disregarded. In other words, the employee’s normal contractual pay must be used as the starting point, not the pay received while on furlough.
  • For those who do not have normal working hours, a week’s pay is calculated according to their ‘reference salary’ for claiming furlough pay under the CJRS, but without the £2,500 cap otherwise imposed by the scheme.

The Regulations also apply to other statutory employment rights which involve calculating a ‘week’s pay’, including statutory notice pay, pay for time off for seeking alternative employment in a redundancy situation and compensation for unfair dismissal.

Notice pay during furlough

An area which has been causing confusion for employers was whether claims could be made in respect of the contractual notice periods of furloughed employees. Previous guidance had only referred to statutory notice periods, and did not mention contractual notice periods. There was some concern, as a result, that HMRC had intended to make a deliberate distinction between the two and that claims could not be made for furloughed employees serving a contractual notice period.

HMRC updated its guidance on this point on 17 July 2020. The update guidance clarified that employers could make claims in respect of both the contractual and statutory notice periods of furloughed employees.

The reference to contractual notice period has been removed from the latest 3 August version of the guidance for employers. However, it still appears in the employee guide of the same date, so appears to have been omitted in error rather than having been intentionally excluded.

CJRS errors and penalties guidance

On 28 July 2020, HMRC published two new guidance documents for employers on what to do if they have claimed too much or too little under the CJRS, and the penalties they will face if they fail to report overpayments.

The Errors Guide confirms that employers who have received overpayments must notify HMRC and make repayments. The process for doing so and relevant deadlines are set out in the guide. Where employers have claimed too little, they should inform HMRC and amend their claim. However, since 31 July 2020 employers have no longer been able to amend a claim for a period up to 30 June.

If you are an employer who has claimed too little, you must ensure that you still make the correct payments to furloughed employees, even where you are no longer able to claim the amount by which you have been underpaid.

In the Penalties Guide, HMRC has confirmed that it may recover the full amount of any overpayment employers receive through an income tax charge, with interest and penalties due on late repayments. If an employer fails to notify HMRC that they have received an overpayment, penalties of up to 100% of the overpayment may be imposed where the employer’s failure was deliberate and concealed. It is therefore essential to notify HMRC of any overpayment as soon as possible to avoid penalties, and to avoid jeopardising any payments you may have otherwise received under the Job Retention Bonus (JRB) Scheme (see below).

The Job Retention Bonus Scheme (JRB)

The JRB Scheme was announced by Rishi Sunak on 8 July 2020, with the aim of discouraging employers from making wide scale redundancies when the CJRS ends on 31 October 2020. Further details of the scheme have now been published in a policy paper from HMRC.

The JRB will be a taxable one-off payment of £1,000 made to employers for every employee who:

  • an employer previously claimed for under the CJRS;
  • remains continuously employed by them until 31 January 2021; and
  • is not serving their notice on or before that date.

All employers are eligible for the JRB scheme. Payments will only be made to employers who have claimed non-fraudulently, hence the importance of informing HMRC of any overpayments received under the CJRS as soon as possible.

As an employer, you will be able to claim for any employee, including office holders, company directors and agency workers, who:

  • was furloughed by you and in respect of whom you submitted a CJRS claim that meets all relevant CJRS eligibility criteria;
  • is continuously employed by you from the most recent CJRS claim in respect of that employee to 31 January 2021;
  • is paid at least £520 a month on average between 1 November 2020 and 31 January 2021 (a total of at least £1,560 over the three months);
  • is included in up-to-date Real Time Information (RTI) records covering the period up to 31 January 2021); and
  • is not serving a contractual or statutory notice period which started before 1 February 2021.

If you have had employees transferred to you as part of a TUPE transfer, or by the PAYE business succession rules, you may also be able to claim a JRB in respect of those employees. You must have claimed successfully for the employees transferred to you in order to be eligible, and it is only possible for employees who transfer before 31 October 2020.

Employers will be able to claim the JRB from February 2021 through a government website. More details of the process will be included in further guidance about the scheme, which is due to be available by the end of September. To ensure that your business is able to claim the payments, you should ensure in advance that employee records are up-to-date and correctly reported through RTI. You should also make sure that all CJRS claims have been accurately submitted and any necessary amendments have been notified to HMRC.

For further information on the above guidance or any other employment law queries, please get in touch with a member of our employment team.

To find out more, read our latest FAQs on returning to a safe working environment and coronavirus, furloughing staff and making redundancies.

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