COVID-19: HMRC releases new guidance on flexible furlough scheme

Please Note: All information correct at time of writing on 15 June 2020. We do our very best to make sure our information is as up to date as possible, but we’d encourage you to check out our latest articles and to check the government website for updates as they happen.

Late on Friday 12 June, HMRC updated their guidance on the Coronavirus Job Retention Scheme to reflect the forthcoming changes to the scheme to allow flexible furlough.

Our Employment Law experts have studied the guidance in-depth, and have summarised the key points below.

Summary of changes

From 1 July, employers can bring furloughed employees back to work for any amount of time and still claim the furlough grant for the difference between the hours they would normally have worked and the hours actually worked. For example, if an employee normally works four days a week and the employer brings him back to work two days a week, his employer would pay him normal pay for the two days a week worked and be able to claim and pay to the employee, furlough pay for the remaining two days.

From 1 August, the maximum amount which can be claimed under the scheme each month will reduce to reflect the financial contribution employers will have to start making from this date.

  • From 1 August, the government will pay 80% of wages up to a cap of £2,500 for the hours an employee is on furlough and employers will pay Employers’ National Insurance Contributions and pension contributions for the hours the employee is on furlough.
  • From 1 September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough. Employers will pay Employers’ National Insurance Contributions and pension contributions and top up the employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for the time they are furloughed.
  • From 1 October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee is on furlough. Employers will pay Employers’ National Insurance Contributions and pension contributions and top up the employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for the time they are furloughed.

The wage caps are proportional to the hours an employee is furloughed. For example, an employee will be entitled to claim up to 50% of the £2500 cap if they are furloughed for 50% of their usual hours.

 The scheme will close on 31 October 2020.

Minimum period of furlough

Under the current system, employees must be furloughed for a minimum period of three weeks. From 1 July this is abolished and there will be no minimum period of furlough.

Currently, when an employee returns to work, their period of furlough comes to an end and they must agree to be put back on furlough should the employer need to furlough them again. From 1 July, the employer can enter into a flexible furlough agreement with an employee which can last any amount of time. Employers should be clear that the wording of their agreement allows them to do what they want to do.

For example, an employer may have entered into a flexible furlough agreement whereby the employee periodically carries out work without bringing the period of flexible furlough to an end. If the employer then feels confident that this arrangement can come to an end and the employee returned to their usual hours permanently, they will have to enter into a new flexible furlough agreement if they subsequently want to put the employee on furlough again.

Any period of furlough which started before the 30 June, must still be a for a minimum consecutive period of three weeks. For example, if an employee is put on furlough on 25 June, the current rules will apply and they will need to serve at least three consecutive weeks on furlough before they can return to work or be flexibly furloughed.

This is, of course, assuming that the employee is not being put on furlough for the first time as the last date for doing this was 10 June (the only exception to this being if the employee was on maternity leave or any other statutory family-related leave at the time and the employer had furloughed at least one other worker for three consecutive weeks prior to 30 June).

Agreement to be flexibly furloughed

As with furlough itself, the employee must agree to be put on flexible furlough and that agreement must be evidenced in writing.

It’s unlikely that the original agreement to furlough will cover this change to the furlough arrangements and therefore additional documentation will be required.

A further Treasury direction to cover the flexible furlough scheme is expected, which should detail the exact requirements but given that there seems to be quite a lag in publishing directions relating to the scheme, it’s best to assume that a new agreement will be required.

Maximum number of employees you can claim for

The guidance states:

“The number of employees you can claim for in any claim period starting from 1 July 2020 cannot exceed the maximum number of employees you claimed for under any claim ending by 30 June 2020”

This may not be the case if the employer has employees returning from statutory family-related leave (the guidance says “statutory parental leave”).

This may be problematic if the employer previously used a rota system for putting employees on furlough and now wants to bring everyone back but working reduced hours each week. The minimum claim period is a week and all employees on full or flexible furlough during the claim period must be included in the claim. However, this would mean including a higher number of employees in a claim than claimed for previously during in any claim prior to 30 June.

Length of the claim period

Any claim for periods starting before 1 July must end on or before 30 June. This is the case even if the employee is going to continue to be furloughed full-time after 1 July.

For example, employee A was put on furlough on 1 June. Her employer plans to keep her on furlough until the end of July. They submit claims for furloughed staff monthly and have already submitted a claim for her furlough pay up to 12 June. They are not able to claim for the period 13 June – 12 July as the claim period for furlough prior to 1 July has to end on 30 June.

They will, therefore, have to submit two claims for this period:

  • one covering the period 13 June- 30 June
  • one covering the period 1 July to 12 July

Under the current system, there is no limit to the maximum length of the claim period and claims can be backdated to March 2020. However, this is changing. From 1 July, claim periods starting on or after 1 July (which will be the case for every employee continuously furloughed at that time) must:
  • start and end in the same calendar month
  • the claim period must be a for a minimum period of seven days

The only circumstances where a claim period of less than seven days will be permitted is where the employer is claiming for either the first few days of the month or the last few days of the month and they have already claimed for the period ending immediately before it. For example:

Employee B is put on furlough from 14 July to 4 August. His employer is not able to submit one claim covering this period as from 1 July, the claim period must start and end in the same calendar month. The employer will, therefore, have to submit two claims:
  • one for the period 14-31 July
  • one for the period 1-4 August

Although the August claim period will be less than seven days, in these circumstances it would be acceptable.

Please remember that the seven days is not the minimum period of furlough, it is the minimum claim period.

When to submit your claim

Claims for periods ending on or before 30 June must be submitted by 31 July.

The main rules regarding submitting claims remain the same, namely:

  • You should try to match your claim periods to the dates you process your payroll if this is possible
  • You can only make one claim for any period, so it is essential to include all furloughed or flexibly furloughed employees even if they are paid at different times or were put on furlough at different times during this period
  • Where employees are continuously furloughed or flexibly furloughed, the claim periods must follow on from each other and there should be no gaps
  • You can claim before, during or after your payroll date
  • You can make your claim up to 14 days before your claim period end date and you do not need to wait until the end of a claim period to make your next claim

If the employer is claiming for flexibly furloughed employees, it is essential to be sure of the exact number of hours they have worked or will be working during the claim period. If claiming in advance of the end of the claim period and the employee ends up working more hours than they stated when submitting the claim, this must be corrected.

Employee’s usual hours

An employer will not need to work out their employee’s usual hours if they are fully furloughed (this means that they do no work at all during the claim period).

If they do some work during the claim period, they are flexibly furloughed and the employer will need to work out the hours they usually work and the hours they actually worked during the claim period (the difference will be the basis for the furlough claim). 

Calculating usual hours where the employee has set hours and whose pay does not vary with the amount of work done

In these circumstances, the employer should:

  • Take the number of hours the employee was contracted to work for at the end of the last pay period ending on or before 19 March 2020  (if the employee was on holiday, sick or taking family-related statutory leave, the employer should treat those days as if they had been in work)
  • Divide by the number of calendar days in that repeating working pattern (include non-working days)
  • Multiply by the number of calendar days in the pay period (or partial pay period) they are claiming for (round up to the next whole number of days)


Calculating usual hours where the employee works variable hours

Where an employee works variable hours, the employer should use as a starting point the higher of either:
  • the average number of hours worked in the tax year 2019 to 2020
  • the corresponding calendar period in the tax year 2019 to 2020


When making these calculations, the employer should include all hours for which they received their full pay (e.g. annual leave) and overtime (if pay for these hours was not discretionary).

The guide sets out the following instructions for calculating usual hours in these circumstances:
When calculating usual hours based on the average number of hours worked in the tax year 2019 to 2020 -
  1. Start with the number of hours worked (including paid leave) in the tax year 2019 to 2020 before the employee was furloughed, or the end of the tax year if earlier.
  2. Divide by the number of calendar days the employee was employed in the tax year 2019 to 2020, up until the day before they were furloughed or the end of the tax year if earlier
  3. Multiply by the number of calendar days in the pay period (or partial pay period) you are claiming for.
  4. Round up to the next whole number if the outcome isn’t a whole number.


When calculating usual hours based on the corresponding calendar period –
  1. Identify the pay periods in the 2019 to 2020 tax year that correspond to at least one calendar day in the pay period (or partial pay period) you are claiming for.
  2. If the pay period (or partial pay period) you are claiming for starts and ends on the same calendar days as the identified pay period in the 2019 to 2020 tax year - use the number of hours they worked in that pay period.
  3. If the pay period (or partial pay period) you are claiming for does not start and end on the same calendar days as the identified pay periods in the 2019 to 2020 tax year – you’ll need to add together a proportion of the hours worked in each of the pay periods you’ve identified.

Calculating the number of furloughed hours for each employee

The number of furloughed hours will be the employee’s usual hours for the claim period less the number of hours actually worked (or expected to be worked).

What records do I need to keep and for how long?

  • the amount claimed and claim period for each employee
  • the claim reference number
  • the calculations used when making the claim


If the employee was flexibly furloughed, the employer should also retain:
  • the employee’s normal hours of work hours worked including any calculations that were required
  • the actual hours worked


All documents should be retained for six years.

Correcting an error in your claim

If the employer made an error when submitting their claim, which resulted in them receiving an overpayment, they must notify HMRC and pay this back.

This can now be done when submitting their next claim when they will be asked whether they need to adjust the amount claimed because of a previous error. They should retain a record of the adjustment for six years.

If the error was made in their final claim, HMRC are currently working on a way for employers to report their error and repay the overpayment and guidance will be available on this as soon as the process is finalised.

If an employer needs to increase the size of the claim, they should contact HMRC direct as they will need to carry out additional checks.

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