Furloughing workers. Applying for the grant template letter agreeing changes to employment contract image


Wednesday 11th November 2020.

This article was written in May 2020 and is now out of date. If you have landed here, (via a cached or bookmarked page), please follow the link to our latest article that explains the extended CJRS furlough scheme from 1st November 2020, containing information on how to apply for the scheme and a template furlough agreement letter to send to employees to gain their agreement prior to being put on the scheme.

Furlough scheme to end 31st October

HMRC Portal for claiming the grant: here,
and at GOV.UK www.gov.uk/guidance/claim-for-wages-through-the-coronavirus-job-retention-scheme,
refresh the page and click the ‘how to claim’ link.


This HMRC step by step guide, outlines the specifics of what you need to do to claim for the grant.

HMRC has produced updated guidance for employers on how to calculate your claim, it explains different pay and grant reclaim scenarios.

So far HMRC has been processing claims and making the grant payment to employers within 6 working days.

On 20th March the Government introduced The Coronavirus Job Retention Scheme (CJRS) where an employer designates a worker as being on leave from the business (furlough leave). Under the scheme, all UK employers, regardless of size or sector, can claim a grant from HMRC to cover 80% of the wages costs of employees who are not working but are kept on the payroll (‘furloughed’), of up to £2,500 a calendar month for each employee. Employers can choose to top up the remaining 20% if they wish, but do not have to do this.

Guidance for employees can be found on GOV.UK check if your employer can use the CJRS scheme.

There is also a recorded webinars explaining the CJRS on HMRC’s youtube channel.

The Q&A below explains the scheme, what you need to do in order to furlough workers and how to apply for the CJRS grant.

We are advising employers to communicate with staff first, and seek their agreement to be designated as furloughed workers, before sending a second letter formalising the decision.

We have put together this template of a second letter that, following initial discussions with employees, employers should customise and send to employees,  seeking their agreement, showing the exact changes to their salary and other benefits and confirming that they have been furloughed and keep a record of this communication. 
Download the template letter. 

This letter is a template only, and will need customisation. There may be well be questions from your employees and almost certainly variations required, so please do get in touch if you have queries, if you need a word copy of the letter, or to discuss your particular situation and what you need.

The only way for Employers to make a claim is online. Employers will be able to claim for:

  1. – Wage costs, plus
  2. – the employer’s NI contributions, plus
  3. – the minimum automatic enrolment employer pension contributions on that wage.

How do I make a claim for furloughed staff under CJRS?

Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, for example, 20 or more, it may be necessary to start a collective consultation to gain agreement to the changes to staff terms of employment.

Information you need before making a claim

You will need to have the following:

  • a Government Gateway (GG) ID and password.
    If you don’t already have a GG account, you will need one and you can apply for one here. (Please note, this process is taking at least 10 days or so, and the letter (!) HMRC sends confirming your Gateway ID and password will be send to your business address, so make sure you have a way of getting your hands on it!
  • Be enrolled for PAYE online. If you aren’t registered yet, you can do so now, or by going to GOV.UK and searching for ‘PAYE Online for employers’.

Information you will need to make a claim

You will need to provide the following information to make a claim:

  1. The bank account number and sort code you want HMRC to use when it pays the claim.
  2. The name and phone number of the person in your business that HMRC should contact with any queries.
  3. Your employer Self-Assessment UTR (Unique Tax Reference), Company UTR or CRN (Company Registration Number).
  4. The name, employee number and National Insurance number for each furloughed employee.
  5. Your employer PAYE reference number.
  6. The number of employees being furloughed
  7. Payroll/employee number for the furloughed employees (optional)
  8. The claim period (start and end date)
  9. Amount claimed (per the minimum length of furloughing of 3 consecutive weeks).

You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.

Employers with less than 100 furloughed staff will be asked to enter details of each employee they are claiming for directly into the system (yes, really) – these details will include:

  • the employee’s name,
  • National Insurance number,
  • claim period and claim amount,
  • payroll/employee number (optional)

Employers with more than 100 or more furloughed staff will be asked to upload a file with the information rather than input it directly into the system. HMRC say that they will accept the following file types: .xls .xlsx .csv .ods

Likewise, this file should include the following information for each furloughed employee: their name, National Insurance number, claim period and claim amount, and payroll/employee number (optional).

If you want an agent to make the claim for you

If your business uses an agent who is authorised to act for your business for PAYE purposes, the agent will be able to make a claim on behalf of your business using their ID or password. So please speak to your agent now.

However, if your business uses a file-only agent (files your RTI return but doesn’t act for the business in other matters), the file-only agent won’t be able to make a claim on your behalf. Your file-only agent can assist you in obtaining the information you need to claim (which is listed above). You will need the information listed above in order to make the claim directly.

HMRC have said they cannot provide your employees with details of claims you make on their behalf. They have asked that businesses help by keeping their employees informed, answering any questions that they might have. Please ask your employees not to contact HMRC.

  • a Government Gateway (GG) ID and password.
    If you don’t already have a GG account, you will need one and you can apply for one here. (Please note, this process is taking at least 10 days or so, and the letter (!) HMRC sends confirming your Gateway ID and password will be send to your business address, so make sure you have a way of getting your hands on it!
  • Be enrolled for PAYE online. If you aren’t registered yet, you can do so now, or by going to GOV.UK and searching for ‘PAYE Online for employers’.

Employers should retain all records and calculations in respect of your claims.

HMRC confirms that the CJRS will be in place for at least 3 months from 1 March.

Which employees are covered?

The HMRC guidance states that CJRS will cover employees who have been on the payroll since 28th February this year, on any type of contract including:  

  1. full-time and part-time employees
  2. employees on agency contracts, and
  3. employees on flexible for zero-hour contracts

An employee is considered furloughed under the scheme only if he or she does no work for the employer. The scheme does not therefore cover the wages of employees whose hours are reduced.
Note furloughed employees are allowed to undertake training for their current employer, and this training has to be paid at their full salary rate.

In recent updates to the CJRS scheme, employees who are unable to work because they have caring responsibilities resulting from COVID-19 can also be furloughed.

How to put employees on furlough leave?

Employers need to:

  • Decide which employees to designate as furloughed workers.
  • Notify those employees of the intended change.
    The HMRC guidance states that it is important to take legal advice on this because the changes will affect each worker’s contract of employment and need the workers’ agreement.
  • Consider whether you need to consult with employee representatives or trade unions.
    For example, where the employer intends to vary the contracts of 20 or more employees, and it intends to dismiss employees who do not consent to the change in their terms, for the purposes of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), those employees who do not consent to the change in their terms will be classed as dismissed by reason of redundancy.

    The employer will therefore have a duty to inform and consult appropriate employee representatives and notify the Secretary of State using form HR1.

    The HMRC guidance states that employers will need to follow this process before placing employees on furlough leave.
  • Agree the change with the furloughed employees.
    Most employment contracts will not permit an employer to reduce an employee’s pay, provide them with no work, and change their employment status without agreement – otherwise there is the risk of a constructive/unfair dismissal, wrongful dismissal/breach of contract claims and unlawful deductions of wages claims.

    Technically under the employment contracts each employee should be given the period of notice in their employment contract (e.g. one month for most employees or the number of weeks equivalent to the years of service if longer) before the change takes effect.

    However, faced with the alternatives, which are likely to be unpaid leave, lay-off, or redundancy, the majority of affected employees are likely to agree to be placed on furlough leave.
  • Confirm the employees’ new status in writing. Ideally, the employer should advise how long it expects furlough leave to continue, however this may be difficult in the current climate. Employers may wish to put employees on furlough leave for an initial period, subject to review.
  • Submit information to HMRC about the employees that have been furloughed and their earnings through the new online portal, (see above).
  •  Ensure that the employees do not carry out any further work while they are furloughed.

What wages should employers pay during the period of furlough leave?

  • During the period of furlough leave, the employer should pay the employee at least the lower of 80% of the employee’s salary or £2,500. In each case PAYE (Income Tax) and NI is deducted before the salary is paid to the employee.
  • The HMRC guidance states that employers can choose to top up wages to 100%, but are not obliged to do so.
  • For full-time and part-time salaried employees, the employee’s actual salary, before tax, as at 28 February 2020 should be used to calculate the 80%. 
  • The employee’s wage will be subject to income tax and other deductions e.g NI and workplace pension contributions.
  • The HMRC guidance notes that fees, discretionary commission and bonuses should not be included. 
  • HMRC states it will issue further guidance on how to calculate claims for employers national insurance contributions and the minimum automatic employer pension enrolment contributions before CJRS goes live.
  • Where an employee’s pay varies, the employer will be able to claim for either:



    -the higher of the employee’s earnings in the same month the previous year, or

    -the employee’s average monthly earnings in the 2019/20 tax year. 
  • In the case of an employee who has been employed for less than a year, the employer will be able to claim for an average of the employee’s monthly earnings since he or she started work. 
  • In the case of an employee who only started in February 2020, the employer will be required to pro-rate the employee’s earnings so far.
  • The Guidance also covers the application of the national minimum wage (NMW) to furloughed employees. 

It states that, since employees are only entitled to the NMW while doing work, furloughed employees, who are not working, must be paid at the 80% rate (or £2,500) even if, based on their usual working hours, this would be below the applicable rate of NMW. 

However, the Guidance goes on to state that if employees are required to, for example, complete online training courses while they are furloughed, then they must be paid at least the NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

The National Minimum wage from April 2020 is £8.72 for those aged 25 and over.

What happens if an employee is on Statutory Sick Pay?

Employees who are on sick leave or self-isolating should get statutory sick pay but can be furloughed during this time. We therefore think that an employee on contractual sick pay could also be placed on furlough leave.

Employees who are shielding in line with Public Health Guidance or at home looking after children can be placed in the Coronavirus Job Retention Scheme.

What should I say to employees and what should I ask them to sign?

The Guidance recommends that employers discuss furloughing with their staff and make any changes to the employment contract by agreement

The template letter above, that you can download, is the second letter to send to your staff, after you have notified them initially that the business is considering furloughing. The second letter is the workers agreement to change their contract so that their salary is reduced and they are on furlough leave.

If the employer is planning to reduce the salary and any benefits related to salary (eg pension) to the 80% level, then under employment law this is an unlawful deduction from wages for the 20% of salary and benefits, and could be constructive (unfair dismissal). This is why it is important to get the workers agreement by signing the second letter.

Overall it is important to meet/speak with the worker to explain what the business is proposing to do and to seek their agreement. In effect this is consultation.

Please note that this second letter assumes that March salary and benefits were paid in full.

If this is not the case then please speak with us, as a more detailed letter will be needed explaining what is happening.

This second letter will need to be counter-signed by the employee and it is safest to get the second letter counter-signed even if there has been agreement by email. Under employment law it is important to have a counter-signed letter evidencing the change. If the employer is maintaining 100% of salary and benefits and just designating the employee as a furloughed worker a different letter will be sent. HMRC recommends that copies of these letters are kept for at least 5 years.

It is important to maintain good communication with employees and be available to speak as needed. 

You should expect ongoing questions from your teams about this and returning from furlough leave, we advise using these to produce your own Q&A to help them. Please contact us if you need a return from furlough leave letter.

Are employers obliged to top up the remaining 20%?

The guidance for employees states that ‘your employer could choose to fund the differences between this payment and your salary, but does not have to’.

Withholding 20% of an employee’s salary will, however, amount to breach of contract and unlawful deduction of wages, unless the employee gives their consent. It is expected that the majority of employees will consent since furlough leave is a better alternative than unpaid leave, lay-off, or redundancy.

What happens to pension, holiday and other benefits?

Each employer will have different arrangements. This second letter needs careful customisation, as we’ve said, to reflect what is happening to these benefits. Employers can claim for the employers workplace pension contribution as under the grant, and when paying workers employers will deduct the worker’s workplace pension contribution and pay the contributions into the relevant pension scheme as normal.

Employees will continue to accrue the basic 20 days and 8 public holidays (5.6 weeks) Working Time Regulations statutory holiday over the furlough leave period, and employers will need to pay this at 100% salary (because it is a benefit accrued when the employee was receiving full salary) even if employers are only planning to pay 80% salary.

Can an employee request their employer puts them onto furlough leave?

Yes, an employee can request this, but the employer does not have to agree.

It is the employer’s decision which employees to place on furlough leave, if any. It seems that it is also the employer’s decision whether to place employees on furlough leave, or make them redundant.

Potentially redundant employees do not have a right to require their employer to place them on furlough leave as an alternative to redundancy. However, it is hoped that many employers will see the new scheme as preferable to business closure and making redundancies.

How do I choose which employees are placed on furlough leave and which are not?

Employers will make a commercial judgment about which critical business functions will need to carry on (e.g. Board or senior management oversight, IT support teams, finance teams, HR, legal, facilities management/security etc). Choosing who needs to be placed on furlough leave, and who must continue to work may prove a challenging task for some employers. 

This is especially difficult if you intend to pay staff on furlough leave their full pay, while other staff are being asked to work as normal for their pay. Staff who were delivering services on-site, are likely to be natural candidates for furlough leave.

The starting point is to consider business needs as stated above. Keep records of why that decision was made showing which roles were critical to the business functioning during the coming three months. 

The HMRC guidance states that equality and discrimination laws continue to apply to the selection process for employees to go on furlough leave. Take care to avoid direct or indirect discrimination in the selection process. Make contact if you need help or have queries on this.

Where an employer must select between staff doing identical business critical roles, the first step is to ask for volunteers to remain working, or use a random selection policy for large teams. 

For clients we are advising who have employees who are no longer needed to deliver a service on site (e.g restaurants, leisure facilities, bars) as the site is shut, these clients have asked for volunteers to be placed into the Coronavirus Job Retention Scheme. They have received very positive response and large numbers of workers accepting the re-designation in order to preserve their employment.

For the functions which are critical for the business (referred to above) employers could consider having enough staff available if a team member should go sick or have access to temporary worker support from home where possible so that critical function can continue.

What happens if the employer is planning to furlough 20 or more staff?

This letter is designed where less than 20 staff are employed by one legal entity at one establishment are to be included in the CJRS. 

If there are more than 20 staff and the employer would have to consider redundancies if the employees did not accept the furlough leave at 80% salary, then the collective consultation paragraph in this letter needs to be included.

The Guidance makes specific reference to these risks and the need to take overall legal advice.

What happens to employees who have been made redundant, can they be furloughed and be in CJRS?

If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages through the scheme. This applies to employees that were made redundant or stopped working for you after 28 February, even if you do not re-employ them until after 19 March. This applies as long as the employee was on your payroll as at 28 February and had been notified to HMRC on an RTI submission on or before 28 February 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 28 February 2020

What happens to employees hired after 28 February 2020?

In the important change to the scheme we stated at the beginning, employees hired after 28th February are now eligible to join CJRS, if they were employed as of 19th March and were on your PAYE payroll on or before that date.

What is the minimum time that an employee can be furloughed?

Furlough leave runs for a minimum of 3 weeks. The scheme is open 1st March until end of October 2020. Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made to furlough, nor when the employee is written a letter confirming their furloughed status.

Can an employee volunteer or do training work during furlough leave?

A furloughed employee can volunteer e.g as an NHS volunteer, as long as he/she does not provide services or generate revenue for the organisation.

If an employee is required to complete online training courses whilst they are on furlough leave then they must be paid their 100% salary (which must be of course at least National Living Wage/National Minimum Wage) for the day/s spent training.

Can an employee work for different employer whilst on furlough leave?

in another important change to the scheme ,that we mentioned above, if contractually allowed, your employees are permitted to work for another employer whilst you have placed them on furlough leave.
For any employer that takes on a new employee, the new employer should ensure they complete the HMRC new starter checklist form correctly. If the employee is furloughed from another employment, then Statement C of this starter checklist need to be ticked.

What happens to an employee who is on maternity leave, contractual adoption pay, maternity pay or shared parental pay?

The normal rules apply and they are entitled to claim the usual statutory pay or allowances.

For example an employee who qualifies for statutory maternity pay will still be eligible for 90% of their average weekly earnings in the first six weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower).The statutory flat rate is currently hundred and £148.68 a week, rising £151.20 a week from April 2020.

If the employer offers enhanced (earnings -related) contractual pay to women on maternity leave this is included as wage costs and can be claimed through CJRS.

The same principle applies to contractual adoption, paternity or shared parental pay.

Recapping what need to claim under CJRS?

It’s worth repeating these important details. To claim the grant employers will need:

  • a Government Gateway (GG) ID and password.
  • If you don’t already have a GG account, you will need one and you can apply for one here. (Please note, this process is taking at least 10 days or so, and the letter (!) HMRC sends confirming your Gateway ID and password will be send to your business address, so make sure you have a way of getting your hands on it!
  • Be enrolled for PAYE online. If you aren’t registered yet, you can do so now, or by going to GOV.UK and searching for ‘PAYE Online for employers’.

  1. The bank account number and sort code you want HMRC to use when it pays the claim.
  2. The name and phone number of the person in your business that HMRC should contact with any queries.
  3. Your employer Self-Assessment UTR (Unique Tax Reference), Company UTR or CRN (Company Registration Number).
  4. The name, employee number and National Insurance number for each furloughed employee.
  5. Your employer PAYE reference number.
  6. The number of employees being furloughed
  7. Payroll/employee number for the furloughed employees (optional)
  8. The claim period (start and end date)
  9. Amount claimed (per the minimum length of furloughing of 3 consecutive weeks)

How frequently can an employer submit a claim?

An employer can only submit one claim every three weeks.

Can an employer backdate the claim to 1 March 2020?

The Guidance says yes if applicable, provided the claim only starts from the date the employee stopped working. HMRC has reserved the right to audit all claims. For cash flow planning we suggest being prudent and waiting until the CJRS portal is active to see exactly what statement/information needs to be provided to HMRC in order to verify the date of the furlough leave.

Can I still make employees redundant whilst they are on furlough or afterwards?

Yes, and your employees have their normal rights to redundancy protection and payments in this situation.

Can I change an employee to be back to work after they have completed the minimum 3 weeks furlough leave?

Yes, employers can place employees on furlough leave more than once, and one period can follow straight after an existing furlough period, while the scheme is open. The scheme will be open for at least 3 months.

What happens when CJRS ends?

Employees that have been on furlough leave have the same rights as they did previously. Returning employees will still have their usual rights to statutory sick pay, maternity rights, other parental rights and rights against unfair dismissal and suffering discrimination. Please contact us if you need a return from furlough leave letter.

What happens if the business can no longer receive back all employees when their furlough leave ends?

Employers will need to make a decision, depending on the business situation at that time, whether all employees can return to their duties.

If the business is not in a situation to receive employees back when their period of furlough leave ends, it will be necessary to consider termination of employment through a fair and reasonable redundancy process.

It is not yet clear whether the furlough leave scheme will allow people to alternate periods of work, with periods of furlough leave. If this is the case, obviously the flexibility will help employers and employees alike.

Please contact us by email or phone, number below, if you need advice or you want to discuss what to do next. We are here to help.

Contact us

For more information or queries about issues discussed in this article, please contact by email.

To speak directly with or any other of The Legal Partners team of specialist business and HR lawyers based at our Richmond UK office, or our partner lawyers in Singapore, please call +44 203 755 5288

This article explains the main legal issues and common situations to consider. It is not a substitute for legal advice. Please get in contact to discuss your particular issue or queries.

Contact us

For more information or queries about issues discussed in this article, please contact by email.

To speak directly with Richard or any other of The Legal Partners team of specialist business and HR lawyers based at our Richmond UK office, or our partner lawyers in Singapore, please call +44 203 755 5288

This article explains the main legal issues and common situations to consider. It is not a substitute for legal advice. Please get in contact to discuss your particular issue or queries.