What is furlough pay?

Definition of furlough pay

Furlough pay refers to the wages paid to workers who have been furloughed due to coronavirus.

Important: The Coronavirus Job Retention Scheme closed on 30th September 2021. Employers can no longer claim for wages that they paid to furloughed or flexibly furloughed employees when the scheme was in effect.

Employers make furlough payments to their employees through their payroll system and can then claim the money back from the government through the Coronavirus Job Retention Scheme. A percentage of an employee’s wages can be claimed back, up to a maximum amount per employee per month. This is designed to help employers retain staff members who they may otherwise have been forced to lay off during the coronavirus crisis.

Employers may choose to pay 100% of their employees’ wages while they are furloughed. However, they are not obliged to do so and may currently reclaim 60% of any employee’s salary from HMRC.

Furlough payments that are claimed for by a business cannot include discretionary payments such as tips or bonuses, non-monetary payments or benefits in kind. More information on what to include in furlough pay claims can be found on HMRC's website.

We’ve created a handy furlough calculator for monthly payroll to help you work out furlough pay for each of your furloughed employees.

To learn more about what the coronavirus crisis could mean for your business and to stay up to date with the latest news, take a look at our small business coronavirus hub.

Disclaimer: The content included in this glossary is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this glossary. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.

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