What is furlough pay?

Definition of furlough pay

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

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, but are not obliged to do so and may only reclaim 80% 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.

Furlough pay in FreeAgent

Employers who use FreeAgent’s payroll can amend furloughed employee’s payslip details to include furloughed days. This automatically produces a monthly report in FreeAgent, which contains the details required for a Coronavirus Job Retention Scheme claim.

For businesses that don’t use FreeAgent, 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.

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