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Coronavirus Job Retention scheme and furlough


What does furlough mean?

The word furlough generally means temporary leave of absence from work. This can be due to economic conditions affecting one particular company or matters affecting the country as a whole. Until now the expression has not carried any meaning in UK employment law.

Furlough leave has been temporarily introduced by the government during the coronavirus pandemic to mean leave offered which keeps employees on the payroll without them working. As the furloughed staff are kept on the payroll, this is different to being laid off without pay or being made redundant. The ability to furlough employees is designed to support employers who are severely affected by coronavirus.

People who get furloughed must not work for the employer during the period of furlough but usually return to their job afterwards unless redundancies follow.

More information is available on the government website >>.

Which employers does the Coronavirus Job Retention scheme apply to?

Any employer in the country (whatever size) will be eligible for the scheme. Charitable and non-profit organisations are included. The government guidance dated 26 March has confirmed that the UK employers that can apply includes:

  • businesses
  • charities
  • recruitment agencies (if the agency workers are paid through PAYE)
  • public authorities.

To be eligible the employer must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.

Public sector

The government does not expect much public sector use of the scheme because many public sector employees are continuing to work throughout the coronavirus outbreak.

Non-public sector employers who receive public funding for staff costs are expected to continue to pay staff and not to place them on furlough.

The scheme is intended to apply only to employers who cannot cover staff costs due to COVID-19. These employers can access support to continue paying part of their employee’s wage, in order to avoid redundancies. It is not known if any evidence is required to demonstrate eligibility or if there is any room for dispute with HMRC concerning whether the employer would otherwise have made redundancies. It is not known if a large company with sufficient cash flow will be eligible if there is doubt as to whether redundancies would have been made, or if grants will be repayable if employers plan to make redundancies immediately after the coronavirus lockdown and furlough periods come to an end. The government have stated that the payments are grants and not a loan.

Detailed treasury guidance is expected imminently. This should clarify the mechanics of the scheme; all employers are clearly eligible to apply but we do now know the extent of the evidence required.

It is also not known if the owner of a small business who pays themselves a salary is covered. It may be that they can furlough themselves, although the self-employed are not covered. If certain amendments to the Coronavirus Bill are passed then a similar scheme may apply to the self-employed but we do not know if this legislation will be enacted in its present form.

Where a company is in administration, the administrator will be able to access the Coronavirus Job Retention Scheme >>.

More information is available on the government website >>.

When will the scheme and online portal be operational?

The ability to furlough employees under the Coronavirus Job Retention Scheme will be operational from the end of April. The scheme is backdated and will apply from 1 March for at least three months until 31 May (unless extended).

How can employers access the Coronavirus Job Retention scheme?

Employers access the scheme through an online portal. Employers should have written to the affected employees confirming that they have been furloughed and should keep a record of this. The employer provides details of the affected furloughed employees online and submits information to HMRC about their earnings and any other information required, which will presumably include the employee’s NI number. Employers should probably:

  • Fairly select employees affected for being furloughed (the government have not said this but it seems sensible).
  • Decide whether to pay 80% of salary or to supplement it.
  • Gain the employees’ written consent unless contractual provisions already cover lay off.
  • Stop the employees from working if they are now working from home, or send them home from the workplace.
  • Calculate the amounts they are claiming from HMRC (this is important).

To work out the amounts they are claiming employers will have to work out the employer NI and minimum automatic enrolment employer pension contributions for all employees.

When the portal is operational employers will apply with their ePAYE reference number, bank account number and sort code and specify the:

  • number of employees being furloughed
  • claim period (start and end date)
  • amount claimed ( the minimum length of furlough is three weeks)
  • employer’s contact name and telephone number.


Employers are advised by the government to claim in advance of an imminent payroll or at the point when they run their payroll.

HMRC will retain the right to retrospectively investigate and audit employers’ claims.

Once HMRC have the claim and agree the employer’s eligibility a BACS payment will simply arrive directly into the bank account supplied.

More information is available on the government website >>.

Do employers just make one claim for all employees under the Coronavirus Job Retention scheme?

Employers make a collective claim for the group of furloughed employees under the scheme, but it is anticipated that employers may need to make more than one claim throughout the period of furlough.

It’s anticipated that employers will submit one claim at least every three weeks. Three weeks is the minimum length of time an employee can be furloughed for.

Employers have to pay over the entire grant received for gross pay to the employees plus any top up employers are choosing to pay.

More information is available on the government website >>.

Which employees can be furloughed under the Coronavirus Job Retention Scheme?

The employees that can agree to being furloughed are those working for businesses that would otherwise have to dismiss as redundant or lay off part or all of their workforce.

The furloughed employees must have been on the employer’s PAYE payroll on 28 February 2020, including:

  • full-time employees
  • part-time employees
  • agency employees on agency contracts provided they are not working at all
  • zero-hour contract workers provided that they are employees albeit on flexible contracts.

For employees who were changing jobs and were not on the employer’s payroll on that date complexities arise – see our FAQ on placing new employees on furlough.

More information is available on the government website >>.

Can employers place new employees on furlough immediately and receive an 80% contribution towards their pay?

No, if an employee starts a new job the employer cannot immediately then furlough that new employee and claim reimbursement of 80% of their pay under the coronavirus job retention scheme. The scheme is only open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020. The relevant employees must have been on the payroll on that date and would otherwise be dismissed as redundant or laid off.

The situation covering new employees would be relatively unusual but some employers may have a recruitment process already underway and have made job offers which have just been accepted. The following applies:

  • Employees hired after 28 February 2020 cannot be furloughed or claimed for under the scheme.*
  • Employees on unpaid leave cannot be furloughed, unless placed on unpaid leave after 28 February 2020.
  • Employees already made redundant or laid off between 28 February and 20 March (when the scheme was announced) are eligible under the scheme if reinstated.
  • Employees on schedule to be made redundant after 20 March 2020 can be furloughed instead of proceeding with the redundancy process.

*If new employees were not on this employer’s payroll on that date they do not qualify for the scheme with their new employer. An option may be to persuade their old employer to reinstate them so they can be placed on furlough by the previous employer, if the former employer will agree to this. This seems to be permissible within the rules and applies both to employees who were dismissed as redundant as well as those who left voluntarily.

The scheme will then cover the cost of wages backdated to 1 March. This ensures that those people who already been made redundant as a result of the coronavirus are covered.

Can employers backdate the furlough period to 1 March for all employees, even those who have been working since then?

No employers cannot backdate the furlough period for all employees. The scheme is only backdated to 1 March to cover employees who have already been made redundant as a result of the coronavirus restrictions.

Employers are only eligible to claim the reimbursement once they have agreed the furlough with employees and they have stopped working.

We just made a group of employees redundant; should we reinstate them and put them on furlough leave?

Employers who have just made a group of employees redundant can reinstate those employees and put them on furlough leave.

The government has confirmed the coronavirus retention scheme covers employees who have already been made redundant after 28 February 2020, if they are rehired by the same employer. It is not mandatory for employers to reinstate employees and place them on furlough, but for redundancies that are still in the pipeline, there is a risk of unfair dismissal claims if the furlough option is not considered along with all the usual method of avoiding redundancies.

Employers should remember that as part of the redundancy process they have to explore alternatives. Bearing in mind that the aim of the scheme is to ensure that employers who cannot afford to pay staff wages do not make redundancies, employees could at least argue that any redundancy decisions made between the scheme being announced on the 20 March and during the three month period of the scheme, would be unfair.

Employers who decide they have no alternative but to press ahead with redundancies now, despite the existence of the scheme, should fully consult and keep careful records to show why the redundancies will still be needed despite the scheme’s availability.

When the government ends the job retention scheme at the end of May (unless extended) employers can decide whether there is sufficient work for employees to return. If the work has ceased or diminished, or is expected to cease or diminish, then redundancies can be implemented at that stage following full redundancy procedures for notice, consultation and selection.

What about part-time employees?

The government guidance >> has confirmed that for both full time and part-time employees, the employee’s actual salary before tax, as at 28 February, is used to calculate the 80% payment. Fees, commission and bonuses are not to be included in calculating the amount.

Employees with two or more employers can be furloughed for each job separately. However, the £2,500 cap applies to each employer individually. So, an employee with two jobs can have 80% of salary reimbursed with a cap of £5,000.

For example, an employee who works two days a week for Employer A and three days a week for Employer B would receive their 80% of their actual salary for those two days if on furlough from Employer A. If their other role continues the employee could receive their normal salary from Employer B as well.

The guidance does not yet cover the position if the employee is then offered additional work from Employer B. It seems that this is simply an inadvertent benefit for the employee.

Are payments to the furloughed workers under the Coronavirus Job Retention Scheme a loan or a grant?

Under the Coronavirus Job Retention Scheme, all UK employers who would otherwise have dismissed employees during this crisis can access payments for part of the employees’ salary. This is a grant which employers do not have to pay back. The scheme will run for three months (but may be extended as necessary).

HMRC will pay 80% of furloughed workers wages, up to a cap of £2,500 per month.

Can I place an employee on furlough instead of Statutory Sick Pay?

Employees on who are on sick leave or self-isolating should get Statutory Sick Pay. Employers can place them on furlough leave after the sick pay period if there is no work for them to do and they would otherwise be laid off or made redundant.

The government guidance >> says that employees who are shielding themselves in line with public health guidance can be placed on furlough. This means employees who are extremely vulnerable (for example, due to organ transplants,  lung cancer, severe chest conditions or immunosuppressed conditions) and who have been notified by the NHS to isolate for 12 weeks.

Do employees have to agree to be furloughed?

Yes, employees must be consulted and agree to being furloughed. Changing the status of employees always is subject to existing employment law.

Depending on the wording of the employment contract there may be an ability to lay-off workers. Although lay-offs under the Employment Rights Act 1996 are a different legal concept the wording in contracts may enable some employers to impose a furlough period.

If there is no lay off provision in the existing contract the employer will need to agree with the employee that they going to become furloughed because no work is available. Inevitably employees will mostly agree to this. The main alternative would be dismissal by reason of redundancy with the possibility of a delayed redundancy payment or no redundancy payment (for employees who have worked for less than two years). In most cases employees will agree where the alternative is redundancy.

In some cases, the unions may join in a collective consultation process to agree the furlough change to the existing terms of employment. As normal employment laws apply when furloughing employees, the equality and discrimination laws will apply. For example choosing a disproportionate amount of men or women could lead to discrimination claims later on.

In a minority of cases there may be some negotiation. In sectors like hospitality, some staff may be needed and others not. Some employees may be resentful that they are having to work as they are classed as being essential whilst others are being furloughed on 80% of salary. Others may be resentful that they are classed as dispensable whilst others are working and receiving their full package. Discuss all of the options with employees and stay up to date with the latest on the Government website >>.

If employees do not agree to be furloughed can we dismiss by reason of redundancy?

Yes, if employees do not agree to be furloughed employers can dismiss by reason of redundancy if the redundancy definitions are met and a proper process followed.

Some employers may feel that the long-term effect on their business will be inevitable closure or rationalisation. If employers feel furlough is likely to be followed by redundancies it may help to select employees for furlough using a process similar to redundancy selection. This would involve using objective criteria, such as a scores matrix based on skills, productivity, previous appraisals etc.

Is an employer required to supplement employees’ salary over the 80%?

No, employers can make up the additional pay, but they are not required to do so.

For employees who have been furloughed employers can choose whether to:

  • Only make the salary payment reimbursed by the government.
  • Pay all of the difference between the grant and the employee’s normal salary.
  • Pay part of the difference between the grant and the employee’s normal salary.

Any extra payment the employer chooses to make will be either the additional 20% of salary, or any amount in excess of £2,500. If management choose to pay more, it will depend upon the business’ overall health and cashflow affecting the ability to fund payments. Concerns about staff retention once the crisis has passed may also affect decisions being made.

The employers affected will have greatly reduced or eliminated income during these three or more months. So many employers will not be able to supplement the government’s payment.

There is no reason why employers could not choose to supplement the salaries initially and then choose not to in later months, although presumably then the employee’s consent to the furlough could theoretically be withdrawn. An employee would be unlikely to withdraw consent when the alternative is redundancy.

Will the furloughed employees receive £2,500 exactly?

The furloughed employees are unlikely to receive £2,500 exactly. More detailed guidance is expected but some principles are already known – see the question on national insurance and pensions below.

At a minimum, employee will receive the lower of 80% of their regular wage or £2,500 per month. Employers can choose to top up the employee’s salary above 80% but they are not obliged to.

Fees, commission and bonuses should not be included when working out the 80% figure.

Employees who earn under £3,125 a month will receive less than £2,500. This is because for those earning £3,125 a month, 80% of salary would be £2,500:

  • Employees who earn less than £3,125 a month normally, will get 80% of their salary for three months (or more).
  • Employees earning in excess £3,125 a month will have the £2,500 cap applied. These employees will receive less than 80% of their salary for those three months (or more) unless the employer chooses to supplement it.

The £2,500 a month figure has presumably been chosen as it is broadly £30,000 a year which is the national median net salary.

Can employees work for the employer when furloughed?

No, to qualify for the scheme, the furloughed employees must not undertake work for the employer at all while furloughed.

Employers can place part of the workforce on furlough whilst some continue to work. The furloughed members of staff must not work at all. Employers should note that this contrasts with the coronavirus support scheme for the self-employed who may carry on in business whilst claiming the support allowance.

Reduced workload

The coronavirus support scheme does not cover the wages of employees who are still working, but are doing less because work has reduced during the pandemic restrictions. If an employee is working, but on reduced hours, or for reduced pay, they are not eligible for support under the scheme.

Employers must therefore continue paying staff who are still working but working less, unless they vary the employee’s contract by consent. Reducing hours and pay without consent for those who are still working on a reduced basis would be a contractual breach, leaving the employer open to constructive unfair dismissal claims in accordance with normal principles.

Are casual workers and zero hours contract workers covered?

The 80% wage guarantee will not cover zero-hour contracts or casual workers, unless they work on the PAYE system.

For casual and zero-hours contract workers who are on the PAYE system with variable hours, their previous pay can be used as a benchmark for furlough pay – see the question on calculating the figures for those who work variable hours for more information.

For casual and zero-hours contract workers who are self-employed a number of options are available:

  • A self-employed support scheme to claim a taxable grant worth 80% of trading profits, up to a maximum of £2,500 per month, for three months (unless extended).
  • Easier access to benefits to cover a drop in income. This includes removing the income floor for universal credit and moving the application process to an online and telephone process.

More information is available in our separate question on the self-employed and on the government website >>.

How do employers calculate the 80% figure for furloughed employees who worked variable hours?

Employers claim for the higher of either:

  • the same month’s earning from 2019; or
  • average monthly earnings from the 2019-20 tax year.

If the employee has been employed for less than 12 months before the claim, then the employer has to use an average of the actual monthly earnings since the employee’s start date.

For employees who only started during February 2020 the employers will have to use those earnings on a pro rata basis.

Can employees staying at home to look after young children be placed on furlough? What about those on maternity, paternity and adoption leave and pay or shared parental rights?

Employees staying at home to look after young children are thought to be included in the furlough system in preference to being made redundant.

Employees eligible for statutory maternity pay or maternity allowance can claim up to 39 weeks of statutory pay or allowance as normal. The same principles apply for normal paternity, adoption or shared parental pay rights.

If the employer offers enhanced contractual rights these are included as wage costs that can be claimed through the scheme.

Are furlough payments taxable?

Yes, furloughed employees’ wages are subject to Income Tax and National Insurance as usual.

Employers also pay employers’ NI and automatic enrolment contributions unless the employee has opted out or has ceased saving into a workplace pension scheme – see the separate question on this below.

Employees also pay their automatic enrolment pension contributions unless opted-out.

The Coronavirus Job Retention Grant payments are made to offset deductible revenue costs and must therefore be included as income for Income and Corporation Tax purposes. The amounts paid out as salary are still deducted as employment costs as normal when calculating taxable profits.

What happens about employer National Insurance and pension contributions for furloughed employees?

Employers are still liable for employer NI and employer pension contributions on behalf of their furloughed employees.

The reimbursement from HMRC covers wages equal to the lower of 80% of the employee’s regular salary or £2,500 per month, plus the associated employer NI and pension (minimum automatic enrolment) contributions.

If employers choose to top-up the 20% of salary above the 80% grant, then employer NI and pension contribution on the top-up amount will not be funded through the coronavirus job retention scheme.

HMRC will issue more detailed guidance on this before the scheme is online.

What if this means the employees receive less than the National Living Wage or Minimum Wage?

The normal minimum wage rules do not apply to furloughed employees, as they are not working.

The government have indicated that if workers have to complete online training courses whilst they are furloughed, then they must be paid at least the minimum wage for the time spent training, so for that period employers may need to top up the 80% of salary if the employee would slip beneath the minimum wage, although they would not have to do this  for the remainder of the furlough period.

What support is now available for employers to cope with coronavirus?

The support available for employers and individuals to cope with the coronavirus pandemic is changing almost daily. Keep checking the Government website >> for the latest information.

As part of their coronavirus planning employers should allocate members of senior management to monitor and apply for the measures available to support them including:

All sectors

  • Statutory Sick Pay relief for SMEs
  • The Coronavirus Job Retention Scheme whereby certain employers can claim 80% of ‘furloughed’ employees’ salaries for the next three months.
  • A small business grant funding of £10,000 for all business receiving small business rate relief or rural rate relief.
  • A Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank.
  • A new lending facility from the Bank of England to help support liquidity among larger firms, to bridge coronavirus disruption to cash flow.
  • Deferral of VAT and Income Tax payments.
  • The HMRC Time To Pay Scheme.

Retail, hospitality and leisure businesses

  • A 12-month business rates holiday.
  • Grant funding of £10,000 for relevant businesses with property with a rateable value of under £15,000.
  • Grant funding of £25,000 for relevant businesses with property with a rateable value between £15,001 and £51,000.


Self-employed individuals or members of partnerships can also claim support provided that their trading profits are under £50,000. See our separate question above for more detail on this.

If furloughed workers do not book any holiday time does holiday leave accrue?

Yes as employees remain employed during furlough leave statutory holiday will accrue during the furlough period.

The statutory minimum holiday of 5.6 weeks per year will accrue, but the precise amount of holiday left will depend upon how much holiday the employee has already taken. If the employer provides contractual holiday, above the statutory amount, employers can ask the employees to agree this will not accrue during furlough. However, the right to accrue annual leave under the Working Time Regulations will continue unless the employee books part of the furlough period as leave.


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