Furlough and the job retention scheme

The Coronavirus Job Retention Scheme: furlough guidance

The overall objective is to keep people at home while enabling employers to retain staff who will be needed when they begin to rebuild their businesses in the future.


  1. All UK businesses with a UK bank account and with a PAYE scheme are eligible, (‘any employer in the country, small or large, charitable or non-profit’), including agencies, public bodies, umbrella companies and single director/shareholder companies (technically the director shareholder cannot then work for the firm, but can continue to perform their statutory obligations as directors, eg, official legal filings), but all are subject to the same rules.
  2. Initially, the guidance stated that the scheme was aimed at supporting employers “whose operations have been severely affected by coronavirus”. This wording has now been expanded to state that the scheme will apply “if you cannot maintain your current workforce because your operations have been severely affected by coronavirus” (new words in italics).
  3. The scheme pays a grant (not a loan) to the employer.
  4. Maximum grant will be calculated per employee and is the lower of 80% of ‘wages’  or a cap of £2,500 per month. The government will also cover the employer national insurance and minimum auto-enrolment pension scheme contributions employers are  pay on the wages they must pay their furloughed staff – on top of the wages covered under the scheme.
  5. Furlough requires the employee to do no work, so short time working could not continue during furlough. However, you may consider whether it is possible to re-organise reduced work patterns to allow for some of those on short time working to go back to full hours and the others to be furloughed. This should be discussed with employees first. Special provisions exist to permit volunteer work and training.  
  6. The employer is not required pay the additional 20% but can do so if they wish. Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme.
  7. It is available to employees on the PAYE payroll at 29 February 2020. Additional rules exist for staff paid variable amounts, details are included in the additional information section. Fees, commission and bonuses should not be included.
  8. The grant will be paid to the employer through a new online portal system which is being built for this purpose. As this will take time to build, businesses should look at the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime.

Grant application

  1. The online service used to claim is not available yet, it is expected to be available by the end of April 2020. Once the system is open Aston Hughes & Co will be happy to assist in the submission process where we run your payroll.
  2. Employers will submit information to HMRC through a new online portal. A claim can be made every three weeks.  To claim, the following will be needed:

ePAYE reference number

the number of employees being furloughed

the claim period (start and end date)

amount claimed (per the minimum length of furloughing of 3 weeks)

bank account number and sort code

contact name

phone number

  • Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.
  • You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.
  • The grant is included in income and the salaries paid are expenses in computation of taxable profits.

When the government ends the scheme

When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy). Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments. Once the scheme has been closed by the government, HMRC will continue to process remaining claims before terminating the scheme.

Additional Guidance

  1. Furlough can be backdated to 1 March 2020. It will last for at least 3 months and will be extended if necessary. Note that while the scheme is backdated to the beginning of March a firm will only be eligible to claim the grant once they have agreed the furlough with their staff and staff have stopped working for the employer. The furlough grant can only be claimed from the date the worker is advised in writing of their change of status.  This will be subject to employment law in the usual way.
  2. Employees eligible for furlough can be on any type of employment contract, including:

Full-time employees

Part-time employees

Employees on agency contracts

Employees on flexible or zero-hour contracts

The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.

  • The rules for the grant will not displace the existing employment contract. So for example, the entitlement to holiday and sick pay would depend on the contract. 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, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment. 
  • It is not likely that employee contracts will include a specific right to use furlough. However, contracts which contain a right to lay-off employees on no pay already gives organisations the right to send employees home and not pay them for a temporary period and so it is likely that these can be used to furlough employees. The employment contract will determine whether employees can be furloughed without consent but this contract may be renegotiated, however, that is a matter for employment law and legal advice should be sought.  Relevant employees must be designated as furloughed employees.
  • If contracts do not contain a right to unpaid lay-off, organisations can ask the employee to agree to furlough. Although 80 per cent of wages may not be an initially attractive option next to full pay, it is likely to be more attractive than redundancy, which may be the end result if alternative options cannot be found.
  • Organisations need to designate employees as furloughed, which means it is their choice. However, Selection of employees for furlough must be done on a fair and objective, none discriminatory basis. If organisations are not placing everyone on furlough, they should consider carefully who it should be. Forcing particular employees on to furlough without their input, and therefore forcing them on to 80 per cent wages, may result in discrimination claims from those who allege they were made to do it because of their age, disability or pregnancy.
  • If an employee does not agree to be furloughed then redundancy may need to be considered, however, making an employee redundant without considering furlough is likely to be considered unfair dismissal.
  • To be eligible for the grant employers must write to their employee confirming that they have been furloughed and keep a record of this communication.
  • A furlough agreement should include the following:
  • Employee’s agreement to furlough
  • Date of commencement
  • Details of how employer can bring furlough to an end.
  • Confirmation that employee not allowed to carry out any work for the employer during the furlough period other than volunteering or training.
  • Details of pay and agreement of employee that they will accept less than their contractual pay.
  • If applicable, agreement that they will be treated as using up statutory and contractual holiday entitlement during the furlough period.
  • Confirmation that statutory rights will continue.
  • Request that employer be kept up to date with contact details of employee.
  • Reserve the right for the employer to make contractual changes to the scheme and detail how any changes will be notified.
  • Confirm that all other express and implied terms of the contract of employment remain in force.
  • It has yet to be clarified whether or not those re-employed under a new contract will qualify, although the policy intent would seem to support this would be reasonable.
  • Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working. Therefore, furloughed workers, who are not working, are paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.

However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

  1. For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included. For employees whose pay varies, if the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:
  2. the same month’s earning from the previous year
  3. average monthly earnings from the 2019-20 tax year

If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.

If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.

  1. Employees can be asked to take holidays during furlough, however you must give them twice as much notice as the actual holiday, and they must receive their normal pay whilst on holiday (which can include overtime and commission).
  2. You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted. 
  3. The employer may agree with the employee to have a pension break so that the employee is not making their contribution and neither is the employer.
  4. If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply. Employees on statutory maternity/adoption/paternity/shared parental leave cannot be paid less than the statutory minimum maternity pay.  If a pregnant lady is furloughed, this may affect computation of her maternity pay.
  5. Employees on unpaid leave (for e.g on a sabbatical or other unpaid leave at the request of the employee) cannot be furloughed, unless they were placed on unpaid leave after 28 February.
  6. Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.
  7. Employees who are shielding in line with public health guidance can be placed on furlough.
  8. If you intend varying the contracts of 20 or more employees at one establishment then the collective consultation rules apply and, where possible you should consult with the unions or, if none, elected representatives and file an HR1 form, however, as you are not making redundancies at this stage, there is no need to wait 30 days before furloughing employees.  (Failure to submit an HR1 form is a criminal offence).
  9. A furloughed employee can be made redundant and any grant will stop and the same rules as normal apply.
  10.  Questions have been raised as to whether workers can be moved in and out of being furloughed if work becomes available to an employer and then ceases again.  This has yet to be clarified, but it is considered very likely that they will. The scheme is being designed to allow for flexibility so that furloughed staff can be brought back to work to replace those still working who later become sick. It is anticipated that this will be seen as difficult to regulate and anticipate that a minimum period of furlough leave may be built in as a requirement before the person can return to work.
  11. A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation. However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
  12. If your employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually .
  13. If employees are on lay-off they will receive, subject to service criteria, statutory guarantee pay (SGP) whereas furloughed employees will get 80 per cent of their wages. SGP is £29 per day (£30 from 6 April 2020) for a maximum of five days in a rolling 13-week period, rising to £30 from 6 April, so furlough offers the employee a much more favourable option in terms of pay. If  employees have already been laid-off, an organisation can get in touch with those employees and agree to change their current status from lay-off to furlough. This would simply involve changing their pay arrangements from nothing (if not entitled to SGP), or SGP to 80 per cent wages, as they are already not working.
  14. There does not appear to be a maximum or minimum number of employees who can be furloughed.
  15. Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme.

Public sector organisations

Where employers receive public funding for staff costs, and that funding is continuing, the Government expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them. This also applies to non-public sector employers who receive public funding for staff costs.

Organisations who are receiving public funding specifically to provide services necessary to respond to COVID-19 are not expected to furlough staff.

In a small number of cases, for example where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the coronavirus response, the scheme may be appropriate for some staff.

The information is based on our current understanding of information published so far. It should not be relied on for advice at this stage but is intended to give an indication of how the provision will work in practice.

Reclaim of Statutory Sick Pay

Small-and medium-sized businesses and employers will be able to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. Those who follow advice to stay at home and who cannot work as a result will be eligible for statutory sick pay (SSP), even if they are not themselves sick.  Employers should use their discretion and respect the medical need to self-isolate in making decisions about sick pay.

The eligibility criteria for the scheme will be as follows:

  • this refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19
  • UK based employers with fewer than 250 employees will be eligible – the size of an employer will be determined by the number of people they employed as of 28 February 2020
  • employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
  • employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note. If evidence is required by an employer, those with symptoms of coronavirus can get an isolation note from NHS 111and those who live with someone that has symptoms can get a note from the NHS Website
  • eligible period for the scheme will commence the day after the regulations on the extension of SSP to those staying at home comes into force
  • the government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible.

Anyone not eligible to receive sick pay, including those earning less than an average of £118 per week, some of those working in the gig economy, or self-employed people, are able to claim Universal Credit and/ or contributory Employment and Support Allowance.  For those on a low income and already claiming Universal Credit, it is designed to automatically adjust depending on people’s earnings or other income. However, if someone needs money urgently they can apply for an advance through the journal.