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The Coronavirus Job Retention Scheme


On 20 March 2020, the Chancellor announced the Coronavirus Job Retention Scheme (“the Scheme”) which he stated will cover 80% of payments to employees up to a total of £2,500 per month, back-dated to 1 March.

The Scheme was initially to be in place until 31 May, but it has been extended until the end of October. It will be subject to changes after the end of July that are detailed below.

From 1 August, employers will have to pay employer's national insurance contributions (NICs) and pension contributions on furlough pay. Currently, the government meets the employer’s NICs and the equivalent of the minimum employer’s auto-enrolment pension contributions.

From 1 September, the government will only reimburse 70% of pay (up to a maximum of £2,190). Employers will be required to top-up to 80% (or more, depending on what the arrangement is with respective employees).

From 1 October, the government will only reimburse 60% of salary (up to a maximum of £1,875), and employers will continue having to top up to 80% (or more).

The government has been regularly publishing updated guidance on the Scheme. The latest guidance for employers is here and that for employees is here.

The Treasury issued a direction to HMRC regarding the operation of the Scheme on 15 April. An amendment direction was published on 22 May, dated 20 May (“the Direction”). This does not take into account the changes to the Scheme that are to take effect after the end of July and so a further amended Direction is awaited.

The HMRC portal through which employers can claim under the Scheme went live on 20 April. For details of how to claim and further link to the portal click here.

These are the key points:-

Who does the Scheme apply to?

  • The Scheme is open to all UK employers that had a PAYE scheme in place on 19 March 2020. 10 June will be the last day that employers can place employees on furlough under the Scheme for the first time.
  • Any organisation can apply, including charities, recruitment agencies and public authorities. The guidance states that the government does not expect public sector employers to use it as long as central government continues funding wage costs in the normal way. It sets out the approach to be taken with contractors with public sector engagements in scope of IR35 off-payroll working rules. However, there is no exclusion in the Direction for public sector or publicly funded employers. Arguably, therefore, the guidance on this point is no more than an encouragement to public sector and publicly funded employers not to draw on public funds through applying to the Scheme but, absent a further direction to preclude it, they are just as eligible to apply to the Scheme as any other employer.
  • The Direction states that employees must be furloughed by reason of circumstances arising as a result of coronavirus or coronavirus disease.
  • To be eligible, the employee must have been on the payroll on 19 March 2020 (or, if they were made redundant or otherwise left the employer’s employment before that date, 28 February 2020 - see below). This is subject to the important qualification that there must also have been an RTI submission to HMRC on or before 19 March notifying it of payment in respect of the employee.
  • Anybody who was on a payroll and had been subject to an RTI submission to HMRC on 28 February and has since been made redundant, or stopped working for a particular employer for any other reason, can be rehired and put on the Scheme. (We would encourage any employer who is thinking about rehiring such an employee to take advice before doing so, however, to ensure that they have considered all of the potential implications and, if they are to go ahead, that any appropriate caveats or other measures are applied.)
  • As well as employees, the Scheme can be applied for any of the following groups, if they are paid via PAYE:
    • Office holders, including company directors (and, in turn, including directors of personal service companies (“PSCs”).
    • Salaried members of Limited Liability Partnerships (“LLPs”).
    • Agency workers (including those employed by umbrella companies).
    • “Limb (b)” workers (i.e. individuals who provide their services personally but are not conducting a business on their own account, i.e. they are not self-employed). (The self-employed may be able to obtain a grant under government’s Self-employment Income Support Scheme.)

In this note references to “employees” include all such persons and references to “employer” are to be construed accordingly.

In the case of a director, a board resolution must be passed to effect this, and it must be noted in the company records.

What restrictions apply to the operation of the Scheme?

  • The Direction provides that employees must be instructed to cease work and that this requirement will be satisfied if (i) the employer and employee have agreed that the employee will cease all work in relation to their employment (which can be made by means of a collective agreement between the employer and a trade union); (ii) the agreement specifies “the main terms and conditions upon which the employee will cease all work”; (iii) the agreement is incorporated expressly or impliedly in the employee’s contract; (iv) the agreement is in writing or is confirmed in writing by the employer (and writing includes in electronic form); and the employer keeps the agreement/collective agreement/confirmation until at least 30 June 2025. The unqualified reference to the employee agreeing to cease work is unfortunate: in general terms, where an employer continues to pay an employee in full, it is not obliged to provide the employee with work, and so does not require the employee’s consent that they cease work. Similarly, if there is a lay-off clause, the employer has the right to direct the employee to not work. However, in our view it is unlikely to be an issue if employers in those circumstances simply record in writing that the employee ceased work from the relevant date, without seeking agreement – including because this will not be inconsistent with the published guidance and HMRC are unlikely to take the point when carrying out audits; and if they do, they will be vulnerable to judicial review applications.
  • An employee must not do any work for the employer, or any organisations that are connected with the employer whilst they are furloughed - although from 1 July, 'flexible-furlough' is being introduced, meaning employees will be able to work part-time and be furloughed part-time. Further guidance is to be published in this regard on 12 June. The Direction defines "connected" as follows:
  • Furloughed employees are able to undertake training and do volunteer work, provided this does not contribute to business activities, generate income or profit, or significantly contribute to the production of goods or services for sales.
  • Directors can still fulfil a duty or other obligation arising from an Act of Parliament relating to the filing of company's accounts or provision of other information relating to the administration of the director's company, make claims under the Scheme and pay employees of their company.
  • The carrying out of duties as a trustee or manager of an occupational pension scheme is permitted (save where the employer’s business is the provision of occupational pension scheme independent trustee services).
  • Subject to any restrictions under their contract of employment (which are not waived by the employer), an employee who is furloughed by an employer may undertake work elsewhere whether on a voluntary basis or, for a different employer (as long as it is not an organisation that is linked or associated with the employer that has furloughed them), on a paid basis.
  • Furlough leave must be taken in minimum blocks of 3 weeks to be eligible for funding.
  • Employees can be furloughed multiple times, i.e. they can be furloughed, brought back to work, then furloughed again (subject to funding being available only for any furlough period which lasts for at least 3 weeks).
  • Employees who are unable to work because they have caring responsibilities resulting from coronavirus can be subject to the Scheme, e.g. employees that need to look after children can be furloughed.
  • Employees cannot be on sick leave and furlough at the same time. If an employee is entitled to SSP, they can only be furloughed from the end of the period of entitlement. This includes that an employer and an employee can agree that the employee will no longer be entitled to SSP and will commence furlough.
  • Where a period of unpaid leave started before 1 March, and the employer and employee reached an agreement before 20 March 2020 to end it earlier than originally planned, the employee can be put on furlough after the revised end-date. No claim can be made under the Scheme for a period of unpaid leave between 1 March and 30 June and furlough cannot begin during that period - although there is no express prohibition on ending that leave earlier than planned in order to furlough.

What payments are recoverable under the Scheme?

  • For details of what can be claimed and how to claim, click here
  • Individuals are only entitled to the minimum wage for the hours they work, so even if 80% of a furloughed employee’s normal earnings would take them below the minimum wage based on their normal working hours, to pay only that will not be a breach of the minimum wage rules.  However, they are entitled to be paid minimum wage for any time spent training.
  • Employers can choose to top up pay to 100% (or otherwise pay employees in excess of the capped amount recoverable under the Scheme), but do not have to if contracts of employment or otherwise arrangements agreed with employees do not require them to do so. If employers do make payments beyond the cap applicable to the Scheme, as they might be obliged or they may otherwise agree to do, associated employer NICs and auto-enrolment pension contributions will not be recoverable.

    Note: The guidance for employers states that:

    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

    The Scheme does not automatically allow employers to unilaterally reduce employees’ pay: whether they can do so is dependent on the terms of employment contracts or otherwise the agreement of employees. That said, where a contract of employment does not permit an employer to unilaterally reduce pay and an employee refuses to agree to this, this measure can sometimes be imposed unilaterally. This is a matter for advice in each case. An employer who gets this wrong will be open to claims for unlawful deductions from wages and, potentially, also wrongful and/or unfair dismissal.

    Further, furloughing employees on reduced pay in breach of contract where 20 or more employees are affected at one establishment will expose the employer to protective awards of up to 90 days’ pay per employee.

    We therefore strongly encourage employers to obtain advice before reducing an employee’s pay in circumstances where a lay-off clause entitling them to do so has not been successfully incorporated into the contract – and indeed, where such a clause appears in a written contract, it will be a matter of advice as to whether it actually has operational affect.

  • Employees on statutory maternity, paternity, adoption and shared parental leave who entitled to only of statutory maternity, paternity, adoption or shared parental pay or maternity allowance are not subject to the Scheme. However, any enhanced contractual pay to such employees are included as wage costs that can be claimed through the Scheme. There is nothing in the guidance which prohibits employees ending statutory leave early and then being furloughed (subject to the legal requirement that women take a minimum of 2 weeks’ maternity leave, or 4 weeks if their normal place of work is a factory or workshop), including switching to shared parental leave and then being furloughed.
  • Entitlement to, and the rate of, maternity allowance and statutory maternity, paternity, adoption, shared parental and parental bereavement pay first payable on or after 25 April is unaffected by furlough: where somebody is on furlough during part or all of the period over which normal weekly earnings are calculated for these purposes and their pay is reduced as a result, the calculation will be based on the pay that they would have received if they were not furloughed.

TUPE and successor businesses

A transferee employer can apply the Scheme to employees who transferred to it under TUPE or the Employment Rights Act after 28 February.

It has not been made clear, however, whether transferees are to have the right to access transferors’ payroll records for the purposes of determining the historic pay of furloughed employees on variable pay that is necessary to determine payments to be made under the Scheme.

If an employee is placed on furlough less than 3 weeks before they transfer, the transferor can still claim for that employee under the Scheme if the transferee continues the period of furlough post transfer.


A long-standing frustration was that the government’s guidance was silent as to the inter-relation between furlough and holiday. The Direction also did not shed any light on the matter.

However, the guidance for employees and the part of the guidance for employers relating to what they can claim now states that it is possible to take holiday while on furlough, and that the holiday pay paid must be the full entitlement in accordance with the Working Time Regulations (“the Regulations”). Although the guidance is silent on the point, holiday pay entitlement in respect of any element of annual leave beyond the 5.6 week entitlement under the Regulations will be governed by the contract of employment.

The guidance is silent on whether an employer can compel an employee to take annual leave while on furlough. However, separate guidance on workers' entitlement to holiday and holiday pay during the Covid-19 pandemic states: "If an employer requires a worker to take holiday while on furlough, the employer should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the worker from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday."

The caveat reflects principles set out in European case law, which call into question whether an employer can force a worker to take holiday at all during the “lockdown”, not merely during furlough - but the government does not offer an answer to the question and so may be adding to, rather than helping to resolve, confusion among employers as to their legal obligations.

Our view is that employers can compel employees to take holiday during the period of restrictions on social movement, including employees on furlough, on the basis that they are not prevented from resting or relaxing or (albeit perhaps not as much as in normal circumstances) enjoying a period of leave. The more the “lockdown” measures are relaxed (as they have started to be), the stronger this argument becomes.

As indicated in the guidance, unless a contract of employment or some other workforce agreement provides otherwise, if an employer wishes to compel an employee to take part of their holiday entitlement under the Working Time Regulations, they must provide notice of at least twice the duration of the holiday to be taken.



A very good service - it simplified the appeal process for me considerably which went very smoothly.

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They simplified the appeal process for me considerably

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They simplified the appeal process for me considerably

- Mr Griffiths

A very good service - it simplified the appeal process for me considerably which went very smoothly.

- Mr P Griffiths, Telford