Coronavirus Job Retention Scheme and Furlough 30.03.20

Frequently asked questions

An updated version of the guidance relating to the Government’s Job Retention Scheme and furlough has been published offering some additional clarification, you can read our latest article on this here.

What is “Furlough”?

Furlough leave has been introduced by the Government during the Coronavirus pandemic meaning that leave can be offered to employees which will keep them on the payroll without them working. Employers will be eligible for the Government grant through the Job Retention Scheme to cover 80% of salaries of furloughed workers, capped at £2,500 per month, plus the associated NI and Employer’s pension contributions capped at the statutory required legal minimum. The salary includes the basic salary but excludes commission, bonuses and similar payments. We are waiting for more in-depth details for the calculations to be published.

Furlough is an “all or nothing” concept. If an employee is classed as “furloughed” they cannot do any work for the employer during this period and this includes any voluntary work. The minimum furlough period is 3 weeks.

If employees continue at a reduced capacity, working reduced hours then the Employer will not qualify for the Coronavirus Job Retention Scheme reimbursement. In such cases the Employer may be able to reach an agreement with employees to pay reduced salary for reduced hours for a period, as an alternative to redundancies.

Which businesses can claim through the scheme for furloughed employees?

All UK business are eligible to claim under the scheme. The company must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.

Which employees can be furloughed?

The following employees can be placed on furlough:

  • Employees on any type of contract (full-time, part-time, zero-hours, etc.)
  • Employees must have been employed by the Company on 28 February 2020
  • The Scheme also covers those made redundancy since 28 February but since re-hired by the same Company
  • Employees who are not working at all; those working on reduced hours do not qualify
  • Employees on unpaid leave which started after 28 February 2020; if unpaid leave started before this date they do not qualify
  • Employees who are shielding in line with public health guidance can be placed on furlough
  • Employees eligible for Statutory Sickness Pay due to sickness or self-isolating cannot be placed on furlough during their sick leave but ca be furloughed thereafter
  • Employees on maternity leave or other type of family friendly leave can also be furloughed and claimed for

A crucial requirement for the scheme is that the employee cannot and does not do any work during the furlough period. The main aim of the scheme is to protect jobs that would otherwise have to be lost as redundant.

How to implement furlough?

Some employers may have a lay-off clause in their contracts which allows them to give employees no work and no pay for a period due to a downturn in business. This is similar to the furlough (albeit not legally the same), and it is thought that these employers can rely on their contractual lay-off clauses to implement furlough leave.

Most employers, however, will not have the required contractual rights and therefore agreement will have to be sought from employees to implement furlough. It is very important that employers seek agreement from the employees whom they propose to put on furlough leave. The agreement should be put in writing and this evidence may be required once the scheme is up and running, or for audit purposes later on. The initial draft of government guidance makes it very clear that implementing furlough remains subject to existing employment law. Unilaterally forcing this on employees would likely be considered a serious breach of contract.

What happens if the employee refuses furlough?

Because employee agreement is needed to implement furlough, there is always a risk of employees refusing this option. We do not expect this to happen frequently because the offer of 80% salary will in most cases be the best option available when the alternatives are unpaid leave or redundancy. Some employees may find themselves in a position where taking redundancy pay (especially if a generous package is offered contractually) will be preferable for them.

If employees do not agree to be furloughed, the Employer can dismiss by reason of redundancy if the redundancy definitions are met and a proper process is 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. Advice on appropriate criteria should be sought and we of course advise on this.

Are there any negatives to implementing furlough?

While employee furloughs can be a positive alternative to layoffs and redundancies for employees, they can have negative consequences too:

  • As employment will continue during furlough, so will any benefits provided under the employment contract. This will include some potentially costly benefits which the employer will have to continue funding. All other employee costs will also continue such as employer’s NI contributions and employer’s pension contributions (it is unclear whether the Government grant is intended to cover these costs or not). Additionally, annual leave will also continue accruing.
  • The furlough scheme has the potential to cause resentment among employees, especially in circumstances where some employees in the same business are placed on furlough (but still paid at least 80%, potentially more for doing nothing at all), some are on sickness leave (in absence of company sickness pay they will only be paid Statutory Sickness Pay) and some will have to continue working (earning full salary).


For salaried employee, 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 those whose earnings vary, 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:

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

All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees. The reimbursement from the scheme will also include the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on paying the reduced wages.

Employers don’t have to top up the salaries in order to be eligible for reimbursement under the Scheme but can choose to do so. Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).


The online service used to claim is not available yet. The Government expect it to be available by the end of April 2020.

The scheme is open for at least three months starting from 1 March 2020. Employers can use the scheme at any point during this period and claims can be backdated to 1 March.

To claim, you will need:

  • your 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)
  • your bank account number and sort code
  • contact name and phone number

You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.

What next?

The CBW HR Consultancy team is on hand to help, please speak to your usual CBW contact, or speak to a member of the HR Consultancy team.

Please click here to view all articles relating to furlough and Coronavirus Job Retention Scheme guidance.