With the announcement of the COVID-19 Job Retention Scheme last week, HMRC has now released guidance on how employers can make a claim.

What is it?

  • The Coronavirus (COVID-19) Job Retention Scheme (Scheme) is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020, designed to support employers whose operations have been severely affected by COVID-19.  The Scheme was first announced by the Chancellor on 20 March and further guidance for employers and guidance for employees was published on 26 March 2020.
  • The Scheme involves 'furloughing' designated employees who would otherwise have been laid off during the coronavirus crisis and keeping them on the payroll instead of dismissing them as redundant or putting them on unpaid lay-off. It is available to all UK employers (including charities, recruitment agencies and public authorities), so long as they have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
  • The Scheme will be backdated to 1 March 2020 and run for three months from that date. It will be extended if necessary. The Government expects the Scheme to be up and running by the end of April 2020.

How does it work?

  • Employers can use an online portal (currently being established by HMRC) to claim a grant for 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month. Employers can also claim a grant for the employer NICs and the minimum auto-enrolment employer pension contributions (3%) by reference to the subsidised 80% wage.
  • Employers who have submitted a claim and are eligible for the grant will receive a BACS payment from HMRC (equal to the lower of 80% of each furloughed employee’s regular salary or £2,500 per month) plus the associated employer NICs and minimum automatic enrolment employer pension contributions on paying those wages.
  • Employers must pay furloughed employees the full amount of the grant for 80% of their gross pay, subject to deductions for employee tax and NICs and any other deductions in the usual way. Employers can choose to top-up the 80% payment from HMRC, but are not obliged to do so. 

For regular salary employees, employers can use an actual gross salary as of 28 February 2020 for the calculation (not including fees, commission or bonuses). For staff with variable pay, employers can claim the higher of either (a) the same month's earnings from last year; or (b) the furloughed employee's average monthly earnings for 2019/20 tax year (again, not including fees, commission or bonuses). 

For employees employed for less than a year and employees on zero hours contracts, employers can claim the average of their monthly earnings since they started work. For employees who started work in February 2020, employers should pro-rate their earnings so far. The Scheme only applies to employees who were on the payroll on 28 February 2020, so any employees hired after that date are excluded. 

Who can be furloughed?

  • As long as they have been on PAYE payroll on 28 February 2020, furloughed employees can include
    • full or part-time employees; 
    • employees on agency contracts (although only if they are not working);  
    • employees on flexible or zero-hour contracts; and 
    • employees who have been made redundant since 28 February 2020 but subsequently rehired.
  • Employees on sick leave or self-isolating should receive Statutory Sick Pay (SSP), but can be furloughed afterwards.
  • Employees who are shielding in line with public health guidance can be placed on furlough.
  • Employees with more than one employer can be furloughed for each job (with a separate cap for each employer).

Who can't be furloughed? 

  • Employees who are working, but on reduced hours, or for reduced pay.
  • Employees hired after 28 February 2020.
  • Employees on unpaid leave, unless they were placed on unpaid leave after 28 February 2020.

What rights do employees have while they are on furlough? 

  • Employment rights: The guidance notes that employees on furlough have the same rights as they did previously, including SSP entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments. Holiday entitlement will also continue to accrue during furlough. 
  • No work: To remain eligible for the Scheme, furloughed employees cannot do any work for an employer that has furloughed them, although they can volunteer or undertake training (as long as they are not providing a service or generating revenue for that employer). However, if they do undertake training for the employer, they must be paid at least the National Living/Minimum Wage for that time. 
  • Multiple employers: Furloughed employees who have more than one employer can be put on furlough by one employer and continue to work for another, if it is permitted within their employment contract. Such employees can receive separate payments from each employer and the 80% of normal wage subject to the £2,500 monthly cap applies to each job.
  • National Living / Minimum Wage (NMW/NLW): The guidance notes that individuals are only entitled to the NLW/NMW for the hours they are working.  As furloughed employees are not working, they must be 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 employees are required to 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.
  • Family leave and pay: For employees on or due to take family leave, the normal rules apply and they will receive their normal entitlement for that leave. For example, furloughed employees eligible for Statutory Maternity Pay or Maternity Allowance can claim up to 39 weeks of statutory pay or allowance in the usual way. Where employers offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that can be claimed through the Scheme (and the same principles apply to contractual adoption, paternity or shared parental pay).
  • Rotation: Employees need to remain on furlough for a minimum of 3 weeks. However, employers can place employees on furlough more than once, and one period can follow straight after an existing furlough period, while the scheme is open. 

How do we designate employees as furloughed?

  • Employers should discuss with their staff and make any changes to the employment contract by agreement. Whilst the Scheme does not require employers to maintain normal pay (i.e. employers can just pay 80%), it recognises that employers will still need to deal with the employee's contractual right to normal pay, hence the need for consent. 
  • Making decisions in relation to the furlough process (including who to offer it to), will be subject to equality and discrimination laws in the usual way.
  • Employers should write to employees confirming that they have been furloughed and keep a record. This written evidence helps demonstrate eligibility under the Scheme.  The guidance doesn't set out any prescribed form for this communication to staff.  The guidance for employees notes that if they refuse to furlough then they may be at risk of redundancy or termination of employment.


Our initial view of the HMRC guidance is positive, in that the process around designating employees as 'furloughed' is relatively light-touch (which seems sensible in the circumstances) and on the basis that there is additional support for employers in terms of being able to claim back employer NICs and minimum pension contributions on top of the 80% monthly employment costs.  

As with any new law or guidance, there are, inevitably, still some areas which are open to interpretation, so we will update our guidance as and when any further information becomes available.

In the meantime, please do not hesitate to get in touch with any member of our Employment, Incentives and Immigration Group for further advice on any of the issues raised in this note.

Key Contacts

Helen Almond

Helen Almond

Principal Knowledge Lawyer, Employment & Immigration
Manchester, UK

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