Coronavirus QandA

This Q&A was written on 23rd March 2020 and updated on 27th March 2020. It will be updated from time to time as more information becomes available. Please note that this document does not constitute the giving of legal advice – this is intended to be a guide to the issues employers will need to consider and is not a substitute for taking specific legal advice as situations are likely to be fact specific.

1. What is the scheme?

On 20th March 2020, the Government announced the introduction of a Coronavirus Job Retention Scheme. Additional guidance on the scheme was published on 26th March 2020.

Under the scheme, UK employers can claim a grant from HMRC to cover 80% of the usual monthly wage costs of employees who are not working but are retained on the payroll, up to a cap of £2,500 per month per employee, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on those wages. The scheme applies to all employees on PAYE and will therefore include those employed on part-time and zero-hour contracts. The scheme is to be backdated to 1st March 2020 and will be open for at least three months, and may be extended if necessary.

According to the website at present, in order to access the scheme, employers will need to “designate affected employees as furloughed workers and notify employees of this change”.  

The Government is currently setting up the scheme. We understand that employers will be able to submit applications via an online portal, although this is not yet live. The Government expects to be in a position to make the grants available by the end of April.

Employers can only make one claim under the scheme every three weeks, which is the minimum length of time for which an employee can be furloughed.

Payments received from HMRC MUST be used to pay the employee, no fees can be charged from the money that is granted. Payments to the employee are still subject to deductions including income tax, national insurance contributions and pension contributions (if applicable) in the usual way.

Payments will be made from HMRC via BACS to the employer’s nominated bank account.

2. What does furlough mean?

“Furlough” is not a concept currently recognised by UK law. Generally, it means to take a leave of absence from work.

Employees can be furloughed for up to the full duration of the scheme (see below) but if furloughed, the furlough must last for a minimum of three weeks.

3. Which employers are eligible to use the scheme?

The scheme is open to UK employers that had a PAYE payroll scheme on or before 28th February 2020 and have a UK bank account.

The scheme therefore applies to businesses, charities and public authorities, although the Government expects that it will not be used by many public sector organisations, as the majority of employees will be continuing to provide essential public services.

Where employers receive public funding for staff costs, and that funding is continuing, the Government expects employers to use that funding to continue to pay employees as usual. Where funding is not continuing, it may be appropriate to furlough employees.

To be eligible, employers must write to employees confirming that they have been furloughed (see further below for how this can be done) and keep a record of this letter.

4. Which employees are eligible for the scheme?

Furloughed employees must have been on your PAYE payroll on 28th February 2020. The scheme therefore does not apply to any employees who joined after this date.

The scheme also covers employees who were made redundant after 28th February 2020, if you re-hire and then furlough them. The guidance does not make clear any arrangements for re-hiring employees, but it is likely to be reasonable to ask employees to repay any payments in lieu of notice and/or statutory redundancy payments to the employer as a condition of being re-hired.

5. Can employees continue to work during furlough? Can we use furlough for employees who are working reduced hours on reduced pay?

Employees are not permitted to undertake ANY work for or on behalf of the employer during the furlough. This includes providing services or generating revenue.

Furloughed employees can take part in volunteer work or training as long as it does not provide services to or generate revenue for the business.

Employees who are working reduced hours are not eligible for the scheme.

6. How do we calculate an employee’s wages?

For full and part-time employees, you should base your claim on the employee’s actual salary, before tax, as at 28th February 2020. Fees, commission and bonuses should NOT be included in the calculation. You will need to calculate 80% of this wage for the period of the furlough and then apply the cap of £2,500 per month for anyone’s wages exceeding this amount.

7. How will normal salary be calculated for those with variable pay, such as zero-hours workers?

For employees who have been employed for a full 12 months prior to the claim, you can claim for 80% of the higher of:

  • The same month’s earnings from the previous year; and
  • The average monthly earnings from the 2019/2020 tax year;

subject to the cap of £2,500 per month.

If the employee has been employed for less than 12 months, you can claim for 80% of an average of their monthly earnings since they started work with you, subject to the cap.

If the employee only commenced employment in February 2020, you should pro-rata their earnings and calculate 80% of this amount, again, subject to the cap.

8. Can an employer elect to top up the wage to 100%?

Yes – an employer can offer to top up the wage but there is no obligation on them to do so. Clearly, topping up the wage is likely to assist with obtaining consent to furloughing the employee. Whether you intend to furlough on 80% or to top up out of your own budget should be made clear to the employees when seeking their consent for furlough.

9. How do we calculate the Employer National Insurance and Employer Pension Contributions we can claim?

Once you have calculated the amount that you can claim, you can use this to calculate the employer national insurance contributions and automatic enrolment pension contributions (up to the minimum mandatory contribution of 3% of income above the lower limit of qualifying earnings) you can claim. The Government will be issuing further guidance on how to do this in due course.

Employer national insurance contributions and automatic enrolment pension contributions applicable to any top up of salary (or any voluntary automatic enrolment contributions above the minimum mandatory contribution) will not be funded through the scheme and employers will remain liable for these amounts unless an alternative agreement has been reached with employees.  

10. Can you force an employee to take furlough leave?

This will depend on the contract of employment. If the contract contains a clause allowing you to lay off the employee (lay-off means to send the employee home with no work or pay, save for Statutory Guarantee Payments, where applicable) then you may not need separate consent in order to furlough an employee, as in this scenario, the Government will simply be stepping in to provide up to 80% of pay when the employer already has the right to lay off employees without pay.

If the contract does not contain a clause entitling you to lay off the employee, then you will need the consent of the employee to designate them as a furloughed worker. It is anticipated that in most cases an employee would consent to being furloughed rather than face more severe measures such as redundancy. If you are simply requesting the consent of the employee to furlough then it is unlikely that any collective consultation obligations would be triggered.

However, if you are asking employees to consent to being furloughed otherwise you will impose furlough or they are at risk of redundancy, then this would be likely to trigger the obligations to engage in collective consultation with elected employee representatives, if there are 20 or more employees affected at any one establishment. A failure to comply with the collective consultation obligations can result in awards of up to 90 days’ gross pay per employee. We recommend that you seek legal advice in any such cases.

11. Do we need to consult with a Trade Union about the proposal to place employees on furlough?

This will depend on the collective bargaining terms that have been agreed with any trade union. If you are obliged to consult with a trade union about any terms and conditions relating to pay, then you would need to consult the trade union about the proposals and agree the change with the union in the usual way.

12. How do I get consent from employees to put them on furlough?

We envisage that most employees will be likely to voluntarily consent to a proposal to vary their contractual terms and conditions to place them on furlough. Employers will need to write to employees confirming that they have been furloughed to be eligible for the scheme and therefore employers should ask employees to countersign a letter confirming their agreement to being furloughed. In the current situation with many employees based at home, it may be possible to have employees electronically sign documents or to simply reply to an email confirming their agreement.

13. Can employees still work/work from home whilst furloughed?

No – employees are not permitted to perform any work during furlough. Employees may undertake training during furlough so long as this does not generate revenue for the employer.

Any tasks undertaken by an employee for the benefit of the business are likely to be considered work. As such, any tasks required to be performed by an employee, however minor and ad-hoc, may mean that the employee is not suitable for furlough leave.  

14. Does the 80% include employer pension contributions and employer's NICs?

No – the employer can claim for these sums in addition to the 80% of salary (subject to the cap).

15. Do we still need to seek consent to furlough if we are proposing to top up the pay to 100%?

Yes, subject to the above points about whether there is a contractual right to lay off already in existence, as this would still represent a change to the employee’s terms and conditions of employment.

16. Is it a breach of trust and confidence if the employer does not 'top up' the extra 20%?

In cases where there is no contractual right to lay off, if an employer did not seek the consent of an employee to put them on furlough and simply imposed the change, it is likely that this would constitute a breach of trust and confidence, theoretically entitling the employee to resign and claim constructive unfair dismissal. However, in the current climate, it is more likely that an employee would remain in employment and bring a claim for unlawful deductions from wages for the “missing” 20%. If you are not going to top up the salary you therefore need to obtain the employee’s consent to accept a reduced salary during the furlough (see above).

17. At what rate would benefits (such as holiday entitlement) accrue during furlough?

All other employment rights remain the same during furlough and therefore all contractual benefits, such as annual leave entitlement, would continue to accrue in full during any furlough, unless expressly agreed otherwise with affected employees. This is because a furlough is akin to a sabbatical, during which all terms and conditions of employment remain.

It would be open to employers who are seeking the consent of employees to place them on furlough and therefore to accept a reduced rate of pay to also seek consent to vary benefits for the duration of the furlough. For example, employers could ask employees to forgo a car allowance, or to only accrue statutory holiday entitlement during the furlough and to forgo any additional contractual entitlement. Employers would need to weigh up the benefits of minimising these additional costs during this time versus making consent harder to obtain.

18. Can apprentices be furloughed?

It has not yet been confirmed whether apprentices are included in the scheme but on the basis that it has been stated to apply to all employees who are on PAYE, we understand that it will be possible to furlough apprentices, subject to the same principles as above in terms of obtaining consent. We will confirm the position as soon as possible.

19. How do I select which employees should be furloughed? Can I only furlough employees who are at risk of redundancy?

We are not aware of any restriction at present on the scheme only being available to those who are at risk of redundancy.

All other employment rights and protections still apply and therefore employers will need to ensure that they do not inadvertently trigger claims for discrimination, or less favourable treatment of part-time or fixed-term workers, when selecting employees for furlough. We recommend that employers rely on business justifications for identifying roles for furlough, and/or consider adopting objective selection criteria as necessary.

20. We have been forced to close our business by the Government recommendations but we would not be proposing to make the staff redundant as we will need them when we are able to reopen. Can we still use the scheme?

We are not aware of any restrictions that would prevent such businesses from accessing the scheme. We await further information from the Government.

21. Can an employer rotate furlough leave amongst staff, and can employees dip in and out of it?

It is not yet clear whether there will be any restrictions on how many times an employer can apply for a grant in relation to the same employee and whether once an employee has returned to work, they can subsequently be re-furloughed. For some employers who do not need to furlough all staff, it may be desirable to rotate employees on furlough so that all employees (or all of a particular type/role) are rotated and accordingly all face a period of time for which they are receiving only 80% of pay. The scheme is clear that furlough must be for a minimum of at least three weeks and therefore this may not be viable for some employers who are hoping to rotate employees.

22. Will it be unfair if an employer makes someone redundant rather than placing them on furlough leave?

This will depend on the circumstances of the case. If the redundancy is solely proposed because of the current situation regarding the Coronavirus, then it is likely to be unfair to make an employee redundant rather than putting them on furlough and claiming a grant from HMRC, since such action would potentially be deemed unreasonable in the circumstances. Employees can claim unfair dismissal if they have two or more years’ service.

However, if a redundancy consultation process was ongoing prior to the onset of the Coronavirus crisis, and/or the situation is not affected by the Coronavirus, it may still be possible to fairly dismiss an employee for redundancy notwithstanding the terms of the scheme.

If redundancies are proposed due to what the employer considers will be a permanent reduction in work, even once the immediate crisis has abated, it is possible that a Tribunal would consider that a redundancy was fair (provided that a fair process was followed) and that furlough was not a viable alternative to redundancy in any event. However, the Government has strongly encouraged any business considering redundancies to fully consider the support available before making decisions.

We strongly recommend that you seek specialist employment law advice before effecting any proposed redundancies.

23. How do you deal with employees who object to their colleagues getting 80% of pay on furlough leave when they still have to work?

It will be important to manage carefully any communications with employees about access to the scheme and how employees have been selected to go onto furlough. We recommend that employers consider selection for furlough based on a clear business rationale as to the types of work that have reduced and/or whether it is feasible to perform such work from home. Employers could consider incentives for those who are having to continue working, such as additional holiday entitlement or bonuses.

24. Can employees who are absent from work due to sickness be furloughed?

The updated guidance states that those who are currently considered to be incapable of work, whether under the normal rules on sickness absence or under the deemed incapacity provisions under the recent changes to the legislation on statutory sick pay eligibility (which cover those who are self-isolating based on medical guidance but may not actually be symptomatic), should receive Statutory Sick Pay but would be eligible for furlough once the sickness absence has ended.

The guidance confirms that those shielding in accordance with public health guidance can be placed on furlough.

Potentially, there could be claims for disability, age and/or pregnancy discrimination if an employee is self-isolating based on medical guidance because of a disability, their age or pregnancy (and is therefore receiving only SSP), but employees performing the same role who have remained in work are furloughed. The guidance confirms that those shielding in accordance with public health guidance can be placed on furlough.

25. Can employees on unpaid leave be furloughed?

The guidance states that employees on unpaid leave cannot be furloughed, unless they were placed on annual leave after 28th February 2020.

26. Can directors be furloughed?

Potentially, yes, if they are employed executive directors and are subject to PAYE. Non-executive directors are unlikely to be covered by the scheme. This is, of course, subject to obtaining the individual directors’ consent.

The calculation of wages for directors should be based on their normal salary only and should not include dividends or other payments made to the director.

27. Can we put someone who is working out a notice period on furlough?

Subject to the above points about obtaining the employee’s consent, there does not appear to be any reason why an employee under notice could not be furloughed, provided that they do not undertake any work during furlough. However, obtaining consent in the circumstances may be more difficult than with other employees.

28. Can agency workers be furloughed?

End-users do not employ agency workers and therefore they would not be able to furlough agency workers. It is open to employment businesses to furlough employees on their PAYE if end-users have terminated assignments, for example.

29. What happens if an employee is sick during furlough? Do they continue to receive their salary or SSP?

This is not currently clear. We don’t yet know how furlough leave will interact with sickness absence. We will provide further information as soon as possible.

30. What happens to annual leave that has been booked during a period of furlough?

We understand that employees will still be eligible to take annual leave during a period of furlough. It is not currently clear what pay the employee should receive for the days taken if they have agreed with the employer to accept a reduced salary during the furlough period. It is likely that holiday would be paid at the adjusted rate but we will confirm this as soon as possible.

31. What happens if I can’t continue to pay employees until I receive the money from the Government?

Any failure to pay an employee their usual wage (or any agreed reduced rate) on the correct date would constitute an unlawful deduction from wages and the employee could bring a claim for the arrears and/or resign and claim constructive unfair dismissal.

The Government is offering temporary Coronavirus Business Interruption Loans through the British Business Bank, which should be available to small and medium-sized businesses from this week. Employers are likely to be expected to take advantage of this and/or other measures put in place by the Government to assist businesses prior to receiving a grant, rather than considering making redundancies in the interim. It is likely that any such redundancies could be considered to be unfair.

Alternatively, employers could try to agree with employees that they will be furloughing them and that they will be paid when the funds are received from HMRC. This would not amount to a valid waiver of a claim for unlawful deductions from wages but employees may understand the employer’s position and not bring claims.

32. Can furloughed employees claim a statutory redundancy payment?

Employees who are furloughed are not dismissed or made redundant.

Employees who have been laid off or placed on short-time working are eligible to apply for a statutory redundancy payment if they meet certain conditions (for example if they have two or more years’ service and have been laid off without pay for four or more consecutive weeks or six or more non-consecutive weeks in any thirteen week period). We await further information on whether furloughed employees would be able to resign and claim a statutory redundancy payment in similar circumstances, but we suspect that this is unlikely, because the provisions around short-time working only apply if the employee is receiving less than 50% of their usual week’s pay.

33. Can furloughed employees claim a statutory guarantee payment?

Statutory guarantee payments are payments potentially available to those employees who have been laid off or subject to short-time working. They can apply where an employee receives less than 50% of their normal weekly pay in a week. Employees can claim up to five days’ payment in a three-month period from their employer. The Statutory Guarantee Payment is currently £29 per day. We understand that furloughed employees are unlikely to be able to claim a statutory guarantee payment because they will be receiving the alternative more generous payments under the Job Retention Scheme, but we await clarity on this point.

34. What are employees on maternity, paternity and adoption leave entitled to?

Individuals who are on or plan to take maternity leave must take at least two weeks off work (four weeks if they work in a factory or workshop) immediately following the birth of their baby. Employees who qualify for Statutory Maternity Pay, will still be eligible for 90% of their average weekly earnings in the first six weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate. If you offer enhanced (earnings related) contractual pay to women on maternity leave, this is included as wage costs that you can claim through the scheme. Employees on maternity and adoption leave can end their leave early either by providing eight weeks’ notice or if the employer and employee agree to allow an earlier date. The employee can be furloughed on their return to work.

The same principles apply to contractual adoption, paternity or shared parental pay.

35. Do employers still have to meet the National Living Wage/National Minimum Wage if the employee is furloughed?

Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working. Furloughed workers are not working and therefore 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 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.

36. Can an employee who is furloughed by one employer take a new job with another employer while furloughed?

The guidance specifically states:

  • a furloughed employee cannot carry out any work (paid or unpaid) for the organisation from which they are furloughed;
  • furloughed employees can undertake voluntary work for other organisations provided it is unpaid; and
  • an employee can be furloughed by more than one employer.

The guidance does not include any advice to cover a situation where, for example, a full time employee is furloughed but after being furloughed takes up a new role with a second employer which is paid.

The Government is yet to provide guidance on its anti-fraud measures and, at this stage, we would recommend that employees do not take up new roles while being furloughed. We will provide further guidance once we receive it.

37. How do we make a claim?

Once you have obtained the consent of employees to place them on furlough and confirmed this in writing, you will need to provide the following information to HMRC:

  • Your ePAYE reference number;
  • The number of employees being furloughed;
  • The claim period (start and end date);
  • The amount claimed (per the minimum length of furloughing of three weeks);
  • Your bank account number and sort code;
  • Your contact name; and
  • Your phone number.

HMRC retains the right to retrospectively audit all claims.


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Author: Lucy Gordon

Senior Solicitor, ESP Law Ltd

Lucy is an employment solicitor who brings to ESP over a decade’s experience at DLA Piper, one of the world’s most prestigious law firms. At DLA Piper, Lucy was involved in a number of global projects for major international customers and handled a varied case-load of employment matters for a range of UK customers, including complex Employment Tribunal cases involving whistleblowing and TUPE.