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Coronavirus – Job retention scheme - UK

  • United Kingdom
  • Coronavirus
  • Coronavirus - Workforce issues
  • Employment law


Updated 15.06.2020

On Friday 20 March 2020, the Chancellor announced a new “Coronavirus Job Retention Scheme” (the Scheme) to help pay people’s wages.

NB This note relates to the form and operation of the Scheme prior to changes introduced after 30 June 2020. Whilst many principles of the Scheme are retained beyond this date, there are also significant changes to its operation. For details of the Revised Scheme, please see our updated briefing.

Importantly, to aid understanding of the Scheme and how it operated pre-30 June (although many elements remain applicable after that date)s, the following documents were published:

In this briefing, we attempt to answer some of the most common questions raised by employers concerning the Scheme, based on our best understanding and interpretation of the Direction and available Guidance. We encourage a pragmatic approach to the Scheme by employers according to their particular needs and circumstances. What we say below nonetheless errs on the side of caution in terms of scheme interpretation and assumes employers will want to be as assured as possible of reimbursement in accordance with the Scheme rules. Where employers are able to be more flexible and to offer greater financial support for employees, whether by supplementing pay offered under the Scheme, or otherwise, will be a matter for careful consideration and decision.

This note is a generic briefing, based upon the Treasury Direction of 20 May 2020 (published 22 May) and Government Guidance and other information available as at 28 May 2020 and is not a substitute for detailed legal advice on the specific circumstances employers are facing. Employers should therefore take legal advice.

In this briefing we consider several aspects of the Scheme up to and including 30 June 2020:

  • an overview
  • scheme start date
  • to whom it applies;
  • what payments it covers
  • what employers need to do in preparation
  • operation of furlough
  • some specific scenarios e.g. those with health issues, on maternity leave or caring for children
  • the process for making a claim

Overview of the Scheme

The Scheme is presented slightly differently in the Direction and the Guidance but both reflect the fact that it has been created as an exceptional response to an exceptional situation. Both anticipate employers seeking reimbursement for specified employment costs for furloughed workers, subject to a cap, arising from the health, social and economic coronavirus emergency. The Guidance, for example, states that the Scheme is designed to help employers whose “operations have been severely affected by coronavirus to retain their employees and protect the UK economy. However, all employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus”.

To access the Scheme, employers must “furlough” (i.e. place on temporary leave from work) employees who were on their PAYE payroll on or before 19 March 2020 and in respect of whom HMRC received a notification of payment via its Real Time Information system (RTI) on or before 19 March 2020. This means an RTI submission to HMRC, notifying payment in respect of that employee must have been made on or before 19 March 2020 (for further information on this RTI date, please see below “What about staff who were already sent home, dismissed or hired prior to the Scheme becoming active?”).

During furlough, employees must undertake no work for the organisation (or associated organisations).

Until 1 July 2020, the Scheme does not apply to employees placed on reduced hours (see updated briefing on the Revised Scheme).

The Scheme is an overlay to existing UK employment law – it does not change the fundamental principles. It is a helpful option for employers to consider and offers the opportunity to recover certain costs while they take stock of the extraordinary circumstances (in some cases existential threats) they are facing. Employers can accordingly decide to furlough and pay staff who otherwise they would, as a consequence of the coronavirus outbreak, (a) have made redundant (itself a cashflow issue – as indicated) or (b) have laid off without pay (and for most employers, as they do not have a right to lay off, this risks claims for breach of contract and unlawful deductions from wages).


The Scheme has been extended to the end of July in its current form, with an ongoing commitment through to October. In tandem with Government moves towards a gradual easing of lockdown (see the Government “road map” and guidance notes for England here and here) employers should be planning now for their business needs after furlough, in terms of managing a gradual return to work or, given the legal requirements, planning for any consultation processes as part of prudent business planning.


Each employer will need to take detailed financial and legal advice in the light of its unique circumstances.

Start date

When did the portal go live?

The HMRC claims portal opened on 20 April and the aim is that the majority of verified claims are paid within 6 working days.

To whom the Scheme applies

Which employers are covered by the Scheme?

In order to claim under the Scheme, the Direction states that an employer must have a PAYE scheme registered on HMRC’s RTI system for PAYE on 19 March 2020. The Guidance also reflects this and elaborates a little in that “businesses, charities, recruitment agencies and public authorities” are included.

Some specific categories to highlight include:

Companies in administration: Administrators are able to access the Scheme. However, the Guidance states that it expects an administrator would only do so if there is a reasonable likelihood of rehiring the workers. In our view, the administrators therefore need to be comfortable that the staff can be retained pending a sale or restructuring of the business so this would not cover a situation where the business is, effectively, unable to be saved.

Two recent High Court cases -the first court cases concerning the operation of the Scheme - have also both confirmed that, once applications for funding under the Scheme have been made by the administrator/s and sums arising from this paid to employees who have agreed to be furloughed, the administrator/s will be taken to have “adopted” their contracts of employment, for the purposes of employment protection aspects of insolvency. This means that monies paid through the Scheme can be paid to the furloughed employees in priority over the administrators' fees and expenses and the distribution of assets to floating charge and unsecured creditors.

Public sector organisations: are able to access the Scheme but the Guidance suggests this will be appropriate only in limited circumstances.

The Direction itself is silent as to any restrictions on the use of the Scheme by public sector organisations. However, the Department for Education, for example, has issued guidance to education sector employers which contains more detailed restrictions than in the Guidance on the use of the Scheme by these employers.

Employers in the public sector or who are in receipt of public funding should therefore continue to take advice on any proposed use of the Scheme.


Employers in the public sector or who are in receipt of public funding should therefore continue to take advice on any proposed use of the Scheme.

Contingent workers in the public sector: separate guidance for public sector employers states:

“The Cabinet Office has issued guidance on how payments to suppliers of contingent workers impacted by COVID-19 should be dealt with where the party receiving the contingent worker’s services is a Central Government Department, an Executive Agency of a Central Government Department or a Non-Departmental Public Body.

Read more information on contingent workers impacted by COVID-19. This guidance applies to agency workers paid through PAYE, as well as those paid through umbrella companies on PAYE and off-payroll workers supplying their services through a Personal Service Company (PSC).”

What about staff who were sent home, dismissed or hired prior to the Scheme becoming active?

Employers can make claims under the Scheme, backdated to 1 March 2020, if applicable. The Guidance states, “If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages from the date on which you furloughed them, even if you do not re-employ them until after 19 March 2020”.


Accordingly, employees that were employed as of 28 February 2020 and on payroll (i.e. notified to HMRC on an RTI submission on or before 28 February) and were made redundant or stopped working for the employer after that , can qualify for the Scheme if the employer re-employs them and puts them on furlough. Furthermore, the Guidance extends the provision on re-hiring to those who were made redundant or stopped working on or after 19 March 2020. Employers seeking to use the Scheme for rehires in this way should take advice on how to best achieve this, as well as on how to deal with any termination payments already made to the former employee and the future dismissal at the end of the furlough leave period. Employers should also be prepared to give evidence about the reason for any refusal to “rehire”, to avoid potential claims relating to, for example, discrimination, victimisation or whistle-blower detriment. The claim for a rehired employee can only be made from the date when they are placed on furlough (and not their leaving date, for example).

The Scheme does not cover new starters unless they were on the PAYE payroll on or before 19 March 2020 and, importantly, were also notified to HMRC on an RTI submission on or before 19 March 2020.


What about TUPE transfers?

Both the Direction and the Guidance identify that the PAYE or business succession rules are applicable under the Scheme and, therefore, transferee employers will be able to claim under the Scheme for employees acquired pursuant to the TUPE Regulations.

This extends coverage to transfer of insolvent businesses, allowing a claim under the CJRS to be made by the transferee even where the transferor has been wound up and the automatic transfer of employment contracts would not apply. Transferors will also be able to claim under the Scheme for employees whose furlough periods have not lasted the full 21 days because they have, in the meantime, transferred to a new employer who is claiming in relation to the post-transfer period.

What payments the Scheme covers

Does the Scheme cover wages for workers as well as employees?

Integral to the purpose of the Scheme is that the amounts paid to an employer pursuant to a claim for reimbursement under it relate solely to permissible and actual expenditure within the Scheme rules i.e. in respect of wages as described in subsequent paragraphs below.

The Guidance states that, for employers to claim under the Scheme, the claim must relate to staff for whom an RTI submission, notifying payment, was made to HMRC on or before 19 March 2020. Relying on the Guidance, therefore, those on payroll and covered by the Scheme include directly-engaged workers in relation to whom the ‘employer’ currently deducts income tax and national insurance via PAYE. This therefore includes many ‘casual’ workers but the Guidance states that the Scheme covers all types of employment contracts, including full-time, part-time, agency and flexible or zero-hour contracts.

Although the Direction wording differs from the Guidance and refers expressly to eligibility according to tax legislation (section 4 of Income Tax (Earnings and Pensions) Act 2003), which applies to those working under of contract of service (in employment law terms an “employee”, office holder, someone in apprenticeship and to certain agency workers), in practice, workers are deemed “in scope” of those working under contracts of service for tax purposes. Accordingly, we see no obvious discrepancy between the Direction and the Guidance, which includes a paragraph about Limb B workers, in practical terms.

Similarly, both the Direction and Guidance are clear that agency workers (including those engaged via ‘umbrella’ companies) are covered where they are paid via PAYE by their agency (technically, an employment business). However, this is only where they have no work from that ‘agency’. It is the agency, not the end user or hirer that should make any application to the Scheme. The ‘agency’ is encouraged to discuss the matter with the end user client. Agency workers should perform no work for, via, or on behalf of that ‘agency’ while they are furloughed, including for the agency’s clients.

The Guidance is clear that apprentices can be furloughed in the same way as other employees and can continue to train whist furloughed. It is nonetheless important for employers to bear in mind that apprentices must receive at least the Apprenticeship Minimum Wage/National Living Wage/National Minimum Wage as appropriate for all the time they spend training. Employers will need to cover any shortfall between the amount recoverable under the Scheme and the appropriate minimum wage.

Company directors with an annual pay period are eligible to claim, as long as they meet the relevant conditions. This includes being notified to HMRC on an RTI submission on or before 19 March 2020, which relates to a payment of earnings in the 19/20 tax year.

It is clear is that the Scheme is not accessible to the self-employed for tax purposes, where the individual makes a self-assessment to HMRC each year.


Which wages are covered by the Scheme?

The Direction refers to “Qualifying Costs” under the Scheme and its provision is reflected and elaborated upon in the “Guide to Working out 80% of Wages”  and which offers some worked examples. The entirety of the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money. No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme.

There is a distinction between a “fixed rate” employee and other employees. Fixed rate employees are (consistent with NMW legislation), likely only to be those with annual hours stipulated in the contract. Those who have weekly or monthly hours of work will not therefore, according to HMRC be fixed rate employees. This is a somewhat narrow interpretation, however, the Guidance also states that HMRC will not apply an unduly technical approach to how employers classify staff.

For fixed rate employees, the reference salary employee is the amount payable to the employee in the latest salary period ending on or before 19 March 2020. The Guide to Working out 80% of Wages: recommends that, to work out 80% of wages for fixed rate full or part time employees on a salary, employers should:


  1. Start with your employee’s wages, which is their last pay period before 19 March - if you’re claiming for a full pay period, skip to step 4.
  2. Divide by the total number of days in the pay period.
  3. Multiply by the number of furlough days in the pay period.
  4. Multiply by 80%


With respect to employees whose pay varies, the Guide to Working out 80% of Wages clarifies that there will need to be a difference in approach for those were employed as at 6 April 2019 i.e. they have been employed for a full tax year and employees whose pay varies and who started employment after 6 April 2019 i.e. they will not have been employed for a full tax year.

Accordingly, if the employee has been employed continuously from the start of the 2019 to 2020 tax year, you the employer can claim the highest of either:


  • 80% of the same month’s wages from the previous year (up to a maximum of £2,500 a month)
  • 80% of the average monthly wages for the 2019 to 2020 tax year (up to a maximum of £2,500 a month)


OR, to calculate 80% of the same month’s wages from the previous year, should:


  1. Start with the amount they earned in the same period last year.
  2. Divide by the total number of days in this pay period - including non-working days.
  3. Multiply by the number of furlough days in this pay period.
  4. Multiply by 80%.


In contrast, for those employees whose pay varies and who started employment after 6 April 2019, employers will need to work out 80% of your employee’s their average monthly earnings and should:


  1. Start with the amount they earned in the tax year up to the day before they were furloughed.
  2. Divide it by the number of days they’ve been employed since the start of the tax year – including non-working days (up to the day before they were furloughed or 5 April 2020 – whichever is earlier).
  3. Multiply by the number of furlough days in this pay period.
  4. Multiply by 80%.


Every day or period after the employee commenced employment with the employer is counted in making this calculation. This includes days when no work was undertaken.

N.B. It is important to note that 80% of normal salary is the minimum that must be paid to employees in order for employers to be reimbursed under the Scheme. If the employer pays less, the claim on the Scheme will be invalid. It is therefore vitally important that employers calculate pay carefully and accurately, paying particular attention to those additional elements of pay described below which may need to be included.

Are any other elements of pay covered by the Scheme?

The Direction states that, in calculating the employee’s reference salary (for the purposes of calculating the 80%), no account is to be taken of: benefits in kind; anything provided or made available in lieu of a cash payment otherwise payable to the employee (including salary sacrifice schemes); or anything which is not regular salary or wages. In this context, “regular” pay means pay that “cannot vary according to a relevant matter except where the variation in the amount arises from a non-discretionary payment”. A relevant matter includes business or individual performance. However, non-discretionary items may be included where a legally enforceable agreement, understanding, scheme, transaction or series of transactions , prescribes the method of calculating the amount of wages or salary payable in respect of the payment (whether or not that method involves the exercise of discretion).

The Guide to Working out 80% of Wages states:

“…The amount you should use when calculating 80% of your employees’ wages is regular payments you are obliged to make, including:


  • regular wages you pay to employees
  • non-discretionary payments for hours worked, including overtime
  • non-discretionary fees
  • non-discretionary commission payments
  • piece rate payments


You cannot include the following when calculating wages:


  • payments made at the discretion of the employer or a client - where the employer or client was under no contractual obligation to pay, including:
    • tips
    • discretionary bonuses
    • discretionary commission payments
  •  non-cash payments
  • non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay …“.


In relation to non-discretionary overtime, the Guide to Working out 80% Wages states that any such payments which the employer is contractually obliged to make at a set and defined rate may be included in the calculation of 80% wages.

In the round, in addition to salary, regular payments which would be deemed part of “normal” wages, or other payments in respect of which there is a legally enforceable agreement may be included in the reclaimable 80% of wages. Anything that is truly discretionary (such as a discretionary bonus or incentive scheme payments) is not recoverable under the Scheme.

Just to clarify, we deal with some examples:


  • Compulsory overtime – would be included (legally enforceable).
  • Non-guaranteed overtime – would be included (legally enforceable )
  • Voluntary overtime – may be included ( although the right to be offered such overtime would not be legally enforceable, there may be a legally enforceable agreement regarding how to calculate such hours which have been worked)
  • Car allowance – would be included (legally enforceable)
  • Shift premiums – would be included (legally enforceable)
  • Call-out payments – would be included (legally enforceable).


Employers must exercise caution to ensure their calculation accurately reflects regular pay and can be justified as such - taking care, too, that they do not risk paying less than the required 80% of wages (as mentioned above).This is a complex area and, for employers with specific pay provision in excess of a basic wage, we would encourage them to seek legal advice, as all circumstances will differ.

Employers are nonetheless able to continue to pay other elements of pay which are not recoverable under the Scheme, provided they are able to bear the cost and (to avoid discrimination claims) this is applied equally. Similarly, they may seek to re-negotiate pay entitlement as a temporary measure as part of the negotiated terms of furlough.

Where an employee has entered into a salary sacrifice arrangement, the salary that is to be used as the reference salary should be the post salary sacrifice salary. It may be possible for employee’s to suspend their salary sacrifice arrangements. The Guidance confirms that COVID-19 may be treated as a ‘life event’ for the purposes of salary sacrifice. This would need to be clearly documented. Where the arrangements are not suspended, the benefits would need to be provided on top of the salary paid to the furloughed employee and, according to the Guidance, no deduction for the benefit may be made from such furlough salary payment.

How much can employers actually claim?

The Direction and Guidance specify that employers can apply for a grant that covers 80% of their usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Student Loan deductions and the Apprenticeship Levy cannot be claimed.

Until August 2020, Government grants will cover 80% of the pay of retained workers up to a total of £2,500 a month (provided, where necessary, they obtain the consent of staff – see below). If 80% of salary is £2,500 per month, the full salary would be £3,125 per month. This amounts to a salary of £37,500 per annum. Accordingly, our calculations suggest that any wages earned by a member of staff in excess of £37,500 per annum are not covered by the Scheme. Wages up to £2,500 paid to such a higher earner would be covered by the Scheme.

Employers will be required to deduct income tax and employer and employee’s NICs from the monies paid to furloughed workers. Student loan deductions should also be paid as usual.

As mentioned above (until August), in addition to the £2,500 or 80% (the lower of the two) employers will also be able to claim from HMRC by way of reimbursement the cost of employer NICs and (mandatory) auto enrolment pension contributions employment costs. Any additional pension contributions would not be recoverable, any apprenticeship levy or the costs of other benefits such as life or medical insurance may not be reclaimed under the Scheme.

In respect of lower earners, it is the lower of £2,500 per month or the 80% that may be recovered by the employer.

HMRC will have the payroll records to substantiate claims and the Guidance states that claims will be checked and that HMRC will reserve the right to audit and, more generally, continue to “monitor businesses” after the Scheme is closed. The Direction also refers to the fact that employers claiming under the Scheme accept that they are doing so only in accordance with the purpose of the Scheme and that any payment they received but do not use for this purpose must be returned to HMRC immediately. A claim under the Scheme will be is accompanied by a requirement for a declaration by the employer to this effect and confirming that the information supplied to HMRC is accurate (comparable to the declaration on a self-assessment income tax return).

Is the employer obliged to make up the 20% of wages lost by staff who are paid under the Scheme?

The Guidance states that employers do not have to pay the 20% top up but can choose to do so. Many employers are doing so (on a time-limited or open-ended) basis. However, to be clear, the furlough scheme itself does not allow the employer to impose a pay reduction – the reduction in pay during furlough leave must be achieved by agreement, under the terms of the contract itself (e.g. a lay off clause) or through dismissal and re-engagement. Unless pay is varied in this way, the obligation to pay full pay will continue.

How does the national minimum wage apply to furloughed employees?

The Guidance confirms that individuals are only entitled to the NMW for the hours they are working and furloughed workers are not working. Therefore, 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 workers are required to, for example, complete online training courses whilst they are furloughed, then they must be paid at least the NMW for the time spent training, even if this is more than the 80% of their subsidised wage.

What steps does the employer need to take to designate staff as “furloughed” workers? 

What steps does the employer need to take to designate staff as “furloughed workers”?

There is no right to be furloughed and, whilst employees may express a preference, the decision to furlough lies solely with the employer. Employers should document their choices as regards the Scheme, i.e. in deciding who to furlough (to manage the risk of any claims for discrimination, etc.).

The confirmation of furlough status should be made in writing to the employee. Such agreement (which, must be accepted but not necessarily does not have to be signed by the employee) must specify “the main terms and conditions upon which the employee will cease all work in relation to their employment”. The Guidance and Direction clarify that a collective agreement reached between an employer and a trade union will satisfy the requirements of the Scheme in this regard. Furthermore, the employer must retain this agreement or confirmation until at least 30 June 2025. This evidential requirement should be noted, given the possibility of a future HMRC audit.

Whilst the Direction states that an essential condition for placing employees on furlough is the need for written agreement as between employer and employee that the latter will undertake no work for the employer during the furlough period, it takes a pragmatic approach to how this may be evidenced. Even so, written confirmation of the fact of furlough and that no work may be undertaken on behalf of the employer should be provided in all cases. Employers should carefully check their furlough letters and communications to be assured of compliance with the Scheme requirements.

The Guidance makes clear employers may need to take legal advice before embarking on furlough. If there is a contractual right to lay staff off in the employment contract, employers will be able to rely on this provision to furlough staff on pay (to the extent permitted by the Scheme) and look to recover those wage costs from the Scheme. In any event, staff need to be notified in writing of the change in their designation, from employees or workers to “furloughed workers” and, as identified above, there must be some record of agreement regarding their inability to work. This need for written record of furlough should also be noted when employees switch (for the purposes of claiming under the Scheme) between various forms of leave (e.g. sick leave, maternity leave etc.) and furlough.

Where no contractual right to lay staff off exists, the Guidance is clear that changing the status of staff remains (as with the remainder of the Scheme) subject to existing employment law - consent to contractual change, consultation obligations etc. Further, depending on the employment contract, this may be subject to negotiation. Additional considerations apply in relation to those staff within scope of union collective bargaining, in which case the employer should first seek to agree the terms of the furlough leave with the union and if the terms cannot be agreed (perhaps because the union is insisting that the employer “tops up” the payment to 100%) then the employer should seek legal advice, as offering furlough leave direct to staff in these circumstances might risk union related claims. As identified above, the terms of furlough must include some record of confirmation regarding the requirement that the employee ceases work during furlough leave.

Operation of furlough

Until 1 July 2020, it is a condition of the Scheme that the employee does no work at all during the furlough period.

HMRC will have visibility of pay records and we would anticipate that, if a member of staff earns wages during a furlough period, it will result in the employer not being reimbursed for any “furloughed” wages paid.

Employees may (and under the Guidance are encouraged to) undertake “required” training and be paid at least the NMW rate for that work. The Direction confirms that such training need not be directly relevant to the employee’s job. Its purpose can be to generally improve an employee’s effectiveness in the employer’s business or the performance of the employer’s business, as long as it does not contribute to business activities, generate income or profit, or significantly contribute to the production of goods or services for sale. 

Does the “furlough period” need to be continuous? Is there flexibility for workers to move in and out of the scheme?

Until 1 July 2020, a minimum furlough period of three weeks (21 calendar days in the Direction) is required. The Guidance states that each period of furlough can be and employers can also place employees on furlough more than once ie legitimately “rotate” workers on and off furlough in minimum three week blocks.

Furlough and annual leave

Provision regarding holiday and furlough is set out in a separate non-statutory guidance, “Guide to holiday entitlement and pay during coronavirus”. There is also Acas guidance available.

This  “holiday entitlement” guide confirms that holiday continues to accrue during furlough and, importantly, that the taking of holiday does not interrupt furlough. It also acknowledges that employers can require workers to take holiday and cancel a worker’s holiday, provided they give enough notice to the worker. However, being on furlough does not alter an employee’s statutory rights to holiday. Accordingly, any period of holiday will still need to be paid at 100% normal pay and not the furlough rate, unless this has been topped up to 100%) i.e. the employer must pay the difference between 80% and normal rate.

Bank holidays are treated in accordance with whether it’s holiday or furlough, and this will be in accordance with the contract (as, potentially, varied by the furlough letter). If the worker would usually have had the bank holiday as annual leave, there are two options: (i) the bank holiday is taken as annual leave while on furlough and the employer must pay the correct holiday pay for the worker or (ii) the bank holiday is deferred by agreement until a later date, but the worker should still receive their full holiday entitlement.

Under the Working Time Regulations (which were amended in March 2020) workers are entitled to carry forward parts of their four week statutory holiday to the next two holiday years where, due to the outbreak, it has not been reasonably practicable to take holiday in the current leave year. The new guide recommends that best practice in all cases is for employers to inform workers of both the need to carry forward, and how much leave will be carried forward. The guide then provides examples of when it might not be reasonably practicable to take holiday as a result of the coronavirus. In so doing, the guide suggests that “workers who are on furlough are unlikely to need to carry forward statutory annual leave, as they will be able to take it during the furlough period”. However, it goes onto recognise that the employee’s ability to gain any real sense of rest or genuine time-off may be impaired by the need to socially distance or self-isolate, thereby preventing the taking of “holiday”. Employers may be faced with a difficult assessment of whether employees can in reality take “holiday”, depending upon their personal circumstances.

Furthermore, the guide notes that some employers may be unable in current circumstances to fund the difference between 80% furlough pay and full pay during holiday. In that event also, it will not be reasonably practicable for the worker to take their leave, in which case it will need to be carried forwards.

Can employers bring staff into the Scheme who are already on sick leave or receiving SSP/CSP due to self-isolation?

The Guidance is clear that the Scheme is not intended for short term absences from work due to sickness, including Covid-19 or self-isolation due to potential exposure to Covid-19. These individuals should be placed on sick leave, during which time (as a minimum) they will be entitled to receive SSP.

However, the Guidance also states that the ability to furlough for business reasons applies to employees on short and long term sick leave and those who are self-isolating. In these cases, based on such business reasons, the employer appears to retain a discretion to furlough. Importantly, the employee should no longer receive sick pay and would be classified as a furloughed employee, but note the comments below regarding where sick pay is more beneficial than furlough pay.

If a currently furloughed employee become sick, the Guidance states that they retain their statutory rights (in this context, to SSP) but it is for the employer to decide whether to place them on SSP or keep them on furlough pay. Employers can claim furlough pay under the Scheme and the SSP rebate scheme in respect of the same employee but not in respect of the same period of time. This mutual exclusivity of the two reimbursement schemes is important: whilst in many cases the furlough pay will be at least equal to (if not higher) than the applicable sick pay, this will not be the case for those employers with generous full pay sick pay terms. Employers will therefore wish to avoid employees seeking to switch from furlough leave to sick pay if the employee could then receive pay that cannot be claimed back under the Scheme.

Where sick pay terms are contractual, of course, a variation will need to be agreed with the union/employee, as applicable, for example to state that, during furlough leave, sick pay will not apply. This is best done at the same time as seeking agreement to furlough leave. Employers who have already placed employees on furlough leave will find it more difficult to agree those changes with union or the furloughed employees and may therefore need to rely on the argument that the furlough leave itself overrides any contractual entitlement to sick pay. Notwithstanding the strict contractual position, employers may in practice be keen to deter employees from seeking to move from furlough to more favourable enhanced sick pay.

What about those who are shielding?

The Guidance states that “employees who are unable to work because they are shielding in line with public health guidance (or need to stay at home with someone who is shielding) can be furloughed.” Effectively this means that such employees can be furloughed if they are unable to work from home.

Employees with caring responsibilities

Employees who are “unable to work” because they have caring responsibilities resulting from coronavirus (e.g. they need to look after children because they are not in school) can be furloughed.

Can employees on maternity and other forms of family-related leave be brought into Scheme by being “furloughed”?

The Guidance does not address this issue clearly. It states – under the heading “If your employee is on maternity leave, adoption leave, parental leave or shared parental leave” – that “The normal rules for maternity and other forms of parental leave and pay apply.” In addition, it states that employers can claim under the Scheme for enhanced (earnings related) contractual pay for employees who qualify for these statutory forms of leave.

In our view, this indicates that if an employee is furloughed and then begins a period of family related leave (called “social benefit leave” in the Direction), they continue to have their usual statutory rights in relation to leave and pay, and their contractual rights as well, unless these are varied in the furlough agreement. The employer does not have to remove them from furlough, can continue to pay them at the furloughed rate but cannot claim under the Scheme for reimbursement of statutory SMP, etc. (see paragraph 8.6 of the Direction).

It is less clear that an employee who is already on maternity or other family leave can be furloughed until they return from leave (including by cutting that leave short). They can only be furloughed if they agree not to work – the Direction makes that clear – and that agreement must relate to circumstances caused by the COVID-19 emergency. Our view is that it is likely that such employees can be furloughed, for example to avoid the employer deciding to make them redundant. Their statutory leave would continue and the employer could not (as explained above) seek reimbursement under the Scheme of any statutory pay to which they are entitled.

“Company directors”

The Direction adopts a relatively narrow (and arguably narrower than the Guidance) interpretation of what will not be regarded as work for directors, namely “fulfilling a duty or other obligation arising by or under an Act of Parliament relating to the filing of company accounts or provision of other information relating to the administration of the director’s company; making a CJRS claim in respect of an employee of the director’s company; or making a payment of salary or wages of an employee of the director’s company””.

Any additional activities (such as board meetings and preparation for the same) would jeopardise a claim under the Scheme.

“Fixed term contracts”

The Guidance now clarifies that a fixed term contract can be extended before its “natural conclusion” and the employee/worker can be furloughed in line with the Scheme. There is no minimum period that needs to be left on the fixed term. However, if the contract expired on or before 19 March, a claim cannot be made under the Scheme.

The process for making a claim

What is the process for the employer accessing funds under the Scheme?

HMRC have committed to making the claim process as “straightforward as possible” and HMRC claims should be made using the amounts in an employer’s payroll – at the same time as running payroll.

Employers will need to be fully organised and efficient when logging on to apply. Employers are encouraged to note the application reference and print a copy as they will not receive an email acknowledgment. They are encouraged not to query payment until 6 working days from applying.

The following information is required:


  • employer PAYE scheme reference number
  • the number of employees being furloughed
  • National Insurance numbers for the furloughed employees
  • names of the furloughed employees
  • payroll/employee number for the furloughed employees (optional)
  • self-Assessment Unique Taxpayer Reference, Corporation Tax Unique Taxpayer Reference, Company Registration Number or Employer Name (as appropriate)
  • the claim period (start and end date)
  • amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
  • bank account number and sort code
  • contact name
  • phone number


Where an employer has fewer than 100 furloughed staff, details of each employee being claimed for will need to be inputted directly into HMRC’s system - this will include their name, National Insurance number, claim period and claim amount, and payroll/employee number (optional).

However, employers with 100 or more furloughed staff will be asked to upload a file containing the equivalent information (rather than inputting it directly). The following file types are acceptable to HMRC: .xls .xlsx .csv .ods.

Where an employer uses an agent authorised to act for PAYE purposes, the agent will be able to make a claim on behalf of the employer, in which case the employer will need to confirm which bank account the grant should be paid into. However “file only” agents (i.e. who file an employer’s RTI return but do not act on any other matters) are not authorised to make a claim on an employer’s behalf, but can assist employers in collating requisite information.

It is very important that employers retain all records and calculations in respect of their claims, including records of the amount claimed for each furloughed employee and the period for which each employee is furloughed and a claim made under the Scheme. HMRC will verify claims and retain the right to retrospectively audit all aspects. HMRC have also stated that they can withhold or recover all payments.

Finally, HMRC have stated that they will not be in a position to respond to employee queries regarding claims. Instead, the responsibility for keeping employees updated is placed very firmly upon employers.

Each organisation will continue to need advice on its unique circumstances.

We have a team of experienced advisers available to advise on this further. Dozens of our experts have been advising employers since 20 March on the Scheme. In the first instance, please contact your usual Eversheds Sutherland adviser or the contacts below.

This note is a generic briefing and is not a substitute for detailed legal advice on the specific circumstances employers are facing. Employers should therefore take legal advice.