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Coronavirus - New Guidance: Government update on the Coronavirus Job Retention Scheme - UK

  • United Kingdom
  • Coronavirus - Workforce issues
  • Employment law


On Friday 20 March 2020, the Chancellor announced a new “Coronavirus Job Retention Scheme” (the Scheme) to help pay people’s wages. Updated Guidance on the Scheme was issued on 4 April 2020 (the Updated Guidance).

This Alert seeks to identify some of the key aspects of the Updated Guidance. Our updated Q and As aim to address some of the main questions we believe that employers continue to have.

In summary, all employers who are severely affected by the CV-19 pandemic are able to access a Government grant, via HMRC and the Scheme, to reimburse them for specified employment costs if they cannot maintain/retain their workforce because of the impact upon their operations. A pre-requisite is that the individual is placed on furlough (a temporary status whilst there is no work available for them to do).

The Updated Guidance now includes the following additional clarifications:


Former workers who left their employment on or after 28 February 2020 for redundancy or any other reason (including resignation) and who cannot be furloughed by a new employer, can be re-hired, placed on furlough and a claim made for their wages. Employers are not obliged to rehire those staff, however, and they will be mindful of the circumstances in which the employee left, the likely availability of a long term role and the complications in re-employing staff (as regards, e.g., continuity of service, any redundancy payments and any other liabilities when the new contract is terminated) and (notwithstanding the Government’s approach) whether public funds should be used in this manner.

Sick leave

When staff are on sick leave or self-isolating, they cannot be furloughed until they are no longer sick and receiving SSP.


This group, i.e. those who are shielding, or those who need to stay home with someone who is shielding, can be furloughed if they are unable to work from home and the employer “would otherwise have to make them redundant”. Whilst unclear, it appears that the reference to “making the worker redundant” in this context may simply mean that, without work to do at home, the worker’s shielding situation means that there is temporarily no work for them to do as opposed to the employer having to show that that worker is “redundant” in the strict legal sense (such as in relation to unfair dismissal or a statutory redundancy payment).

Caring responsibilities

Those with caring responsibilities resulting from CV19 (e.g. for children not able to attend school) can be furloughed, whether or not there is work for them.

Salary sacrifice

For salary sacrifice, it is confirmed that the costs of non-monetary benefits that reduce taxable pay should not be used as the reference pay and the cost of providing benefits should not be included. The Guidance states: “Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.”.

What is included in pay?

Regular pay (for salaried staff and for those whose pay varies) which is due under the contract can be included in a claim (including overtime and contractual commission but not discretionary bonuses, non-cash benefits or discretionary commission).

Working for a different employer during furlough leave

This appears to be permitted with certain conditions, in addition to voluntary work. Employees can continue working for another employer (i.e. not the furloughing employer) with whom they were already contracted pre CV-19. It also seems that employers may claim wages under the Scheme in respect of an employee who is furloughed by them but takes up work for a new employer during the furlough leave, providing that the contract with the furloughing employer allows the worker to work for third parties (such as with the employer’s consent). If the contract restricts the ability to work for third parties, it is unclear if this restriction could be varied or temporarily suspended at the time when furlough leave is agreed with the worker.

Despite the attraction of employees being occupied and in alternative paid employment, if employer consent is required to work for a third party under the contract, employers will wish to consider whether allowing them to commence new employment for another employer is within the spirit of the Scheme. On a practical level, this could be problematic e.g. if the employer is rotating employees on furlough, it may need the employee back in their main job. This explains why the employee guidance refers to the need for workers to be able to return to work for the employer that has placed them on furlough if they decide to stop furloughing them. We recommend that any consent to work for other employers should be given on the basis of an immediate return if required and this can be dealt with in the terms of the furlough arrangements.

Other than training (which the updated Guidance now encourages during furlough) it is confirmed that no work at all may be done for the employer during furlough.

Rotating workers on and off furlough

Furlough can be rotational and there is no limit on the number of times a worker can be furloughed. However, each furlough leave period should be a minimum of 3 weeks. Employers will also be mindful of the potential ‘trigger’ of redundancy payment rights where lower pay and (depending on the contract) no work is provided for certain periods. This is more likely to be an issue for higher earners and those with substantial redundancy rights. Employers should seek to mitigate those risks in their use of furlough and in the written terms of furlough leave.


Disappointingly, given the upcoming Easter and May bank holidays, the issue of whether annual leave may be taken during a period of furlough is not addressed in the Updated Guidance. Current ACAS guidance is ambiguous in that it could be interpreted as stating that furlough and holiday can be concurrent and holiday does not break the furlough which may offer some comfort to employers concerned at accrual of significant holiday entitlements during a longer furlough period. However, given that the Guidance itself does not address the point, employers will be wary of potentially breaking the minimum period by allowing or imposing any annual leave. For the time being, we consider it prudent for employers to make clear to workers that no holiday is to be taken during furlough – e.g. bank holidays will be effectively added to accrued entitlement on return from furlough.

Is the Scheme only for employees?

No, ‘workers’ who are on PAYE as at 28 February 2020 as well as employees are covered, providing comfort to employers with a reliance on ‘casual’ workers.

Fixed term contracts

Employees on fixed term contracts can be furloughed. The Updated Guidance also states that the employer can “renew or extend the contract during the furlough period without breaking the terms of the scheme”. This suggests that the employer can do so without having to show that it would have extended or renewed the fixed term contract in normal circumstances or that there is any prospect that it has any future work for the fixed term contract worker to carry out.


In terms of the scope of the Scheme and the employer’s need to access it, the Updated Guidance confirms the scheme is available to an employer which “…cannot maintain [its] current workforce because [its] operations have been severely affected by coronavirus …” and that it is designed to “…help employers retain their employees and protect the UK economy…”. Whilst certain aspects of the Updated Guidance (such as the ability to rehire leavers and to extend/renew fixed term contracts) seem to contradict this, the Scheme should not be regarded by businesses or individuals as a Scheme which is unlimited or unrestricted in scope. Whilst it is clearly intended to avoid hardship and save jobs, we would advise employers for whom the ability to recover reimbursement of wage costs will be vital to their ongoing survival to consider the rules – and the stated purpose – of the Scheme carefully so that they can be as confident as possible that wages paid out will be reimbursed (in whole or in part) under the Scheme. Other factors for employers to consider are the fact that any valid claim under the Scheme will be met by public money and the potential reputational impact of being perceived to be using the Scheme in an opportunistic or inappropriate way.

Furthermore, employers still need to continue to make strategic decisions for the sustainability and viability of their organisation. This will include assessing (as best they are able) their staffing needs, their cost base and their terms and conditions of employment. The Guidance (when read alongside the updated employee guidance now expressly permits redundancies being made whilst employees are on furlough. Where redundancies or contractual change through dismissal and reengagement are envisaged, despite the furlough Scheme, collective consultation obligations are likely to be triggered. Indeed, the furlough Scheme is currently in place until 31 May 2020. Many employers may well find it difficult to retain their workers beyond that date unless the Scheme is extended. If 100 or more redundancies would occur at any one establishment from 1 June onwards if the Scheme is withdrawn, collective consultation would need to start by 18 April 2020 to allow dismissals to be made from 1 June. This timescale, the challenges involved in remote consultation and the need (where applicable) to elect employee representatives, means that employers may wish to be thinking about taking steps now to prepare for and undertake collective consultation. Any dismissals can be deferred if the Scheme is extended or the wider circumstances mean that dismissals are unnecessary (noting that most employers are keen to retain their talent).

The HMRC claim portal will not be available it seems until end April at the earliest. Given the need for claims to be processed (with new infrastructure and HMRC staff applying many new concepts) it is likely to be mid-May before employers are paid under the Scheme. This will mean further cashflow pressures for employers under major existing financial pressure.

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.