Coronavirus Job Retention Scheme – Updated Guidance for Employers

Following our article regarding the Coronavirus Job Retention Scheme (“the Scheme”) posted last week, the Government have since published some further information regarding the Scheme. We have summarised it and set out below the key points.

Who can apply for the Scheme?

The Government have now confirmed that provided the other conditions regarding furlough leave are met, all UK employers that had already created and started a PAYE payroll scheme as of 28th February 2020 will be eligible to apply. Those employees hired after 28th February 2020 cannot be furloughed and the employer will not receive support for those employees under the Scheme. If you have taken employees on post 28th February, you may want to consider agreeing a period of unpaid leave or redundancy – the employee will not be entitled to a statutory redundancy payment given their length of service but you will have to factor in their statutory / contractual notice, whichever is longer.

Which employees can an employer claim for?

It has been confirmed that under the Scheme an employer will be able to apply for support for the following types of employees (provided that the employees were on the PAYE payroll on 28th February 2020):

  • Full-time employees;
  • Part-time employees;
  • Employees on agency contracts; and
  • Employees on flexible or zero-hour contracts.

The Scheme will also cover those employees who were made redundant after 28th February 2020 as a result of the effects of the Coronavirus, provided that they are rehired by their employer.

What can be reclaimed?

Employers can reclaim up to 80% of furloughed employees wage costs up to a cap of £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment pension contributions on that wage. Fees, commission and bonuses are not included.

How is the 80% of salary calculated?

  • Full time and part time employees

For full time and part time employees, the 80% should be calculated using the employee’s actual salary before tax, as of 28th February 2020.

  • Employees with irregular pay

Calculating the 80% for those employees whose pay varies will depend on how long they have been employed for.

If the employee has been employed for at least 12 months prior to the employer making a claim under the Scheme, an employer can claim for the higher of either:

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

If, however, the employee has been employed for less than a year, the employer can claim for an average of their monthly earnings since they started work.

To calculate the 80% for those employees that only started working for the employer from February 2020, the employer should use a pro-rata of their earnings so far to claim.

Once the employer has calculated the 80% of salary, they should work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions they are entitled to claim.

Please note that if an employer makes the decision to pay the extra 20% of an employee’s salary, any Employer National Insurance Contributions and automatic enrolment contributions on this additional pay will not be covered under the Scheme. In addition, the Scheme does not cover any automatic enrolment contributions above the minimum statutory employer contribution of 3% of income above the lower limit of qualifying earnings – this is currently £512 per month but will increase to £520 per month from 6th April 2020.

National Living Wage/National Minimum Wage

Government guidance now confirms that as employees will not be working during furlough leave, they will not be entitled to the National Minimum Wage (NMW) / National Living Wage (NLW). Therefore, as furloughed employees will be paid the lower of 80% of their salary, or £2,500, some may find that based on their usual working hours, this amounts to less than the NMW/NLW.

However, please note the position with regards to online training courses below. 

Volunteering and training

If an employee is placed on furlough leave, they cannot undertake any work for their employer. However, they can undertake volunteer work or training, but only if in doing so they do not provide services to the employer or generate any revenue for or on behalf of the business.

Please note though, if any employees are required to complete online training courses whilst they are on furlough leave then as a minimum, they must receive the NMW/ NLW for this time, even if this means they will receive wages in excess of 80% of their normal salary.

Do we need to collectively consult on the change to furlough status if 20 plus employees are involved?

We suggest you take advice about whether collective redundancy consultation obligations could apply as that may depend on factors such as the alternative strategy the employer has in mind if employees do not agree to the furlough arrangement.

What happens with holiday pay?

As the employment contract will continue, annual leave will continue to accrue throughout this period.

Practically, we would suggest that you think about encouraging employees to take some of their annual leave entitlement while or following them being furloughed otherwise they could return to work with significant amounts accrued. The guidance does not mention anything about annual leave – the cost of accrued annual leave should be factored in when deciding whether to utilise the Scheme instead of making redundancies.

Can employees be furloughed on a rotating basis?

The guidance is silent on this point. Therefore, it would seem that if it is agreed with the employee, it will be acceptable to designate employees to be on furlough on a three-week cycle (the minimum length an employee can be furloughed for), or a longer cycle, if you wanted to spread the burden of work.

How should we select who should be designated as a furloughed worker?

In many circumstances an employer will be closing their entire workplace / department and therefore you will be furloughing a whole group of employees undertaking the same role. However, if you have to decide which employees to furlough from a pool of employees, for example because you have had a downturn in work so you simply do not need as many people to carry out the role, you may want to ask for volunteers initially. If it is not possible to agree who will be furloughed, then you may decide to select on the basis of fair and objective criteria (e.g. length of service or previous appraisals). The employer must be careful not to discriminate in deciding who is offered the scheme.  We have seen many employers prioritise vulnerable workers. In our view, prioritising the over 70s (direct age discrimination against those under 70) is likely to be justifiable.  In addition, those who do not suffer from serious health conditions do not have a protected characteristic, meaning they would not establish discrimination if others are prioritised for furlough.

Information needed to make a claim

As far as we are aware, employers will need the following information to make a claim:

  • The employers 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);
  • The employers bank account number and sort code;
  • The employers contact name; and
  • The employers number.

It has also now been announced that an employer can only submit one claim every 3 weeks (which is the minimum length of time that an employee can be put on furlough leave for).

We have decided that we need to furlough workers, what is our next steps?

If there is one thing that the government have made clear, it is that normal employment law principles apply given that this will essentially be a change to terms of employment – hours and pay. Therefore, it is important that employers follow the correct process as they could find themselves facing claims of discrimination, breach of contract and/or unlawful deduction of wages. We can help you and guide you through that process.

By way of an outline, if there is a lay off clause within the employment contact allowing you to lay-off an employee (i.e. not providing the employee with paid work for a period of time as a result of a reduction in work) the employee can simply be notified of the change. However, the majority of employment contracts do not contain such clauses. Therefore, employers will need to seek an employee’s agreement to the change (either individually or collectively via a trade union (or employee representatives provided they have the authority to agree contractual changes on behalf of other employees).

Any agreement should be recorded in writing and should contain details of the agreed period of ‘furlough’ and the pay (as a minimum). Employers may also want to consider building in scope to defer payments of salary until the portal is open and employers are able to access the grant, reclaim salary in the event that the employer has already paid the salary and is unable to access the grant and a future lay off clause in the event that there is insufficient work available in the future.

We would also suggest that a paper trail is put in place to make it abundantly clear that  the reason for designating the employee as a furlough worker is as a result of the Coronavirus crisis and an alternative to redundancies (as it is unclear what evidence HMRC may require at a later date to verify the grant application).

We understand that this is a difficult and confusing time for businesses. We would be happy to advise you on the process for furloughing employees and provide template furlough agreements to protect your business. We are already working with a number of employers who are working hard to keep their business going and would be happy to have a chat with you to see how we can help you.

We are currently offering a new retainer service for employers with regards to the Coronavirus pandemic. Through this retainer we are offering employment related guidance and template documentation for a fixed monthly fee. If you would like to learn more about this service please contact our employment department at