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    Furlough – Information and FAQ

    PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.

    By Michael Nadin – Associate Solicitor specialising in Employment Law

    Coronavirus Job Retention Scheme (“Furlough”) – Information and frequently asked questions

    This article is designed to answer frequently asked questions about the Coronavirus Job Retention Scheme which was announced by the government on 20 March 2020 in response to the COVID-19 pandemic. Under the scheme, all UK employers, regardless of size or sector, can claim a grant from HMRC to cover 80% of the wages costs of employees who are not working but kept on the payroll (“furloughed”), of up to £2,500 a calendar month for each employee or PAYE worker, plus the associated auto-enrolment and employer national insurance contributions.


    The scheme is intended to avoid redundancies and unpaid lay-offs which would otherwise have resulted from the economic impact of the COVID-19 pandemic.

    The scheme applies in respect of employees who have been “furloughed”, meaning that they have been sent home and are not required to work. Continuity of employment (and all other aspects of the employment contract) continues but it allows the employer to agree with employees that they will be put on temporary leave of absence (furlough leave), and then allows the employer to recover a proportion of pay from HMRC in respect of employees on that leave.

    Given that the reimbursement that employers can seek per employee is limited (to the lower of 80% of wage costs or £2,500 per calendar month, plus employer national insurance contributions and employer auto-enrolment pension contributions) we anticipate that many employers will seek to amend the contracts of those put on furlough leave to match the amount of money that can be obtained from the government.

    The scheme is backdated to 1 March 2020, open for at least three months, and will be extended if necessary. HMRC are urgently working to set up the new system of reimbursement, and the government hopes the scheme to be up and running by the end of April 2020.

    Who is covered?

    What employees are covered?

    The scheme covers the following individuals, provided that they were on the employers’ PAYE payroll on 28 February 2020, regardless of their contract type:

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

    Employees who were made redundant since 28 February 2020 can qualify if they are re-engaged by their former employer.

    Employees on unpaid leave cannot be furloughed, unless that unpaid leave started after 28 February 2020. We assume that this is intended to prevent employees who are on unpaid leave for reasons unrelated to the pandemic from being transferred onto furlough leave and receiving a windfall.

    Where an employee has more than one job, their employments are treated separately for the purposes of furlough leave, and the reimbursement cap applies to each employer individually.

    Which employers are eligible for reimbursement?

    The scheme is open to all UK employers who had created and shared a PAYE payroll scheme on 28 February 2020, and have a UK bank account. This includes businesses, charities, recruitment agencies with agency workers paid through PAYE, and public authorities.

    What about employees who have already been given notice of redundancy or placed on unpaid leave before furlough leave was announced?

    Employees made redundant since 28 February 2020 can be re-engaged and put on furlough leave. However, the scheme is unlikely to cover employees who were placed on unpaid leave on or before 28 February 2020.

    Can an employer move employees who are already on reduced hours onto furlough leave?

    Some employers have already placed employees temporarily onto reduced hours and pay due to the downturn in work as a result of the pandemic. The employer will not be able to seek reimbursement in respect of wages costs for employees who are still working but on reduced hours. The scheme only applies where employees are put on furlough leave (and doing no work at all).

    Does the employee have to be at risk of redundancy to be covered by the scheme?

    The scheme is intended to cover employers who would otherwise need to drastically cut their payroll as a result of the crisis, either through lay-off or redundancy. However, without further guidance, it is not possible at this stage to say with any certainty when the scheme will apply.

    It seems unlikely that HMRC will undertake a forensic analysis of the circumstances of furlough leave. But it is almost certain that the government will retain the right to retrospectively audit all aspects of the scheme with scope to claw back fraudulent or erroneous claims.

    Can you put employees on long-term sick leave on furlough leave?

    It seems likely that employees who are on sick leave or self-isolating should receive statutory sick pay (SSP), but can be furloughed once they have recovered or are no longer self-isolating.

    Presumably the same applies to employees who are on long-term sick leave and have exhausted SSP.  The purpose of the scheme is to reimburse pay that the employee would otherwise have received, therefore employees who are on nil pay due to sick leave will not qualify until they are fit to work.

    How is furlough leave implemented?

    What steps must employers take to put employees on furlough leave?

    Best practice is for an employer to consult with its staff and seek consent to make temporary changes to the employment contract by agreement. It is a condition of eligibility for reimbursement that furlough leave is confirmed to the employee in writing.

    Employers will need to:

    • Decide which employees to designate as furloughed employees
    • Notify furloughed employees of the intended change.
    • Agree the change with the furloughed employees. Most employment contracts will not permit an employer to reduce an employee’s pay, provide them with no work and change their employment status, without agreement. However, faced with the alternatives, which are likely to be unpaid leave, lay-off or redundancy, the majority of affected employees are likely to agree to be placed on furlough leave.
    • Confirm the employees’ new status in writing. This is an eligibility requirement for accessing the subsidy, and a record must be kept of this correspondence. Ideally, the employer should advise how long it expects furlough leave to continue, however, this may be difficult in the current climate. Employers may wish to put employees on furlough leave for an initial period, subject to review.
    • Submit information to HMRC about the employees that have been furloughed and their earnings through the new online portal, expected to be operational by the end of April 2020.
    • Ensure that the employees do not carry out any further work for that employer while they are furloughed.

    Can an employer rotate furlough leave between its employees?

    Employees must be furloughed for a minimum of three weeks. This is in keeping with the current requirements for as many people to avoid leaving their homes as much as possible.

    However, since employers are likely to receive many requests or volunteers to be placed on furlough leave, it is likely to assist employee relations for employers to be able to move employees on and off furlough leave, subject to that minimum three-week period, so that no employee feels that they have been unfairly denied the opportunity to take furlough leave.

    Can an employee request their employer puts them onto furlough leave?

    Yes, an employee can request this, but the employer does not have to agree. It is the employer’s decision which employees to place on furlough leave, if any. It seems that it is also the employer’s decision whether to place employees on furlough leave or make them redundant. Potentially redundant employees do not have a right to require their employer to place them on furlough leave as an alternative to redundancy. However, it is hoped that many employers will see the new scheme as preferable to business closure and making redundancies. At this stage it is not possible to comment on whether a refusal to place an employee on furlough leave and instead making them redundant could amount to an unfair dismissal.

    Are employers obliged to top up the remaining 20% of salary?

    Employers can continue paying full pay during furlough leave, but they are not obliged to do so. If they do top up, they can only claim back employer national insurance contributions and minimum auto-enrolment payments up to the cap.

    Employers should note though that failing to pay 20% of an employee’s salary will amount to breach of contract and unlawful deduction of wages unless the employee gives their consent. It is expected that the majority of employees will consent since furlough leave is a better alternative than unpaid leave, lay-off or redundancy.

    During furlough leave

    Will employees continue to accrue holiday during furlough leave?

    Furlough leave is an entirely new concept to employment law in the UK. However, it seems likely that holiday will continue to accrue during furlough.

    The government has passed emergency legislation relaxing the restriction on carrying over the four weeks’ holiday with immediate effect. The new legislation permits the carry-over of up to 4 weeks’ leave where it was not reasonably practicable to take it in the leave year “as a result of the effects of the coronavirus”.

    Can employees on furlough leave undertake training?

    Yes, as long as the training is not used by the employer to generate revenue as a way of circumventing furlough leave. If the employer requires the employee to complete training during furlough then this will not bring their furlough leave to an end, but they must be paid the national minimum wage in respect of the training.

    What can the employer claim back?

    What does the reimbursement cover?

    Employers can claim up to the lower of 80% of usual monthly wage costs or £2,500 per employee, plus the associated employer national insurance contributions and minimum auto-enrolment employer pension contributions.

    Fees, commission and bonuses should not be included in the calculation.

    The 80% calculation is based on the employee’s gross salary at 28 February 2020.

    What is the position if 80% of pay is less than national minimum wage based on normal working hours?

    Employees on furlough leave do not need to be paid national minimum wage (NMW) with reference to their normal working hours. However, if they undertake any online training then they must be paid the NMW in respect of those training hours.

    Are the self-employed covered?

    Not by this scheme, but a separate scheme is being set up to provide the self-employed with similar rights.  However, there are some key differences:

    • income will be calculated by taking the average of income over the last three years
    • self-employed people can claim these grants and continue to do business (unlike furlough leave, where employees have to remain at home)
    • the scheme is only open to anyone with trading profits of up to £50k.  Self-employed people who earn more will not qualify.
    • the scheme is only open to those who make the majority of income from self-employment; if you are employed but have a ‘side job’ which is self-employed, you will not be eligible
    • the scheme is only those who have submitted a tax return for 2019 (this is to minimise fraud).  However, those who did not submit their tax return by the due date of 31 January 2020, and have not yet submitted one, can still submit a tax return for 2019 for a further four weeks from today
    • there are no steps to take.  HMRC will contact eligible self-employed people directly and pay the grant straight into their bank account after inviting them to fill out an online form
    • the self-employed income support scheme will be open to people across UK for at least 3 months.  However, the scheme is unlikely to be up and running before the end of June, so it will not help with immediate cash flow issues for self-employed people.

    Whilst there is a lot of information to take in, if you have any questions please do not hesitate to get in touch with me on 01604 609560 or email me here


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