Coronavirus Job Retention Scheme – Furlough Leave

Posted: Tuesday March 31 2020

By: Banner Jones Solicitors

Furlough leave is a government scheme that will allow businesses to continue paying employees’ salary who would have otherwise have been made redundant. The government will reimburse 80% of employees’ employment costs for an initial term of 3 months from 1 March 2020. However, this period may be extended.

Coronavirus Job Retention Scheme – Furlough Leave

Which employers qualify for the scheme?

All UK businesses will be eligible. This will include limited companies, limited liability partnerships, sole traders who employ people, partnerships and charities.

What employees are covered under the scheme?

This scheme will apply to all employees and workers on PAYE. This will include those on zero-hours contracts. There is no guidance yet on how a zero hours’ employee’s pay should be calculated.

What do employers need to do?

An employer will need to identify affected employees (those that would otherwise be at risk of redundancy, lay-off or short time-working) as ‘furloughed’ workers and inform their employees of this.

Employers cannot just impose ‘furlough leave’ unless they have a contractual right to do so. Employers should first refer to their contracts of employment. Without a right to remove work within the employment contract, employers need to obtain their employees’ agreement to become furloughed workers. It is best practice to document any correspondence and/or action relating to furlough leave.

Once employees have been identified as furloughed workers, employers need to submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. This portal is not yet available and further information has not yet been published.

HMRC will reimburse 80% of furloughed workers’ wage costs up to a cap of £2,500 per month per employee. It is not yet clear how this will be calculated or applied. We are awaiting further details from the government on this.

How to qualify for the scheme

To qualify for the scheme, employees must not undertake work for their employer whilst on furlough leave. This means that they cannot be called to work during the furlough period or carry out any work from home.

Does the employer have to make up the 20% difference in the employees’ wages?

The government says that an employer is under no obligation to make up the 20% difference in the employee’s normal salary. However, most employment contracts will not permit an employer to reduce their employees’ wages. Without this contractual right, they must obtain their employees’ agreement to reduce pay. It is best practice to document any correspondence and/or action relating to wage reductions in writing and get an employee to sign this. Employers need to be mindful that withholding 20% of an employee’s salary would usually amount to an unlawful deduction of wages unless the employee consents; though these are indeed unusual times.

What does the £2,500 actually cover?

This amount may or may not include employment costs such as pension and national insurance contributions. However, at this stage, the guidance from the government is still unclear.

Can an employee inform their employer they are taking furlough leave?

An employee cannot declare themselves on furlough leave. It is up to the employer to decide if an employee is to be furloughed. They can however request that their employer put them on furlough leave.

What happens to employee rights during furlough leave?

An employee’s rights will not change during furlough leave. They will remain an employee of the business and will continue to accrue continuity of service and holiday pay.


Coronavirus Job Retention Scheme – Furlough Leave