The Coronavirus Job Retention Scheme is a state-backed initiative which has been introduced in order to save jobs affected by the coronavirus pandemic.

Under the scheme employers will be able to apply for 80% of the wages of employees on ‘leave of absence’, up to £2,500 a month. Employers’ NI will also be covered. This will be reduced to 70% in September 2020, and to 60% in October (with the employer covering the difference) after which the scheme will end.

If an pay fluctuates from month to month, you can claim the higher of either the same month’s earnings from the previous year or your average over the 2019/20 tax year.

How long will the scheme run for?

The furlough scheme is set to run until the end of October 2020. Until the end of July 2020, the government will cover wages of furloughed staff up to the limits above. After this point it seems that the employer will have to contribute something towards this but it is currently uncertain how much this will be. It also seems that there will be some flexibility and staff will be allowed to work part time at this point (the current requirement is zero work for the furloughing employer – see below) but again at the time of writing this is unclear.

New entrants, other than those returning from maternity and paternity leave, will not be eligible under the scheme after 10 June 2020.

What does ‘furlough’ mean?

Until the scheme’s recent introduction, ‘furlough’ was an unused term in UK employment law. It has been brought over from the US to describe what we would have called a ‘lay-off’. The government website refers to this as a ‘leave of absence’. It may be useful to think of it in terms of redundancy, in other words, would the position have been redundant?

‘Lay-off’ and ‘short-time’ clauses are now very unusual in full time or permanent contracts. They are unattractive to employees, as they are similar to zero-hours contracts.

Written agreement?

Furlough must be agreed between employers with a newly relaxed requirement that this agreement only need be confirmed in writing. This means the written confirmation can come after the agreement to furlough.  This paperwork needs to be retained by the employer for 5 years. Get the right documents in place and expect HMRC to have a careful look at your furlough arrangements for years to come.

Flexible furlough

From 1 July 2020 employees who have been on furlough leave for 3 weeks will be able to work part time for their employer. Previously this had been prohibited.

Who is eligible for the furlough scheme?

All employees can be furloughed, no matter what type of contract they are on – but only if they were on a PAYE payroll as of 19 March 2020 (this was 28 Feburary). This means that ‘workers’ will also be entitled, provided they pay their tax as PAYE.

The furlough period must be for a minimum of 3 weeks and can be backdated to 1 March 2020. The government says that staff can be re-employed if they were made redundant after this date, but before 19 March, and your furlough can be backdated accordingly.

However, remember that being furloughed is a voluntary arrangement.

Which employers does the job retention scheme apply to?

The scheme applies to all employers, no matter what size or sector. Public sector bodies and charities are included, provided they were up and running with PAYE before 28 February 2020.

Can furloughed staff be paid below the National Minimum Wage (NMW) if the 80% is applied?

Yes, the government states that the NMW does not apply during the period of furlough. Apprenticeships may throw complications however, so please consult us separately about this.

Does furlough also apply to training?

Employees can undertake training whilst remaining on furlough so long as the training is directly related to the job and it isn’t a business activity in itself.

What is the 80% based on?

Where the employee has been employed for less than a year, the 80% will be based on their average so far. Otherwise the same month last year will be taken, or average earnings during the 2019/20 tax year (whichever is higher).

Wages, past overtime, fees and compulsory commission (but not discretionary commission) can be counted. Tips and any discretionary payments cannot. Nor can non-monetary benefits such as benefits in kind. Likewise, salary sacrifice benefits can’t be counted.

How can claims be made?

The furlough claims portal will go online on 20 April 2020. It will pay out from 30 April. HMRC are expecting a lot of claims. Expect delays if you need assistance from the helpline, however.

How is Statutory Sick Pay (SSP) affected?

If you are on SSP, either because you are ill or because you are isolating at the time of furlough, SSP will be payable rather than furlough pay. Furlough payments will be applicable after the SSP period ends.

How is holiday affected by furlough?

During your furlough, holiday will continue to accrue. HMRC Customer Support has recently tweeted that holiday will not affect eligibility for furlough. This has yet to be formally confirmed however.

In terms of holiday pay, some of it will be the statutory minimum (28 days including bank holidays if you are full time). This should probably be paid at the 100% ‘normal’ rate, but again we are waiting for detailed guidance. HMRC Customer Support has also tweeted that all holiday should be paid at 100%.

If you cannot take annual leave because you are furloughed or in isolation, a temporary new law will now allow up to 4 weeks’ paid holiday to be carried into the next two leave years.

Is maternity leave and pay affected if you are furloughed?

Maternity leave and pay is unaffected by the new scheme. It may therefore be possible to curtail your maternity leave in order to take advantage of the job retention scheme. We recommend that you take advice on this beforehand, as it is one of the many ‘grey’ areas that exists under the current rules.

How will being furloughed be treated for tax and National Insurance (NI) purposes?

From the point of view of employees’ PAYE, furlough payments are going to be eligible for tax and NI deductions.

However, employers’ NI and the minimum auto-enrolment pension amount will be recoverable in addition to the £2,500 / 80% amount.

What are the legal requirements for furloughing an employee?

Written confirmation needs to be provided stating that the employee has been furloughed. This needs to be kept for 5 years. As an employer and employee you will want some sort of agreement to be in place. We can help you draft this. Some tips on what to look out for in a furlough agreement are provided later.

Can my employer forcibly furlough my position?

Furlough must be by agreement. Any reduction in salary and delay in payment being made may otherwise be a breach of the employment contract and give rise to potential claims for unfair dismissal or unauthorised deductions of wages.

Employees with under two years’ service (and therefore with restricted unfair dismissal rights) who want to be furloughed instead of being made redundant will find themselves in a relatively weak bargaining position, as will those who work in a job that is experiencing large-scale cutbacks.

Fair selection for furlough

Employers should also be careful how they go about selecting employees for furlough as the usual protections against discrimination and victimisation will apply.

Employees should not have been selected for furlough on the basis of any protected characteristic, for asserting a statutory right, for health and safety reasons, or for whistleblowing. Further information can be found in our Knowledge library.

Can I work while I am furloughed?

Employees cannot work for the organisation that has furloughed them. However, if an employee has more than one job, each job is treated separately. This means they could be furloughed by more than one employer, or be working for one organisation while being furloughed by another. This means that effectively – if their contract allows it – they could be earning more than 100% of their previous salary.

Volunteer work and training is allowed. Training should be paid at least at the National Minimum Wage.

Fixed term contracts

Employees on a fixed term contract can be furloughed.

Self-employment. Can I claim furlough?

Yes, if you or your member of staff paid tax on your trading profits in the last financial year. The government has provided more information about the Self-employment Income Support Scheme on their website.


HM Treasury has informally confirmed that eligibility for furlough will not be affected where TUPE applies because a business changed ownership. However we are waiting for formal confirmation of this.

I am already going through a redundancy scheme. Do I need to furlough my employee now?

Being furloughed is not a right. If you were going to be made redundant for a reason not related to the pandemic, then it will probably be fair and reasonable for an employer to follow the pre-existing redundancy process.

Even where a proposed redundancy is coronavirus-related, being furloughed is voluntary.

My employer has asked me to sign an ‘agreement for furlough leave’. What should I look out for?

Look out for any permanent amendments to your contract.

For instance, the agreement may be asking you to agree to a reduced salary. Try to make sure that this isn’t a perpetual arrangement.

Your employer may be wishing that they had the ability in your contract to lay you off, reduce your hours or reduce your salary at their will. You may never have agreed to this when you first went to work for them, as in a sense this would make your arrangement similar to a zero hours contract. You should try to resist this.

Alternatively, make sure this isn’t made permanent and/or limit the circumstances or extent to which your employer can do this.

Look out for any clauses that say your annual leave won’t accrue. This won’t be lawful where it cuts down your minimum statutory entitlement.


For more advice on COVID-19 and employment rights, written guidance for employees has been provided on the government’s online portal.

Separate guidance for employers has also been published.

Share this update on

Contact Us

  • Drop files here or
    Max. file size: 20 MB.