Coronavirus Job Retention Scheme: frequently asked questions

Published on 1 June 2020

1 min read

Following a huge take-up following its launch in April, changes to the Scheme to make it more flexible have been recently announced, taking effect in July. From August, employers will have to start contributing to the cost of the Scheme.

What is the current position?

The first announcement of the Scheme on Friday 20 March explained that the Government would guarantee 80% of the wage costs of any employees “furloughed” as a result of the pandemic, subject to a cap of £2500 per month. This payment would apply to any employees furloughed from 1 March onwards. The Scheme, which in its original form had a provisional cut-off date of 31 May, has now been extended to the end of October.

A new, more flexible, version of the Scheme will launch in July, and employers will be asked to make contributions towards the wages costs of furloughed staff starting in August. Employees will continue to receive 80% of their normal wages for the time they spend furloughed until the Scheme ends.

Government guidance on the Scheme was first published on 26 March and has been revised and expanded on numerous occasions since. This needs to be read together with the current Treasury Direction, originally published in April, but which has since been re-issued.

Our FAQs

Who is eligible to claim?

All UK employers that have created and started a PAYE scheme by 19 March are eligible. They must have a UK bank account and have enrolled for PAYE online.

This includes businesses, charities, recruitment agencies and public authorities, though the Government expects that the use of the scheme by the public sector will be limited.
What employees can be furloughed?
Both full-time and part-time employees can be included in the scheme, regardless of the type of contract, as long as they are paid via PAYE, and were on the payroll on 19 March 2020. The Scheme also extends to non-employee workers paid via PAYE, apprentices and certain office-holders, including directors.

No new staff can be furloughed after the end of June. Given that the minimum furlough period is currently three weeks, which means the final date for furloughing new staff is 10 June.

The Scheme can also cover employees made redundant since 28 February, as long as they are re-hired by the employer.

Employees who have been transferred in via a TUPE transfer after 28 February can also be furloughed, and there is also an exception from this cut-off date where PAYE business succession rules apply or where there has been a payroll consolidation.

The Scheme is not available for:
- Employees hired after 19 March
- (Until the end of June) those who are doing any kind of work for the employer or an associated organisation (eg those on reduced hours or working for reduced pay)
- Those placed on unpaid leave before 28 February, though they can be furloughed from date on which it was agreed they would return from unpaid leave
A separate scheme was announced on 26 March for self-employed individuals.
How will the cap on the Government’s contribution be calculated?

The Government will cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and an amount equal to the minimum automatic enrolment employer pension contributions on that subsidised wage. Compulsory commission can be included, but discretionary commission and bonuses must be excluded. The Scheme does not provide finance for pension contributions over and above the legal minimum under the automatic enrolment regime, or cover the cost of benefits in kind.

The Guidance explains what can be claimed for employees whose wages vary. In most cases this will be the higher of the same month’s earnings from the previous year or the average monthly earnings for the 2019-20 tax year.

An employer can choose to top up the employee’s wages beyond this contribution, but will not be obliged to do so. The Government grant will be progressively reduced from 1 August and the employer will need to make up the difference – see below for more details.

What will employers have to contribute from 1 August?

The table below sets out the progressive rise in the minimum employers’ contributions required. Furloughed employees’ entitlement will remain at 80% of their normal wages (up to a cap of £2,500 per month) throughout the final three months of the Scheme, for their normal hours when they are not working.

Month	Government contribution	Employer contribution
August	80% of wages only (no grant for employer national insurance and minimum pension contributions)	Employer NI and pension contributions only
September	70% of wages (capped at £2187.50)	10% of wage costs (capped at £312.50) plus NI and pension contributions
October	60% of wages (capped at (£1875)	20% of wage costs (capped at £625) plus NI and pension contributions

How will flexible furloughing work?

From 1 July it will no longer be a requirement that furloughed staff do no work at all for their employer. Instead, provided that they have previously been furloughed, they will be able to return to work part time on a flexible basis.

Such staff will be paid their contractual wages for the hours they work, and employers will be able to make a claim for the balance of their normal wages under the Scheme for the additional hours they would normally have worked.

More details about how exactly this will work are expected to be published on 12 June.
What records do I need to keep?

Current and earlier editions of the Guidance stipulate that employers must “confirm in writing to their employee confirming that they have been furloughed”. A record of this communication must be kept for five years. Employers must also keep records of how each claim is calculated.

The first version of the Treasury Direction, however, required the furloughed employee’s written agreement (which can be in electronic form) to “cease all work” in relation to their employment. The replacement version of the Treasury Direction, published in May, relaxed this requirement somewhat, but still refers to the need for the employee’s “agreement”. While the tension between the Direction and the Guidance is not as stark as previously, there is still some uncertainty about exactly what is required, and it remains the most prudent course to obtain the employee’s express written agreement to the furloughing arrangements.
Must employees agree to be furloughed?

In most cases, employees must agree to be furloughed, since the arrangements will normally amount to a variation of their employment contracts, for which their consent is required.

It is important to realise that no features of the Scheme override the normal principles of employment law, or the requirements of the collective consultation regime.
Is there a minimum period of furlough leave?

The minimum period for which an employee can be furloughed is currently three weeks. It is permissible to furlough employees multiple times, making it possible to rotate periods of furlough among different groups of staff.

After 1 July, under the new more flexible arrangements, there will no longer be a minimum period.
What about employees on sick leave?

The Guidance says that employees should not be placed on furlough merely because they are on short-term sick leave, or self-isolating. But they can be furloughed if there are business reasons for doing so. However, employers cannot claim both the two week coronavirus Statutory Sick Pay rebate and the furlough grant in respect of the same period of absence.

If an employee becomes ill while on furlough, the guidance says that “it is up to employers to decide whether to move these employees onto Statutory Sick Pay or to keep them on furlough, at their furloughed rate.”
What are the issues employers need to consider before implementing furlough leave?
There are a number of issues that need to be addressed including:
- How employees are to be selected for furlough leave, ensuring that the selection process is fair and free from discrimination
- What variations of their contracts of employment will be required to implement the period of leave
- How holidays and pension entitlement should be treated
- The extent to which making these arrangements will trigger collective information or consultation requirements
- What options to extend in relation to salary sacrifice arrangements (the guidance notes that HMRC agrees that COVID-19 counts as a life event that could warrant changes to these)
In all these cases, what is appropriate and legally feasible will vary significantly from employer to employer, depending on the precise contractual arrangements, any occupational pension scheme and whether there is a recognised trade union. Specific legal advice on these issues is recommended.

Also, if any employees selected for furlough leave hold Enterprise Management Incentive (or “EMI”) share options, we’d recommend that you check with your tax advisers whether this will amount to a “disqualifying event” (meaning the option may lose some of the tax breaks available to holders of EMI options).
What other sources of Government help for businesses are available?

There are a number of other sources of support available. More information is available here.

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Charles Pigott

Professional Support Lawyer
Charles Pigott

Professional Support Lawyer
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