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All Things Furlough – FAQS and what we know so far…

It is hard to imagine that less than a month ago hardly any of us had heard of the word ‘furlough’. Now it is part of our everyday language. In this we look at what we know so far about this new type of special paid leave and address the common questions that employers are asking about the scheme and its application.  We also sum up the recommendations we’re making to our clients.

Information from the Government is changing all the time – particularly the drip-drip detail we’ve been getting about furlough leave.  So while the information in this Newsletter is accurate at the time of writing, based on HMRC’s latest version of the rules dated 15 April 2020 and also the more detailed directions issued on 15th April by HM Treasury, things could always evolve a little further, so it’s not a substitute for taking legal advice based on your own circumstances.

Why this Scheme?

The Government are trying to keep the wheels of the UK economy turning and, vitally, protect jobs by introducing a package of measures to alleviate the impact of COVID-19 on businesses across the UK.  Chief amongst these is the Coronavirus Job Retention Scheme (‘CJRS’ for ease).

CJRS – What is it and who can participate?

The CJRS enables employers to recover up to 80% of wage costs (up to a maximum of £2,500 per month) for employees who agree to be placed on ‘furlough leave’.  This is a new concept and a totally new class of paid leave, where the Government will reimburse the employer for these wage costs. It is a temporary scheme and will currently run from 1 March 2020 for 3 months.  It may be extended if necessary.

It has been created to act as an alternative to implementing redundancies, lay-offs, unpaid leave or other measures employers might otherwise need to instigate during the current crisis.

Must we consider furloughing as opposed to redundancies?

It is possible that we could see the rise of the argument that a redundancy would be an unfair dismissal if the employer had not considered using furlough prior to making redundancies for staff with 2+ years’ service.  This is only speculation at this stage, and would probably take many months to emerge from employment case law, but it is worth factoring in.  It also makes sense on a moral level.

Which employers are eligible?

The good news is that all UK businesses are eligible to claim under the scheme so long as they operated a PAYE payroll scheme on or before 19 March 2020 and have a UK bank account.  (Note: this date of 19 March 2020 is a very recent change to the previous date of 28 February.)

Which types of staff can we furlough?

The Furlough scheme is available to all PAYE employees (including casual employees and zero-hours employees).

Our interpretation of the current CJRS rules (based on the published information as at 15 April 2020) is that ‘workers’ (i.e. those you employ and who you may pay through PAYE but who are not technically your employees – such as casual workers) are not included in the scheme.  This is because the rules are very clear that you have to be an employee in order to be furloughed.   If you have casual workers under a contract that says they are not employees, they cannot be included.

The CJRS will also not be available to any of your self-employed contractors (they have the separate scheme for the self-employed, again recently announced by the Chancellor).

With agency workers, the later iterations of the CJRS rules have now clarified that it must be the agency who should place them on furlough and claim their wages, so long as the agency worker is an employee (working under an employment contract that says they are an employee.

What about this 19 March cut-off date? (was 28 February)

In order for you to be able to furlough an employee they must have been on your payroll by 19 March 2020 and included in at least one RTI payroll submission to HMRC by that date.  (Ignore any commentary or advice you may have seen that gives the cut-off date as 28 February or 1 March – these dates have now been replaced with 19 March.)  This requirement for them to have been in the last RTI payroll submission on or before 19 March is a brand new rule (issued on 15 April).

We have been asked about new employees who (a) started their job in late February or early March but who were not added to the employer’s PAYE system until after 19 March or (b) were added to the payroll system by 19 March but who had not been included in the last RTI payroll submission, usually relating to February’s salaries.  Unfortunately in neither situation will such an employ qualify under the CJRS rules.

This stipulation about having been included in an RTI submission helps clear up the confusion in earlier versions of the rules between “hired” and “on your payroll”.  It is very helpful in that it extends the threshold date well into March.

What about employees recently made redundant?

Employees who have been made redundant since 28 February can be furloughed by their former employer if rehired.

There is clearly a question around whether the former employer might feel at risk here in the scenario where the furlough scheme ends and they are ‘left’ with still employing someone who they made redundant a few weeks ago.  If they still have no need for this employee, do they have to make them redundant all over again?  Or could the previous redundancy still count?  If yes, would the employer just be able to tell the employee to leave, or would that be an unfair dismissal?  What sort of dismissal procedure might be required?

If this is relevant to you, ask us for more information here.

What costs can employers recover?

The CJRS funds 80% of an employee’s “wage”, up to a cap of £2,500 gross per month per employee. There is no limit on the number of employees or the duration (as yet).

For full-time and part-time salaried employees, the employee’s “regular wage” as at 19 March 2020 should be used to calculate the 80% figure.  Fees, commission,  bonuses and any payment that is conditional upon anything happening or not happening cannot be included.

We are not certain what is meant by ‘fees’.  The guidelines are currently silent as to whether pay additions such as shift premia, honoraria and allowances (e.g. car allowance, clothing allowance) come within the definition of “regular wage”.  There is the potential for there to be substantial room for future litigation here.  We recommend that employers only commit under a furlough agreement to pay their furloughed employees whatever money they are granted under the CJRS for that person.  You may wish to avoid committing to paying a certain sum or specific elements of pay and reward only to find that the CJRS will not fully reimburse you.

The guidance also covers the application of the national minimum wage (NMW) to furloughed employees. It states that, since employees are only entitled to the NMW while doing work, furloughed employees who are not working must be paid at the 80% rate (or £2,500) even if, based on their usual working hours, this would ordinarily take them below the NMW.  However, the guidance goes on to state that if employees are required to, for example, complete online training courses while they are furloughed, then they must be paid at least the NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.  The employer must fund any difference.

As for employees whose pay varies, if they have been employed for at least a year the employer will be able to claim for the higher of (a) their earnings in the same month the previous year and (b) their average monthly earnings in the 2019/20 tax year.

If they have been employed for less than a year, the employer will be able to claim for an average of the employee’s monthly earnings since they started in this job. In the case of an employee who only started in February 2020, the employer will be required to pro-rate the employee’s earnings so far.

(It is confusing that here the word “earnings” as opposed to “wage” is used.  We can only assume that the author of the guidelines intended this to mean the same thing, but it again introduces uncertainty.)


The guidelines are largely silent on whether an employer must continue to provide benefits during furlough but it appears likely that the answer is going to be yes, they must be continued unless your furlough agreement specifically agrees that they will not.  This is because they are likely to be a contractual entitlement and the furlough leave will not disrupt this entitlement.

If an employee wishes to suspend or end their auto-enrolment employee pension contributions during furlough, they will need to ask to opt out, using the normal opt-out rules.

Employer NIC contributions

Employers can claim the cost of employer’s NIC for the 80% of wage cost (but not in respect of any voluntary top-up of pay by the employer).

Employer pension contributions

Employers can claim the cost of employer’s pension contributions in respect of the 80% of wage cost but only at the minimum employer contribution rate of 3%. The latest set of rules say that, in order to claim this amount, the employer must continue to contribute the full amount that it is committed to with the employee.  For example, if you currently contribute 5% to an employee, you can claim for 3% (of the 80% amount) but you must continue to pay 5% (of the 80%).

Does the employer have to top up the employee’s pay to 100%?

No, but some employers may wish to make up the shortfall. Where an employer cannot do so (and many will not be able to), this should be made clear to all employees concerned. Our recommendation is to be consistent!

What do employers need to do to place someone on furlough?

First, employers will need to agree which employees they wish designated as ‘furloughed workers’.  An employee cannot insist on being a furloughed worker unilaterally.  It must be by written agreement.  The latest version of the rules are clear that the agreement must be evidenced in writing and kept for 5 years.  It allows the employee to provide written consent via email, avoiding the need for an ink signature if this is not easy to obtain.

Since placing someone on furlough represents a variation (albeit a temporary one) to their contract of employment, normal employment law still applies. Therefore, unless you are an employer with a contractual lay-off clause in your employees’ contract of employment, employers still need to consult with staff with a view to seeking their agreement before placing them on furlough leave.

We recommend that employers put in place a clear written furlough agreement with each furloughed employee.  We have been putting together many furlough letters and agreements over the last week. We’ve rapidly developed a lot of knowledge of furloughing, so please contact us if you need some help.   

How do I choose who to furlough?

In your organisation there are likely to be some employees who are continuing to work, receiving either full or reduced pay, while others will be on furlough leave, getting paid at least 80% for effectively doing nothing.  It is likely that this may cause some resentment (hence why we suggest you consider rotating furlough leave).  It is important to listen to employees’ concerns here.

We do not agree with comments we have read elsewhere that employers should undertake formal selection or consultation processes for deciding who to furlough, as you would with a redundancy exercise.  However, like a redundancy exercise, the employer should focus on which roles it does not currently need, and which can therefore be furloughed, rather than thinking of which people it wishes to furlough.  These decisions should be operational and structural, not personal.  And of course, the employer’s request for an employee to agree to go on furlough, and the employee’s consent, is effectively a mini-consultation exercise.

Those who are off sick because they are either ill or self-isolating may only be getting statutory sick pay (SSP).  As this is approximately only £95 per week in most cases, it is unlikely to be as much as 80% of full pay.  However, the 26 March guidelines are clear that you are not able to furlough someone who is off sick or self-isolating unless you also no longer require their job to be performed.

The one exception to this is those who are self-isolating at home because they are ‘shielding’ under the Government’s shielding advice for those who are at very high risk from COVID-19.  For this small group, their employer is allowed to place them on furlough (with their agreement) even if their role still needs to be performed.

Can I impose furlough on someone who is unwilling to agree to it?

No.  Placing someone on furlough requires their willing consent to vary their contract, so an employer cannot force it on them.

In many cases, the employer will inform staff of the difficult financial situation that the organisation finds itself in and will hope that this is enough, along with the benefits that come with being paid while not having to work, for most employees to be willing to agree to go on furlough.

Where any employees are reluctant to agree, the leverage that an employer may have to persuade them will depend on the situation that the particular organisation finds itself in.  If the employees’ contracts contain a power for the employer to temporarily lay them off without pay, a threat of lay-off as the alternative will normally be enough.  But for the vast majority of employers, who do not have this option, there may well be far less leverage.

The obvious ‘threat’ is to make employees redundant, but this of course comes with an additional cost and may not be viable.  Failing that, it may simply be a case of reminding the employees that the organisation may become insolvent if staff aren’t willing to co-operate.

There is no reason why an employer cannot promise to pay a post-furlough bonus of some type at some point in the future as an incentive to agreeing to be furloughed now (perhaps related in some way to the loss in pay that higher earners may suffer when on furlough).

Can we ask furloughed employees to do any work for us?

No.  An employee is considered furloughed for the purpose of this scheme only if they do absolutely no work for the employer.  The scheme therefore does not cover the wages of employees whose hours and pay are reduced but who keep on working at a reduced level.

While the earliest description of CJRS suggested that employees may still be able to perform some tasks for their employer if it was not something that produced any value for the business, the later versions of the rules have changed tack, stating that “when on furlough an employee can not undertake work for, or on behalf of, the organisation or any linked or associated organisation.  This includes providing services or generating revenue.”   We believe that this is very clearly saying that a furloughed worker cannot do any work whatsoever for the employer.  Asking employees to “volunteer” to perform work for the employer will not be acceptable.

Therefore if you wish to retain some staff to continue to do essential tasks such as maintaining site security, manning your phones or maintaining any equipment or IT systems, they cannot be furloughed.  We would advise you not to take risks here by seeking to ‘hide’ such work.

The rules do say that furloughed employees “can take part in volunteer work“.  However, we do not interpret this as permitting employees to voluntarily do work for their employer.  It seems likely that this is a reference to voluntary work outside of the employer’s organisation, such as volunteering with the Government’s NHS volunteering scheme.

Can we rotate employees on and off furlough leave?

This question may well come up during consultation and our advice is that it could be unreasonable not to consider whether this might be possible.

Tere appears to be nothing to prevent employers taking employees on and off furlough leave – as long as each period of furlough leave is at least 3 weeks (21 days) long.  Some staff (particularly those with children at home) may welcome being furloughed even if it is on a reduced salary. Others will need to maintain their salary, if at all possible.

What about ‘shielding’ employees?

The rules are now clear that anyone who comes within the Government’s shielding list, or has to stay at home because they live with someone who is shielding, can be furloughed, regardless of whether or not you still have work for them to do.

What about employees having to stay at home to care for others?

Employees who have to remain at home to care for anyone connected with Coronavirus, including looking after children because schools are closed, can be furloughed, regardless of whether or not you still have work for them to do.

What about employees who are self-isolating?

Employees who are self-isolating are currently not able to be placed on furlough.  They are able to be placed on SSP for 14 days.  If their employer can create a case for no longer having any work for them then they can be placed on furlough like any worker who is not self-isolating.

What about an employee falling sick during furlough leave?

The latest CJRS rules are now clear that the employer can decide whether someone who falls sick while on furlough should be put onto SSP or left on furlough.  Obviously it will be easier and no extra cost for employers to leave such a person on furlough pay (if they are not topping up to 100%) during that sick leave.

What about employees taking maternity leave or other types of family leave?

These ‘family friendly’ leaves are still available and for some people it will make sense for these to continue (particularly with the special protections that are available to employees taking these types of leave).

However, for an employee on maternity leave who is nearing the end of her leave and is currently in a period of nil pay, she may wish to ask to end her maternity leave and be furloughed instead. There doesn’t seem to be anything to prevent this happening, so long as the employer does not currently have any work for her to perform.

What about company directors?

There are fairly complex rules in the CJRS around whether a company director can be furloughed and, if so, what remaining director’s duties they are able to still perform without invalidating the CJRS rules.  Narrow definitions of statutory directors’ duties under company law are involved.  If you wish to explore this it is best to ask us for specific advice.

What situations will furlough leave not help with?

Furlough leave is to protect the jobs of employees who would have otherwise been laid off or made redundant due to the impact of coronavirus on the employer’s business.   It does not help with any situations where employees had agreed to reduce their hours, or to take a pay cut but where they are still required to work in some capacity.

There is currently no option to combine reduced hours with furlough leave. In our experience, many businesses who still have a flow of work are looking at reduced hours/pay at this stage. Furlough leave may still need to be used further down the line.

How will this affect the employment status of employees?

The employees concerned will remain on the employer’s payroll and will continue to accrue holiday and service as usual.

During the furlough leave, the employee’s employment contract remains in place in other respects, such as important terms covering confidentiality, intellectual property rights, not working for others without permission and restrictive covenants.  You may wish to remind them of this.

Working for others during furlough

If a furloughed employee already works (with your permission) for another organisation in addition to yours, being furloughed by you does not prevent them from continuing to work for that other organisation – or even being furloughed by them too.  It seems clear that the spirit of the CJRS is that HMRC would frown upon such an employee increasing their working hours for that second employer but this is not currently prohibited.

As the scheme is being administered by HMRC and employers have to give the names of the employees being ‘furloughed’, it is likely that any employee who takes new separate paid work during furlough leave will be identified (eventually!). Our guess is that HMRC might then reclaim payments made to the (first) employer. Therefore, it is important that your furloughed employees understand that they cannot undertake work elsewhere during the furlough period during the hours when they normally work for you.

What about annual leave?

We still don’t have any clear answers on this topic yet!

Is the taking of annual leave during furlough leave possible or allowed?  If you agree with an employee who is on furlough that they are taking annual leave and/or you pay them for a day of holiday, will that render their furlough period void?

It feels like it would make sense, particularly if you are ‘topping’ up the salary of furloughed employees to 100%, to require employees on furlough to take their accrued annual leave during any furlough period.  For those employers who cannot afford to ‘top up’, can you insist on employees taking their accrued holiday during furlough if it is not at the proper rate of holiday pay laid down by law?  Would you pay at 80% or at the employees’ full salary?

We don’t yet know the answers to any of these questions.  The safest option at the current time is to assume that employees are not able to take holiday during furlough leave, and wait to see if we get more guidance on this point.  Missing a booked holiday because of furlough leave is not going to provide employees with an immediate or obvious way to bring a claim against you.  It removes any risk of the furlough being seen as invalid by the CJRS.

The second safest approach is to assume for now that anyone taking a holiday during furlough will be paid the furlough rate of pay, not at 100%.  Although this violates the law around holiday pay, it reduces the risk that the taking of such leave will be treated as invalidating the furlough.

To be clear, we do not agree with what is on the ACAS or the CIPD websites about this issue.  We see their advice as risky and not based on any official statements by HMRC.  If ACAS and the CIPD turn out to be wrong and you end up losing all your CJRS furlough grants because you are held to have invalidated the furlough by paying people to take holidays during furlough, you will not be able to sue ACAS or the CIPD for negligent advice!

It is a real shame that, particularly with the Spring bank holidays, the Government has not seen fit to give clarity yet on this critical point.

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