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The Menzies Law Guide to All things Furlough

FAQ’s and what we know so far…

By Anne-Marie Boyle and Luke Menzies

This is a long blog post and rather more dry than our usual fayre.  But we think you will forgive us, in view of the importance of the topic and our wish to share the following information with you all. 

It is hard to imagine that 2 weeks ago hardly any of us had heard of the word ‘furlough’. Now it is part of our everyday language. In this blog 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 blog was accurate at the time of writing, based on the Government’s 26 March 2020 publication of the rules, it is likely to change to some extent, so it’s not a substitute for taking legal advice based on your own circumstances. 

Read on below for our current answers to this list of questions.  Or jump down the page to see a specific answer.  (* and please note that clarification and updates to some of these points can now be found here *)


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.

After existing as just a few hazy lines on the Government’s website for a few days, the rules (if we can call them that, given how unclear much of their wording is) was updated on 26 March 2020 and is available here.

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 idea 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 28 February 2020 and have a UK bank account.

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 outline published on 26 March 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.   So 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 CJRS rules (26 March version) are unhelpfully very unclear in terms of 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), the rules say they can be furloughed.

However, it is not at all clear whether it is the client/end-user who should furlough them and claim the 80% of wage or the agency itself.  Our view is that, in legal terms, it is the agency who is their employer, and so it has to be the agency who places them on furlough.  The REC (the recruitment agency’s representative body) has issued advice which suggests they agree with this view, but the official CJRS is unhelpfully really unclear and could confuse a lot of employers on this point.

What about this 28 February cut-off date?

Employees must have been on your payroll by 28 February 2020 in order for you to be able to furlough them.  Therefore anyone hired or starting since 29 February are not covered.  (Ignore any commentary or advice you may have seen that gives the cut-off date as 1 March – this is wrong.)

We have been asked about new employees who started in late February but who were not added to the employer’s PAYE system until after 28 February.  This is another example of where the 26 March CJRS rules are confused and really unhelpful.

While the rules do indeed say €œFurloughed employees must have been on your PAYE payroll on 28 February…€ they also go on to say €œEmployees hired after 28 February cannot be furloughed…€  (Note the confusion between €œon your PAYE payroll€ and €œhired€.)  The second sentence gives the clear implication being that employees hired on or before 28 February therefore can be furloughed.

Our advice is that this will hopefully be cleared up soon, when more detailed rules are published.  It would be odd, given the objective behind the policy, for the Government to want to explicitly discriminate between those who had been hired and placed on payroll by 28 February and those who had been hired by 28 February but where the employer had not get got around to adding them to their payroll system.

Our view is that where the rules say €œmust have been on your payroll€ they surely mean €œmust have started in your employment€ – and the author has not considered the implications of their inconsistent wording.

We suggest that if you have anyone who falls into this uncertain situation who you wish to furlough, you check with us at the time.  If you do try to furlough them, ensure that the furlough agreement only commits you to paying the employee whatever funds you obtain for their pay under the CJRS, and nothing more.  Then your exposure is very limited.

What about employees recently made redundant?

Employees who have been made redundant since 28 February can be furloughed by their former employer if rehired.   The Government’s idea is apparently that they cannot be furloughed by a new employer but can be by their former employer.

There is clearly a question of 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 the employee had a few days/weeks less than 2 years’ service at the time of the original redundancy, might they then gain this additional service during furlough and thus become more expensive or risky to dismissal again?

There are so many questions here but sadly the CJRS rules do not give us any of the answers.  Going back to normal employment law principles, our best guess here (this week) is that if they had 2+ years’ service at the time of the original redundancy, you could offer to take them on  – after having left 2-3 weeks between the original end date and the re-hire date.  You’ll need this backed up by an express agreement in the furlough agreement that this is a new hire and does not preserve continuity of employment from the previous employment.

There are alternatives, and additional things to mention if this is something you are grappling with.  Get in touch if you’d like more specific advice here.

What costs can employers recover?

The CJRS funds 80% of an employee’s €œwage€, 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 €œregular wage€ as at 28 February 2020 should be used to calculate the 80% figure.  Fees, commission and bonuses 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 €œregular wage€.  There is the potential for there to be substantial room for future litigation here, so 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 €œearnings€ as opposed to €œwage€ 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.

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.

NIC and pension contributions

Employers can claim the cost of employer’s NIC and employer’s auto-enrolment pension contributions (at the minimum rate) for the 80% of wage cost (but not in respect of any voluntary top-up of pay by the employer).

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 agreement.

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 and 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 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 26 March guidelines have changed tack, stating that €œwhen on furlough an employee can not undertake work for, or on behalf of, the 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.  We do not believe that asking employees to €œvolunteer€ to perform work for the employer will 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 €œcan 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.

At present, there 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 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 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.

Furlough also cannot be used for those who are self-isolating at home or staying home to look after children unless their employer also does not have any work for them to perform.

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

Is the taking of annual leave during furlough leave possible or allowed?  If you pay an employee for a day of holiday, might 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.  And with the Easter bank holidays coming up, what will happen then?  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.  It is a measure of the uncertainties here that within our team at Menzies Law we can find no consensus on what the ‘safer’ advice is to give you here!  Is it to allow holiday to be taken, or to say it cannot?  We just don’t know.

Since the Easter bank holidays are fast approaching, we are hoping for some Government guidance on this issue very soon.

What about an employee falling sick during furlough leave?

The CJRS rules are not yet clear about whether it is possible to take sick leave during furlough leave.  It may be that once you are on furlough leave, sick leave is not possible.

If we are wrong about that, we anticipate that most employees would fail to notify their employer if they became sick (or need to self-isolate) during furlough leave because of the adverse pay consequences of doing so if it meant going onto SSP.

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.

We are here to help

We are coming across new scenarios, new information and new questions regarding furlough leave every day.  We are very happy to help guide you through what is undoubtedly becoming one of biggest challenges we have ever seen in employment law.

While the rules on CJRS are currently evolving on an almost daily basis, and some of the elements of it are subtly shifting, we are here to help you keep up to date.

Please contact us on 0117 325 0526 /

Anne-Marie Boyle & Luke Menzies, Menzies Law

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