The Coronavirus Job Retention Scheme - an essential guide for employers

An updated summary to reflect latest guidance on the Coronavirus Job Retention Scheme for employers and an outline of some of the practical challenges employers wishing to use it will face

01 June 2020

Updated 1 June 2020 

On 29 May, the Chancellor of the Exchequer made an important announcement setting out further detail on how the Coronavirus Job Retention Scheme will operate between July and the end of October. Key changes include the introduction of a new ‘flexible furloughing’ scheme from 1 July and the gradual scaling back of government support from 1 August onwards. We explain these latest developments below as well as summarising the key aspects of the scheme (as updated).

On Friday 20 March the government announced the introduction of the Coronavirus Job Retention Scheme in an effort to help employers avoid the need to make mass redundancies as a result of the impact of COVID-19. Details of the scheme were scant at the time but since then HMRC has been updating the guidance on a regular basis as well as issuing new guidance documents. (Links to all key pieces of guidance can be found at the end of this briefing).

In addition and importantly on 15 April, the Chancellor issued a Treasury Direction to HMRC in relation to the Coronavirus Job Retention Scheme. A second Treasury Direction was subsequently issued on 20 May clarifying and remedying some of the inconsistencies between the original Treasury Direction and the various guidance published by HMRC. Any reference to the Direction in this briefing is to the updated Direction, unless otherwise stated. The Direction sets out the legal framework for the scheme and is intended to have legislative effect. It is therefore likely that, where there is any remaining ambiguity between the Direction and the various pieces of employer guidance, the Direction will take precedence. That said, HMRC has stated in open correspondence that whilst it will act in accordance with the Direction, its interpretation of the Direction is set out in its guidance and that it expects employers to look to the guidance in the first instance when seeking to understand the operation of the scheme. This should give employers some comfort when relying on the guidance.

What are the changes to the scheme announced on 29 May 2020?

As previously communicated, the scheme will now run until the end of October. We think it unlikely that the scheme will operate beyond that point.

From 1 July, employers will be able to bring back to work employees who have been previously furloughed for any amount of time and any shift pattern, while still being able to claim under the scheme for normal hours not worked by an employee (with the employer paying for hours that are worked). The introduction of ‘flexible furloughing’ had originally been planned for 1 August but has been brought forward by a month to give employers increased scope to manage their workforce as the lockdown eases.

The scheme will close to new entrants from 30 June. From this point onwards, employers will only be able to furlough employees that they have furloughed for a full three week period prior to 30 June. Importantly, this means that the final date by which an employer can furlough an employee for the first time will be 10 June in order for the current three week furlough period to be completed by 30 June.

From 1 August, the level of grant under the scheme will be slowly tapered to reflect the government’s expectation that people should be returning to work. Furloughed employees will continue to be entitled to receive the current 80 per cent of wages (subject to the £2,500 monthly cap) through to the end of October but from August employers will be expected to contribute towards this. In August the government contribution towards the employee’s pay will remain at 80 per cent but employers will be required to pay employer national insurance and pension contributions. In September, employers will also be required to pay 10 per cent of wages and the government will contribute 70 per cent. In October, the employer contribution will increase to 20 per cent with the government contribution falling to 60 per cent.

The government produced a fact sheet to accompany its announcement and the various HMRC guidance has been updated to include a general reference to the latest changes. The government has also confirmed that guidance on ‘flexible furloughing’ and how employers should calculate claims will be published on 12 June.

Further detail on the latest changes to the scheme is set out below.

Which organisations are able to apply?

All UK employers, (including individuals who employ people), which operated a PAYE scheme on or before 19 March 2020, have enrolled for PAYE online and which have a UK bank account are eligible to participate. Whilst public sector organisations are not excluded from the scheme, the government does not expect many to use it as they will be engaged in providing essential services. Whilst a private sector employer, which receives public funding for staff costs, is not precluded from the scheme, it is expected to continue to use those funds to pay staff and not to furlough them providing the funding is continuing.

The employer guidance states that employers who cannot maintain their current workforce because their operations have been severely affected by COVID-19 can furlough employees and make a claim. It goes on to say that the scheme is designed to help employers, whose operations have been severely affected by COVID-19, to retain their employees and protect the UK economy. It is difficult to know the extent to which HMRC will look to the employer for evidence to demonstrate that it was in this position. However, it is clear that the scheme is open to all employers and the guidance does state that the government recognises that different businesses will face different impacts from coronavirus.

Given that the guidance makes clear that HMRC will retain the right to retrospectively audit all aspects of an employer’s claim, and given that the grants made under the scheme will ultimately be funded by the tax-payer, it makes sense for employers to document the impact and challenges they were facing as a result of coronavirus when making the decision to furlough employees. This is reinforced as updated versions of guidance also state that HMRC will be checking claims and that payments may be withheld or may need to be repaid if a claim is found to be based on dishonest or inaccurate information or is found to be fraudulent. In addition, HMRC has put in place an online portal for employees and the public to report suspected fraud in the scheme and we are aware that there have been a significant number of such reports being made.

How will the Coronavirus Job Retention Scheme work?

The scheme, which started on 1 March, has been extended until the end of October and employers can (subject to the below) use the scheme at any time during this period.

Until the end of July, employers can claim the lower of 80 per cent of a furloughed employee’s gross pay or £2,500 per month plus employer NICs and the minimum employer auto-enrolment pension contribution. (effectively a maximum of £2,804 per month per furloughed employee). As individuals are only entitled to the National Minimum Wage (or equivalent) for hours they are working, furloughed workers can be paid the lower of 80 per cent of their salary or £2,500 (unless they are training – see below) even if this will take them below the appropriate minimum wage if based on their usual working hours. Furloughed staff will continue to receive 80 per cent of their wages (up to the £2,500 monthly cap) for the duration of the scheme.

From 1 August, whilst the government will continue to pay 80 per cent of wages up to a cap of £2,500, employers will be required to pay employer NICs and pension contributions for the hours their furloughed staff do not work.

From 1 September, the government will pay 70 per cent of wages up to a cap of £2,187.50 and employers will need to pay 10 per cent of wages to make up the 80 per cent total up to the £2,500 cap.

From 1 October, the government will pay 60 per cent of wages up to a cap of £1,875 and employers will need to pay 20 per cent of wages to make up the 80 per cent total up to the £2,500 cap.

In each case the cap will be proportionate to the hours not worked as part of any new flexible furlough arrangements (see below for further detail on flexible furloughing).

Importantly, the government announcement on 29 May confirmed that the scheme will close to new entrants from 30 June. From 1 July the scheme will only be available to employers that have previously used the scheme in respect of employees they have previously furloughed. From then on, employers will only be able to furlough employees whom they have previously furloughed for a three week period prior to 30 June.

This means that the final date by which an employer can furlough an employee for the first time will be 10 June, in order for the current three week furlough period to be completed by 30 June. Further, the number of employees an employer can claim for in any claim period post 1 July cannot exceed the maximum number it has claimed for under any previous claim under the existing scheme. Given that further guidance on flexible furloughing is not due until 12 June, this is likely to leave some employers who are considering furloughing for the first time or looking to place more employees on furlough with difficult decisions to make by 10 June as to their likely furlough plans through to the end of October.

The latest government factsheet also confirms that from 1 July and given the forthcoming changes to the scheme, claim periods will no longer be able to overlap months and employers who previously submitted claims for periods that overlapped calendar months will no longer be able to do this going forward.

What can an employer claim for?

The particular amounts for which an employer may claim do not make for an easy read and the terminology in the guidance has changed on several occasions. To add to the complexity, the Treasury Direction also contains detailed information on this. What follows is an overview of the position but we suggest that specific legal advice is taken as there are some remaining uncertainties.

The guidance provides that employers can claim for any regular payments the employer is obliged to pay their employees (subject to the cap). Details of what constitutes ‘regular payments’ has varied in the different iterations of the guidance. The current guidance Work out 80 per cent of your employees' wages now includes the following information (which differs from previous iterations) and states that when calculating 80 per cent of the employee’s wages, the employer should use ‘regular payments’ which the employer is ‘obliged’ to make including:

  • regular wages
  • non-discretionary overtime
  • non-discretionary fees
  • non-discretionary commission payments
  • piece rate payments

The same guidance stipulates that employers cannot include the following:

  • payments made at the discretion of the employer or client (where there is no contractual obligation to pay) including tips (including those distributed through troncs), discretionary bonuses and discretionary commission payments
  • non-cash payments
  • non-monetary benefits (eg benefits in kind).

Benefits provided through salary sacrifice schemes (including pension contributions) should also not be included. Employers should continue to maintain these benefits during any period of furlough, to avoid breach of contract claims, unless the employee agrees otherwise as part of the furlough arrangements. HMRC has agreed that COVID-19 counts as a ‘life event’ which could warrant changes to salary sacrifice arrangements subject to contractual arrangements between employer and employee being updated accordingly.

The Treasury Direction defines ‘regular’ – please refer to our briefing for employers on the Treasury Direction for further detail on this.

An update to the guidance on 14 May clarified the approach employers should take towards non-discretionary payments including non-discretionary overtime payments. When determining, for the purposes of a claim, whether a payment to an employee is non-discretionary, employers should only include payments that they are contractually obliged to pay and to which the employee has an enforceable right. If variable payments are specified in a contract and those payments are always made, then they may be non-discretionary and therefore should be included in the calculation. Where an employee has been paid variable payments due to working overtime, the employer can include these payments in the 80 per cent calculation, as long as the overtime payments were non-discretionary. Payments will be non-discretionary if the employer is contractually obliged to pay the employee at a set and defined rate for the overtime they have worked. It appears that this would apply to voluntary overtime in a number of instances.

The Direction now also includes further details of non-discretionary payments, which includes payments ‘made in recognition of the employee undertaking additional or exceptional responsibilities’ and payments ‘made in recognition of the circumstances in which the employee undertakes the employee’s duties or time when they are undertaken’.

Claims should be started from the date the employee starts furlough – not the date the decision is made to furlough nor the date the employee is written to confirming furlough status.

The guidance differentiates between fixed-rate employees (essentially those paid an annual salary although the definition is more nuanced see our briefing for employers on the Treasury Direction) and those whose hours of work vary. For fixed-rate employees, salary in their last pay period prior to 19 March 2020 should be used as the basis for the calculation. Employers who had already calculated their claim based on the employee’s salary as at 28 February (the date contained in previous guidance) can choose to still use this date for their first claim. For those with variable pay, where an employee has been employed for 12 months or more the employer can claim for the higher of:

  • the same month’s earning from the previous year; and
  • the average monthly earnings for tax year 2019/2020.

Where an employee has worked for less than a year, the employer should claim the average monthly earnings since they started work until the date they are furloughed or, if they have been employed for less than a month, a pro-rata amount for their earnings so far.

Helpfully the updated guidance states that employers should choose the calculation they think best fits the way an employee is paid and that HMRC will not decline or seek repayment of any grant based solely on the particular choice of pay calculation, as long as a reasonable choice of approach is made.

Claims for employees returning from statutory leave, for example, maternity leave should be calculated with reference to their salary and not the pay they received whilst on leave. 

Payments made to the furloughed employees will be taxed in the usual way. Employers can top up the payments to up to 100 per cent but will not be able to recover top up amounts. Furloughed employees must receive no less than 80 per cent of their reference pay (subject to the cap of £2,500) and all of the grant received must be paid to the employee in the form of money. Employers may not net off any of the grant to pay for the provision of benefits or a salary sacrifice scheme nor must they reduce the wages by way of administration charges, fees or other costs.

The Apprenticeship Levy and Student Loans should continue to be paid in the usual way – the scheme does not cover these.

HMRC’s online portal through which employers may make their claim is now up and running. Employers will have to calculate the correct amounts to be claimed themselves and HMRC reserves the right to audit claims retrospectively. Claims cannot be made through the portal more than 14 days in advance of the claim end date. Employers must keep a copy of all records of claims made for six years, including the amount claimed and the claim period for each employee, the claim reference number and their calculations in case HMRC require more information about their claim. Further details on how to submit a claim can be found in Claim for employees' wages through the CJRS.

Furlough must last for a minimum of three consecutive weeks but employees can be furloughed for longer periods. Employees may also be furloughed more than once whilst the scheme remains in force, provided each period of furlough is for a minimum of three weeks. This allows employers to roll employees on and off furlough. Employers are also able to extend an ongoing period of furlough, for any length of time up to the end of October, at which point the scheme is currently due to end. However, depending on the terms of the original furlough agreement, employers may need to obtain employee agreement to any such extension and/or any variations to existing arrangements during any such extension (see the section entitled “Agreeing furlough arrangements” below).

As stated above, if an employee’s furlough is extended beyond the end of July, the employer will be required to contribute to the employee’s salary. A furloughed employee will have continuity of service preserved and they retain their statutory rights so they will continue to accrue statutory holiday. It remains open to employers to seek to agree the suspension of accrual of non-statutory holidays and other benefits. Some benefits, like life insurance or permanent health insurance have annual payment dates and, if payment has already been made, employers may choose to preserve these during furlough. Other benefits represent an ongoing cost which some organisations may not be able to bear at the current time, so may seek to agree with employees that they are suspended during furlough.

Who can be furloughed?

When the scheme was first announced, employers were only permitted to furlough employees who were employed and on the employer’s PAYE payroll on 28 February 2020. This date was later changed to 19 March (which was the day before the Chancellor announced the setting up of the Scheme). In order to make a claim for an employee under the scheme, an employer must be able to show that:

  • the employee has been paid earnings by the employer in the 2019/20 tax year; and
  • the employer made an associated Real Time Information (RTI) return in relation to that employee on or before 19 March 2020; and
  • the employer has not reported a date of cessation of employment for that employee on or before that date.

Although the date of eligibility has changed from 28 February 2020 to 19 March 2020, a number of new joiners may still not be eligible for furlough. For example, if an employee started on 2 March 2020 but did not receive their first salary payment until 31 March 2020, it seems they would fall outside of the scheme if the employer had not issued a RTI return in relation that employee on or before 19 March 2020. Their eligibility under the scheme would therefore appear to be determined by the exact timing of their employer’s RTI submission for March 2020. New joiners paid on a weekly basis who joined in early March are more likely to benefit from this change to the scheme.

Assuming they meet these payroll requirements, all employees, whether working full or part-time or on zero hours contracts, are eligible. Foreign nationals can be furloughed and employers can furlough employees on all categories of visa. Employed agency workers are also eligible if they are part of their employer’s PAYE system. The scheme does not apply to the self-employed for whom separate arrangements are in place.

Importantly, those made redundant or who stopped working for the employer after 28 February but before 19 March can be furloughed if they are reemployed (even if this re-employment is after 19 March) provided they were on the PAYE payroll as at 28 February (which means an RTI submission to HMRC in respect of the employee must have been made on or before 28 February). Employees who stopped working for you or were made redundant on or after 19 March can be re-employed and furloughed provided the employee was on the PAYE payroll on or before 19 March (which again requires an RTI submission to have been made to HMRC in respect of the employee on or before 19 March). No guidance is given as to how redundancy or notice payments already paid to those employees should be dealt with. Employers may wish to consider requiring repayment of sums paid as a condition of reemploying.

The Guide for employers to check which employees they can put on furlough includes the following table for ease of reference:

Was the employee employed with you as of this date?

Date RTI submission notifying payment was made to HMRC

Eligible for CJRS?

28 February 2020

On or before 28 February 2020


28 February 2020

On or before 19 March 2020


28 February 2020

On or after 20 March 2020


19 March 2020

On or before 19 March 2020


19 March 2020

On or after 20 March 2020


On or after 20 March 2020

On or after 20 March 2020


Employees on fixed-term contracts can be re-employed and furloughed provided their contract expired after 28 February (and an RTI submission was made to HMRC on their behalf on or before 28 February) or after 19 March (and an RTI submission was made to HMRC on their behalf on or after 19 March). If the employee’s fixed-term contract has not already expired, it can be extended or renewed and a claim can be made provided an RTI submission was made to HMRC on their behalf on or before 19 March).

Employees who joined an organisation after 28 February and left before 19 March (whether on a fixed-term contract or otherwise) will not be covered by the scheme.

The Direction now confirms that staff cannot be on unpaid leave and furloughed at the same time. For employees who were on unpaid leave before 1 March 2020 any period of furlough cannot begin before:

  • the expiry of the period of unpaid leave on the date agreed or contemplated at the time when it began; or
  • where the duration of the period of unpaid leave was uncertain at the time when it began because it was intended to cover a particular event or circumstance, the ending of that event or circumstance; or
  • the unpaid leave finished on a date set out in an agreement or arrangement reached after the unpaid leave began and before 20 March 2020.

Employees who are unable to work because they have caring responsibilities resulting from coronavirus can be furloughed – this would include employees who cannot work because they need to look after children who are at home because of school/ nursery closures. Employees who have to stay at home with someone who is shielding but who cannot work from home may also be furloughed.

A new employer may be able to claim under the scheme in respect of employees who have TUPE’d over from their previous employer after 28 February 2020 even if there was no RTI submission before 19 March. If the transferor had already furloughed those employees then, depending on the wording of the furlough agreement, the employees should transfer on their varied terms and conditions of employment. However, the guidance is silent on this and we recommend that specific legal advice is sought if you are in this position. 

The guidance includes provisions for those who are off sick or who are self-isolating as follows:

  • the scheme is not intended for short absences from work due to sick leave so employees who are currently working who fall sick or who need to self-isolate should go onto sick leave and receive statutory sick pay (SSP) if eligible. An employee who is on short-term sick leave or who is self-isolating can be furloughed if there are business reasons to do so. In this case, the employee should no longer receive sick pay and should be classified, by adhering to the furlough process, as a furloughed employee;
  • an employee who is being shielded can be furloughed if they cannot work from home – they may be eligible for SSP if they have not been furloughed and cannot work from home.
  • an employee on long-term sick leave can also be furloughed – it is up to the employer to decide whether to furlough these employees. In our view, it may be difficult for an employer to justify a claim if you furlough an employee who is on long-term sick leave if that employee is not otherwise fit and able to return to work although you may want to seek legal advice as discrimination and other issues may arise.
  • an employer can claim under the furlough scheme and under the SSP rebate scheme for the same employee but not for the same period of time. This means that when an employee is on furlough the employer can only make a claim though the furlough scheme and cannot claim for a rebate of SSP;
  • if an employee becomes sick whilst on furlough they are entitled to be paid at least SSP (if eligible). It is up to the employer to decide whether to move the employee onto SSP or to keep them on furlough at their furloughed rate. If an employee who becomes sick is moved onto SSP then the employer can no longer claim for their salary through the furlough scheme. If the employer chooses to keep the sick employee on the furloughed rate then the employer remains eligible to claim for those costs through the furlough scheme. The decision the employer takes as to how to deal with an employee who becomes sick whilst on furlough is likely to depend on whether the employer is topping up the furloughed employee’s salary, whether they offer enhanced company sick pay and whether they are entitled to claim back SSP – again you may wish to seek specific legal advice in these circumstances.
  • the new Direction has been updated to bring it into line with existing guidance. Previously, the original Direction stated that where an employee is receiving SSP at the time that the instruction to cease work is given, a period of furlough leave cannot start until the SSP has ended. The new Direction, whilst still not entirely clear, indicates that an employer and employee may agree to bring a period of sick leave to an end, in order to start a period of furlough. This change is likely to cover clinically extremely vulnerable employees who cannot work from home and whose eligibility to receive SSP is due to them shielding. Please see our briefing for employers on the Treasury Direction for more information.

Employees on maternity and other types of family leave will remain on that leave unless the leave comes to an end in one of the usual ways. The normal rules for maternity and other forms of parental leave and pay apply. An employer can claim through the scheme for enhanced contractual pay for employees who qualify for maternity, adoption, paternity and/ or shared parental pay. This means that those on family-related leave can be furloughed but that claims for wage costs are limited to any enhancements to statutory entitlements (which will still be subject to the 80 per cent cap). The guidance provides links to assist employers with calculating an employee’s average weekly earnings in circumstances where that employee was furloughed, and then began a period of family leave on or after 25 April 2020.

New regulations, introduced separately, mean that furloughed workers who take paid family-related leave on or after 25 April 2020, will have their statutory maternity pay, paternity pay, shared parental pay, parental bereavement pay or adoption pay based on their pre-furlough normal weekly earnings during the eight week reference period used for calculating the statutory pay even if some or all of this reference period falls during a time when they were on furlough (and so on reduced pay).

Employees with more than one employer can be furloughed from one or both jobs and each employer can claim up to £2,500 per month (or any reducing cap from September onwards) for the employee.

A number of individuals who are not employees will also be eligible for the grant if they are paid though PAYE. These include office holders (including company directors), salaried members of LLPs, agency workers (including those employed by umbrella companies) and limb (b) workers.

Apprentices can also be furloughed. They can continue to train whilst furloughed but must be paid at least the Apprenticeship Minimum Wage, National Minimum Wage or National Living Wage as appropriate for all the time they spend training which may mean the employer needs to top up the amount they can claim under the scheme.

Can furloughed employees do any work?

The guidance confirms that currently employees placed on furlough may not provide any services or generate any revenue for their employer or for a linked or associated organisation and that employers are free to consider re-allocating any critical business tasks to staff who are not furloughed. The Treasury Direction arguably goes further stating that the employee must cease ‘all work’ in relation to their employment.

The updated guidance has clarified that employee and union representatives can carry out their duties and activities in relation to individual and collective representation of employees and workers whilst they are furloughed, as long as they do not provide services to or generate revenue for their employer. This will be particularly relevant to employers considering the need to commence or continue TUPE or redundancy consultations.

Employees can take part in volunteer work (although they cannot volunteer for their employer in the same or a different role) and engage in training whilst on furlough. The guidance states that the purpose of any training must be to improve an employee’s effectiveness in the employer’s business, or to improve the performance of the employer’s business. The new Direction confirms that any such training must not provide a service to the employer or the employer’s business activities or contribute to the business activities of the employer or anything generating income or profit for the employer. Further, the training should not (to a ‘significant degree’) directly contribute to the production of any goods the employer intends to supply (as part of the making of such goods or services) or to the supply of services for which any form of consideration is received by the employer. If the training is compulsory employers will need to make sure the employee is paid at least the National Living/Minimum Wage for time spent undertaking it.

Employers cannot apply for furlough payments to top up the wages of those undertaking short-time working (until the new flexible arrangements come into effect from 1 July).

Any statutory duties that company directors are required to undertake by virtue of their office will not count as work for the purposes of the scheme.

The updated guidance makes clear that furloughed employees can take up work for another employer whilst on furlough provided their contract of employment allows them to do so. If you anticipate that furloughed employees will take up work elsewhere, make sure you address this in your furlough agreement with the employee so that any new role does not hinder you when asking an employee to return to work.

As set out above, from 1 July, a new flexible furloughing scheme will be introduced. From this date, employers will have the option of bringing back to work employees who have previously been furloughed for any amount of time and any shift pattern, while still being able to claim under the scheme for normal hours not worked by an employee. There does not appear to be any minimum or maximum number of hours that can be worked with the latest government factsheet merely stating that employers will be able to agree any working arrangements with previously furloughed employees and that when claiming for a grant, employers will need to report and claim for a minimum period of a week (other claim periods are also expressly permitted). In line with the reason behind this change to the scheme, this would appear to allow employers to potentially vary any hours worked by staff on a weekly basis.

To be eligible to claim for hours not worked by staff under any flexible furloughing arrangement, employers will be required to agree any new furloughing arrangements with staff and confirm that agreement in writing. As such, if changes to existing arrangements for those staff currently on furlough are to be made, these will need to be confirmed in writing. Employers will also be required to report hours worked and the usual hours an employee would be expected to work in any claim period. For worked hours, employees will need to be paid by the employer as per their employment terms and conditions (which we believe, could in theory, also be varied with relevant consent) and employers will be responsible for employer national insurance and pension contributions.

The ability for employees to carry out some work whilst still on furlough is to be welcomed and is on the back of the lobbying of various employer bodies. It does,, however, pose questions as to what should constitute an employee’s normal hours and how hours worked and not worked will be accurately tracked and recorded. Further guidance on flexible furloughing and how employers should calculate claims will be published on 12 June.

Can a furloughed employee take holiday?

Previous versions of HMRC guidance remained silent on the interplay between holiday and furlough and employers were referred instead to guidance provided by ACAS on the issue. However, the Guidance on how to calculate 80 per cent of your employees' wages and the Guide for employees to the CJRS both now confirm that employees can take holiday whilst on furlough leave. However, where an employee is on holiday during furlough leave, the employee should be paid at their normal rate of holiday pay (as required by the Working Time Regulations). The furlough grant can still be claimed whilst the employee is on holiday but you will need to top up as appropriate if you have reduced pay for furloughed employees (and you cannot claim for that top-up under the scheme). Further information on the interplay between holiday and furlough (and additional information about temporary changes to the taking of holiday) can be found in our briefing on changes to holiday as a result of COVID-19.

Selecting who will be furloughed

It is for the employer to decide who to furlough. In some cases the job role will determine who is selected but, if you need to choose between employees, for example, because there is less work to do as opposed to no work to do, you should be careful not to discriminate when selecting, for example, by choosing to furlough women on the assumption that they cannot work because of childcare responsibilities. In our view, employers may be able to justify giving preference to employees in vulnerable groups because, whilst potentially discriminatory, given the circumstances, this is likely to be objectively justifiable. Consider asking for volunteers for furlough in the first instance – whilst making no guarantees that they will be selected.

Agreeing furlough arrangements

Employers should discuss and seek to agree furlough arrangements with their affected employees. The original Treasury Direction caused confusion for employers as it stated that to submit a claim for a furloughed employee, the employer and employee must have ‘agreed in writing that the employee will cease all work in relation to their employment’. The new Direction appears to have resolved this issue: whilst agreement between the employer and employee is still required in writing, it can be ‘confirmed’ by the employer to the employee, and ‘writing’ includes communications by email. This agreement may be made by way of collective agreement, and it must specify ‘the main terms and conditions upon which the employee will cease all work’. Therefore, provided employers have written to their employees to confirm that they have been furloughed, and the terms on which this furlough have been agreed, employers should have arguably complied with the new Direction (but this will depend on the specific communications).

Notwithstanding this clarification provided by the Direction, the employee’s consent will still be required to vary their terms of employment as part of any furlough arrangements, or employers risk claims for unlawful deductions from wages, unfair dismissal, breach of contract and/or redundancy payments. Employers should be wary of assuming that an employee who fails to reply to the letter seeking consent to the variation of terms has accepted that variation. On 13 April, the first High Court decision on the furlough scheme was handed down. Whilst the case, In the Matter of Carluccio’s Limited, concerned the actions of administrators, the High Court considered the issue of implied consent i.e. the position of those employees who had failed to reply to the letter requesting their agreement to vary their terms and conditions of employment. The Court rejected the argument that those who had failed to respond to the letter could be taken to have implicitly consented to the variation. Although they accepted that implied consent by way of conduct is possible, insufficient time had passed to accept that that had happened.

Effective communication with affected employees and their representatives will be key to obtaining consent to furlough (if required). Where collective consultation mechanisms are in place these should be the employer’s first port of call when seeking to implement furlough. This may present some practical challenges if employees are working from home. The guidance also suggests that employers may need to take legal advice on any contract change process and consider collective consultation in some circumstances.

We expect employees and trade unions to take a constructive approach to furlough but prudent employers will still need to consider what their plan would be if employees do not consent either because they just don’t reply to the letter seeking to vary their contractual terms or because they actively refuse. Will they seek to impose furlough or potentially make redundancies? In either case employers will have to be mindful of potential collective consultation and notification obligations. The guidance also provides that to be eligible for the grant, employers must write to employees confirming that they have been furloughed and keep a record of that communication for a minimum of five years (the new Direction clarifies that records of the agreement or confirmation of the agreement should be kept until at least 30 June 2025). Where employee consent is required, their consent to the change(s) to their terms and conditions of employment should also be documented.

Any commitments made by the employer in the furlough agreement should be made subject to future changes in guidance. Employers should reserve the right to revisit levels of payment and benefits preserved if the terms of the scheme or the circumstances in general change as well as reserving the right to require employees to return to work (after each three week block of furlough leave) if work becomes available before the scheme ends.

Next steps

As the scheme will not apply to employees who have yet to be furloughed, employers who have not already done so will need to identify who they will furlough and what terms they will offer. This is particularly the case as employees who have not been furloughed by 10 June will not be able to eligible for inclusion within the scheme after that date. Employers will then need to seek agreement to the changes and to document arrangements. This process may be complex and it may be sensible to seek legal advice. In addition employers will need to take the time to categorise their employees to identify those who are fixed-rate and will need to spend time identifying the make-up of the amount they are seeking to claim for each employee. Keep a record of how you arrived at the amounts and the Government guidance upon which you sought to rely in case HMRC raises any issues in relation to your claim.

We have been advising many employers on the issues arising out of this scheme. If we can help your organisation, please contact Luke Bowery or any other member of our employment team. 

Links to the Treasury Direction and current Government guidance:


This briefing gives general information only and is not intended to be an exhaustive statement of the law. Although we have taken care over the information, you should not rely on it as legal advice. We do not accept any liability to anyone who does rely on its content.

Key contact

Luke Bowery

Luke Bowery Partner

  • Employment
  • Restructuring and Redundancy
  • Equality, Diversity and Discrimination

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