The Job Retention Scheme

  • Insight

24 March 2020

As the nation continues to respond and deal with the impact of the Coronavirus, the UK Government’s Job Retention Scheme has been introduced. The Scheme has given rise to a brand new concept in employment law - ‘Furlough leave’.

There’s been some cautious optimism from employers and employees, although there are questions as to the operation of the Scheme.

In this insight article, we answer some of the key questions employers have.

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What is the scheme?

It’s a temporary scheme that is open to employers for at least three months starting from 1 March 2020. The government expects the scheme to be operational by the end of April.

Employers need to make a claim for wage costs through the Job Retention Scheme. Employers will then receive a grant from HMRC to cover the lower of:

  • 80% of an employee’s regular wage, or
  • £2,500 per month.

The associated Employer National Insurance contributions and minimum automatic enrolment pension contributions (as discussed below) can also be claimed. However, fees, commission and bonuses should not be included.

How you calculate the claim will depend on what category the staff fall under. For instance, there are different methods for those whose pay varies, those who have been employed for less than a year, those who only started in February 2020, and potentially for those who are on different kinds of leave.

Employees who have multiple employers can be furloughed for each job. The cap applies to each employer separately.  And so it means that an employee could be paid £5,000 per month if they are a high earner with more than one employer.  

Do employers have to top up pay?

Employers may elect to top up salaries to 100% but there is no obligation to do so, providing agreement is reached with the employee.

How do you claim?

It is for the employer to make payment to the employees and then claim under the scheme. An online service is expected to go live by the end of April 2020. The employer must provide:

  • Its ePAYE reference number
  • The number of employees being furloughed
  • The claim period (start and end date)
  • Amount claimed (per the minimum length of furloughing of three weeks)
  • Its bank account number and sort code
  • Its contact name
  • Its phone number

It is up to the employer to calculate the amount claimed. But HMRC has the right to retrospectively check the claims.

Does the scheme cover all employers?

The scheme is open to all UK employers who had a pay-as-you-earn (PAYE) payroll scheme on 28 February 2020.

This includes businesses, charities, recruitment agencies, public authorities etc. Even public sector organisations are included – although the Government doesn’t expect many of them will utilise the scheme. This is because many of their operations are deemed essential and/or they receive public funding for staff costs.

The Government has said that the payment is to support “employers whose operations have been severely affected by coronavirus”. That is different from the Government’s initial guidance which says that it is to support those who “would otherwise have been [made redundant]”. 

And what if HMRC does not accept that the operations have been “seriously affected” by coronavirus?  On reading the guidance we have, so far, it could mean that Furlough pay ultimately wouldn’t apply.

Which employees are covered?

The scheme will cover staff who are on the PAYE system on or before 28 February 2020. Therefore, it will not cover new starts who are due to join or did join after 28 February 2020.

The scheme will cover the wages for:

  • Full time and part time employees
  • Workers who are not working (including seasonal workers) providing they are not on 'unpaid leave' (see below)
  • Some of those on zero hour contracts
  • Some agency workers

The self-employed are not included and will receive support through a separate system (the Coronavirus Self-employment Income Support Scheme). (For the self-employed who qualify, a taxable grant will be paid from June 2020 which is a top up to reach 80% of their average monthly profits over the last three years – up to a cap of £2,500 per month).

How do employers get agreement?

Furlough leave must be by agreement. The scheme makes it clear that ordinary rules of employment law apply. You cannot ‘put’ an employee on Furlough leave, especially if you are going to reduce their wages.

The Government suggests that employers take legal advice, noting that certain ‘collective consultation’ obligations might apply – which involves having a body of staff representatives elected or consulting with a recognised trade union.

While the Government suggests that collective consultation might apply “if sufficient numbers of staff are involved” that isn’t the end of the story. Where there is a recognised trade union involved, bypassing the union and going straight to the employees with an offer of Furlough could expose the employer to punitive Tribunal awards of up to £4,917 per trade union member.

How do employers select employees for Furlough leave?

Selecting employees for Furlough leave may not be particularly easy. It’s possible that some employees, including those with children for example, might want to take Furlough leave. Equally, those with caring responsibilities might also want to take Furlough leave. In such a situation, an employer may need to select one over the other. Issues could arise in relation to indirect sex discrimination as compared to indirect age discrimination in cases such as that.

Equally, employers may have employees who do not want to take Furlough leave. This will likely apply to those who are in higher paid jobs and/or those whose domestic outgoings might not easily allow for such a drop in salary. If the alternative is potentially redundancy however, Furlough leave might be more attractive. But they might well, now or later, ask “why me?” and bring a claim for discrimination.

Some employers might wish to take into account what an employee intends to do with their Furlough time when deciding who to pick. Will they be undertaking some charitable work to help us all through this? But, again, those with caring responsibilities might struggle more than others to do that. And there are certain restrictions on what employees can do during Furlough leave (see below).

It might be that different protected characteristics of employees effectively compete with one another. In such situations, employers have to be clear about why they are making the decisions they are and ensure that they are behaving proportionately.

Can employees share Furlough leave?

Sharing Furlough leave, e.g. each employee takes two days a week, will not be possible because an employee cannot perform any work for the employer when on Furlough leave and Furlough leave must be for a minimum period of three weeks.

It may be possible to rotate employees after three weeks. We have seen some commentary suggesting that, because employees can take sick leave, it is possible to rotate Furlough leave. However, we believe that that is a misunderstanding of the guidance and that, so far, the guidance doesn’t make the position entirely clear. Employers should, therefore, retain some flexibility in any Furlough agreements.

What can be done during Furlough leave?

Charity work?

Employers will also need to be careful that any requirement does not amount to the employee 'working' for their employer. The question could arise: is the employee undertaking activities which would otherwise be performed by the employer under the banner of 'corporate social responsibility'?

The employee cannot provide services to or generate revenue for, or on behalf of the employer.

There are some careful nuances here.


Some employers may request that their employees undertake some training whilst furloughed, e.g. completing online training courses. However, there will be risks associated with putting too much pressure on staff. 

Staff must be paid at least the National Living Wage or National Minimum Wage, even if this is more than the 80% of their wage that will be subsidised.

Redundancy consultation? Disciplinary or grievance processes?

There’s something of a misapprehension that employers can’t speak to individuals who are on leave. It’s true that some might choose not to participate, but the pressure on everyone is such that many employers would be able to persuade an employment tribunal that, if it came to it, they had acted reasonably in making decisions on the basis of the information they had available.

And it’s our view that consultations taking place during Furlough leave would not amount to 'work'.

Can annual leave be taken during Furlough leave?

In terms of the Working Time Regulations 1998, employees are entitled to 5.6 weeks’ paid leave per year. This even applies, generally speaking, to those who only work part of the year – providing they remain employed throughout. A week’s leave is calculated based upon an average of pay received. So employers will potentially still be faced with an accruing obligation to provide paid annual leave at some point in the future.

It's not yet clear whether employees can take annual leave during Furlough leave.  Some commentary suggests that they can but it is not actually clear and could risk the employer breaking Furlough inadvertently. There is new legislation now entitling employees to carry leave over into the next 2 leave years, and that might be a hint that it cannot be taken during Furlough leave.

What is possible however, is for employees to contractually agree to waive part of their leave (which is different from ‘taking leave’).

When further details are revealed, we’ll update our guidance.

Statutory sick pay (SSP)

Employees who are not on Furlough leave might still be entitled to SSP if they meet certain criteria.  But, for most, this will pay them less than Furlough leave.

The guidance appears to suggest that Furlough leave can only be applied after an employee is no longer on SSP, regardless of why they are on SSP.  But what this means is unclear, because employees can effectively end SSP themselves by declaring themselves fit for work.

Those employers who cannot recoup SSP because they have 250 employees or more should bear that in mind when deciding whether to apply Furlough leave. 

Further, small to medium sized employers should also be aware that not all of SSP is necessarily refunded.

What about maternity leave and sick leave?

Those who are on unpaid leave are not eligible for Furlough leave (unless placed on unpaid leave after 28 February). But, again, what this means is unclear. The guidance refers to being 'placed' on unpaid leave, so whether (for example) unpaid maternity leave or unpaid sick leave counts is not clear.

Excluding those on longer term sick leave or on maternity leave (for example) or who have not worked in February could give rise to discrimination claims, and the employer’s decision may or may not be justifiable.

Those returning from leave (of any description) could be put on Furlough leave in the same way as others. Employers might find that those who are on unpaid leave will, if they have this right, say that they intend to return early.

Some commentary suggests that those who have not received any payment in February would be excluded. But we don’t think that that’s correct. Seasonal workers (for example) are not excluded. Not working is not necessarily the same as being ‘placed on unpaid leave’.

What about those who have already been made redundant or dismissed?

Employers may be able to reinstate former employees who have been made redundant since 28 February 2020. Prompt action may be required for this to work.

Where an employer wants to allow an employee to return, but only for a fixed period, in order to benefit from Furlough leave then it might be possible to enter into a settlement agreement preventing any future claims when the employee leaves again. This will be particularly attractive for employers if an employee will accrue two years’ service during Furlough leave and where there is likely to be a redundancy situation after Furlough leave.

Other options

For some employers Furlough leave is not suitable. For example:

  • They might still need the employees, but for less hours.
  • They might still need the employees 100%, but cannot afford to pay them 100%.
  • They might not be able to afford to pay the employees given that reimbursement comes later.

Negotiation of reduced pay and reduced hours remains possible. If necessary, redundancy is still possible (instead of or after Furlough leave). Again however, process and consultation will be important even where timescales are tight, and especially where there are 20 or more individuals involved.

Even after current restrictions are lifted and Furlough leave comes to an end, few businesses will return to normal immediately. And many employers will, understandably, not wish to operate on the hope or assumption that they will.


There’s a lot to think about. Employers will need to act very carefully at this stage to ensure that they and their employees can benefit from Furlough without storing up too many problems for the future.

Considering contracts will be crucial. Consultation will be crucial. Fair selection processes will be crucial. Trying to reach agreement will be crucial. Different employers will have different options here. Furlough agreements, settlement agreements and paper trails could become very important in the future. Of key importance is retaining as much flexibility as possible.

Guidance and updates

We’re here to help. For our updates on all business areas visit our Business Hub and for all our employment insight on a wide range of employment issues, visit our Employment page. For specific questions on Furlough leave, contact Andrew Brown.

You may also want to read our Coronavirus Guidance for Employers Insight article here.

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