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Coronavirus Job Retention Scheme: How to Furlough workers


Covid-19 How to furlough workers.

Updated Saturday 28th March. Please refresh your page.

How to furlough workers

Furlough means an ‘agreed leave of absence’ from work.

Find further guidance on coronavirus Job Retention Scheme (CJRS) published by HMRC on Thursday evening 26 March 2020 here.

On 20th March 2020 the government introduced a new coronavirus Job Retention Scheme (CJRS) where an employer designates a worker as being on leave from the business (furlough leave).

Under the scheme, all UK employers, regardless of size or sector, can claim a grant from HMRC to cover 80% of the wages costs of employees who are not working but kept on the payroll (‘furloughed’), of up to £2,500 a calendar month for each employee.

Employers can choose to top up the remaining 20% if they wish, but do not have to do this.

The online service, ‘portal’ you will use to claim the grant from HMRC is not available yet. The Government expects it to be available by the end of April .

Guidance for employers on the Coronavirus Job Retention Scheme can be found on gov.uk here.

Brief guidance for employees can be found on gov.uk here, and more detail in the gov.uk article ‘check if your employer can use the CJRS scheme’ here.

We have set out below a Q&A covering the main questions that clients have been asking about the scheme.

We are advising employers to communicate with staff first, and seek their agreement to be designated as furloughed workers, saying that further details will be supplied as they come available.

We have put together a template letter to start furlough leave. This has the same Q&A written here at the beginning of the download document.
Download the template letter.

To start the communication process, we suggest that you send a customised letter, explaining what the business is planning to do.

There may be questions and variations on this letter, so please do contact us to discuss what is needed.

The scheme will be back dated to 1 March 2020, be open for at least three months and will be extended if necessary.

HMRC are working to set up the new system of reimbursement, and have stated that the new portal to register workers in the scheme will not be ready until the end of April. So you should plan for the first grants to be paid in May.

We are waiting for more information once HMRC have issued further details and the portal is set up.

When will coronavirus Job Retention Scheme start?

HMRC expects to scheme to be up and running by the end of April.

How long is coronavirus Job Retention Scheme open for?

HMRC confirms that the CJRS will be in place for at least 3 months from 1 March.

HMRC will create an online portal through which employers will be able to reclaim:

  1. – Wage costs, plus
  2. – the employer’s NI contributions, plus
  3. – the minimum automatic enrolment employer pension contributions on that wage.

Which businesses are covered?

The scheme will be open to all UK employers, including charities, recruitment agencies, and public authorities (who are not receiving direct support from the government) so long as they have:

  1. – created and started a PAYE payroll scheme on or before 28 February 2020, and
  2. – have a UK bank account

Which employees are covered?

The HMRC guidance states that CJRS will cover employees who have been on the payroll since 28th February this year, on any type of contract including:  

  1. full-time and part-time employees
  2. employees on agency contracts, and
  3. employees on flexible for zero-hour contracts

An employee is considered furloughed under the scheme only if he or she does no work for the employer.

The scheme does not therefore cover the wages of employees whose hours are reduced.

How to put employees on furlough leave?

Employers need to:

  • Decide which employees to designate as furloughed workers.
  • Notify those employees of the intended change.
    The HMRC guidance states that it is important to take legal advice on this because the changes will affect each worker’s contract of employment and need the workers’ agreement.
  • Consider whether you need to consult with employee representatives or trade unions.
    For example, where the employer intends to vary the contracts of 20 or more employees, and it intends to dismiss employees who do not consent to the change in their terms, for the purposes of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), those employees who do not consent to the change in their terms will be classed as dismissed by reason of redundancy.

    The employer will therefore have a duty to inform and consult appropriate employee representatives and notify the Secretary of State using form HR1.

    The HMRC guidance states that employers will need to follow this process before placing employees on furlough leave.

  • Agree the change with the furloughed employees.
    Most employment contracts will not permit an employer to reduce an employee’s pay, provide them with no work, and change their employment status without agreement – otherwise there is the risk of a constructive/unfair dismissal, wrongful dismissal/breach of contract claims and unlawful deductions of wages claims.

    Technically under the employment contracts each employee should be given the period of notice in their employment contract (e.g. one month for most employees or the number of weeks equivalent to the years of service if longer) before the change takes effect.

    However, faced with the alternatives, which are likely to be unpaid leave, lay-off, or redundancy, the majority of affected employees are likely to agree to be placed on furlough leave.

  • Confirm the employees’ new status in writing. Ideally, the employer should advise how long it expects furlough leave to continue, however, this may be difficult in the current climate. Employers may wish to put employees on furlough leave for an initial period, subject to review. We advise that a second communication is sent in April when further details have been received from the Government/HMRC.
  • Submit information to HMRC about the employees that have been furloughed and their earnings through the new online portal.
  •  Ensure that the employees do not carry out any further work while they are furloughed.

What wages should employers pay during the period of furlough leave?

  • During the period of furlough leave, the employer should pay the employee at least the lower of 80% of salary or £2,500. In each case PAYE (Income Tax) and NI is deducted before the salary is paid to the employee.
  • The HMRC guidance states that employers can choose to top up wages to 100%, but are not obliged to do so.
  • For full-time and part-time salaried employees, the employee’s actual salary, before tax, as at 28 February 2020 should be used to calculate the 80%. 
  • The employee’s wage will be subject to income tax and other deductions eg NI.
  • The HMRC guidance notes that fees, commission and bonuses should not be included. 
  • HMRC states it will issue further guidance on how to calculate claims for employers national insurance contributions and the minimum automatic employer pension enrolment contributions before CJRS goes live.
  • Where an employee’s pay varies, the employer will be able to claim for either:

    -the higher of the employee’s earnings in the same month the previous year, or

    -the employee’s average monthly earnings in the 2019/20 tax year. 

  • In the case of an employee who has been employed for less than a year, the employer will be able to claim for an average of the employee’s monthly earnings since he or she started work. 
  • 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.
  • 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 be below the applicable rate of 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 National Minimum wage from April 2020 is £8.72 for those aged 25 and over.

What happens if an employee is on Statutory Sick Pay?

Employees who are on sick leave or self-isolating should get statutory sick pay but can be furloughed after this time. We think therefore that an employee on contractual sick pay could also be placed on furlough leave when their fit note return to work date is reached.

Employees who are shielding in line with Public Health Guidance can be placed in the coronavirus Job Retention Scheme.

What should I say to employees and what should I ask them to sign?

The Guidance recommends that employers discuss furloughing with their staff and make any changes to the employment contract by agreement

We advise that the template letter above, that you can download, is the first letter to send to send to staff. 

Accordingly this letter records the date when the first communication to furlough was given to the staff. If the employer is planning to reduce the salary and any benefits related to salary (eg pension) to the 80% level, then under employment law this is an unlawful deduction from wages for the 20% of salary and benefits, and could be constructive (unfair dismissal). 

It is therefore important to meet/speak with the employee to explain what the employer is proposing to do. In effect this is consultation with them.

Please note that this first letter assumes that March salary and benefits will be paid in full.

If this is not the case then please speak with us as a more detailed letter will be needed explaining what is happening.

Employers should then write a second letter to employees seeking their agreement, showing the exact changes to their salary and other benefits and confirming that they have been furloughed and keep a record of this communication.

This second letter would be counter-signed by the employee and it is safest to get the second letter counter-signed even if there has been agreement by email. Under employment law it is important to have a counter-signed letter evidencing the change. If the employer is maintaining 100% of salary and benefits and just designating the employee as a furloughed worker a different letter will be sent.

It is important to maintain good communication with employees and be available to speak as needed. 

You should expect questions from your teams about this and we advise using these to produce your own Q&A to help them.

Are employers obliged to top up the remaining 20%?

The guidance for employees states that ‘your employer could choose to fund the differences between this payment and your salary, but does not have to’.

Withholding 20% of an employee’s salary will, however, amount to breach of contract and unlawful deduction of wages, unless the employee gives their consent. It is expected that the majority of employees will consent since furlough leave is a better alternative than unpaid leave, lay-off, or redundancy.

What happens to pension, holiday and other benefits?

As noted above each employer will have different benefit arrangements we suggest writing separately about the benefits arrangements once the employee has been notified that they have been furloughed.

It is likely that the basic 20 days and 8 public holidays (5.6 weeks) Working Time Regulations statutory holiday will continue to accrue over the furlough leave period, and employers will need to pay this (top it up) if they are only planning to pay the 80% of salary provided by the Government grant.

Can an employee request their employer puts them onto furlough leave?

Yes, an employee can request this, but the employer does not have to agree.

It is the employer’s decision which employees to place on furlough leave, if any. It seems that it is also the employer’s decision whether to place employees on furlough leave, or make them redundant.

Potentially redundant employees do not have a right to require their employer to place them on furlough leave as an alternative to redundancy. However, it is hoped that many employers will see the new scheme as preferable to business closure and making redundancies.

How do I choose which employees are placed on furlough leave and which are not?

Employers will make a commercial judgment about which critical business functions will need to carry on (e.g. Board or senior management oversight, IT support teams, finance teams, HR, legal, facilities management/security etc). Choosing who needs to be placed on furlough leave, and who must continue to work may prove a challenging task for some employers. 

This is especially difficult if you intend to pay staff on furlough leave their full pay, while other staff are being asked to work as normal for their pay. Staff who were delivering services on-site, are likely to be natural candidates for furlough leave.

The starting point is to consider business needs as stated above. Keep records of why that decision was made showing which roles were critical to the business functioning during the coming three months. 

The HMRC guidance states that equality and discrimination laws continue to apply to the selection process for employees to go on furlough leave. Take care to to avoid direct or indirect discrimination in the selection process. Make contact if you need help or have queries on this.

Where an employer must select between staff doing identical business critical roles, the first step is to ask for volunteers to remain working, or use a random selection policy for large teams. 

For clients we are currently advising with employees who are no longer needed to deliver a service on site (e.g restaurants, leisure facilities, bars) as the site is shut, these clients have asked for volunteers to be placed into the Coronavirus Job Retention Scheme. They have received very positive response and large numbers of workers accepting the re-designation in order to preserve their employment.

For the functions which are critical for the business (referred to above) employers could consider having enough staff available if a team member should go sick or have access to temporary worker support from home where possible so that critical function can continue.

What happens if the employer is planning to furlough 20 or more staff?

This letter is designed where less than 20 staff are employed by one legal entity at one establishment are to be included in the CJRS. 

If there are more than 20 staff and the employer would have to consider redundancies if the employees did not accept the furlough leave at 80% salary then the collective consultation paragraph in this letter needs to be included.

The Guidance makes specific reference to these risks and the need to take overall legal advice.

What happens to employees who have been made redundant, can they be furloughed and be in CJRS?

Employees who have been made redundant since 28 February can be furloughed if they are rehired.

What happens to employees hired after 28 February 2020?

Employees hired after 28th February are not eligible to join CJRS.

What is the minimum time that an employee can be furloughed?

3 weeks.

Can an employee volunteer or do training work during furlough leave?

A furloughed employee can volunteer as eg an NHS volunteer, as long as he/she does not provide services or generate revenue for the organisation.

If an employee is required to complete online training courses whilst they are on furlough leave then they must be paid at least the National Living Wage/National Minimum Wage for the time spent training even if this is more than 80% of their salary which will be subsidised by CJRS.

What happens to an employee who is on maternity leave, contractual adoption pay, maternity pay or shared parental pay?

The normal rules apply and they are entitled to claim the usual statutory pay or allowances.

For example an employee who qualifies for statutory maternity pay will still be eligible for 90% of their average weekly earnings in the first six weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower).The statutory flat rate is currently hundred and £148.68 a week, rising £151.20 a week from April 2020.

If the employer offers enhanced (earnings -related) contractual pay to women on maternity leave this is included as wage costs and can be claimed through CJRS.

The same principle applies to contractual adoption, paternity or shared parental pay.

What information does an employer need to claim under CJRS?

To claim an employer will need:

  1. the ePAYE reference number
  2. the number of employees being furloughed
  3. the claim (start and end date)
  4. the amount claimed (per the minimum length of furloughing of three weeks)
  5. the employer’s bank account number and sort code
  6. employers contact name
  7. employers contact phone number

Employers will need to calculate the amount they are claiming from the Government. HMRC will retain the right to audit retrospectively all aspects of an employer’s claim.

How frequently can an employer submit a claim?

An employer can only submit one claim every three weeks.

Can an employer backdate the claim to 1 March 2020?

The Guidance says yes if applicable. For cash flow planning we suggest being prudent and waiting until the CJRS portal is active to see exactly what statement/information needs to be provided to HMRC in order to verify the date of the furlough leave.

What happens when CJRS ends?

Employees that have been on furlough leave have the same rights as they did previously. Returning employees will still have their usual rights to statutory sick pay, maternity rights, other parental rights and rights against unfair dismissal and suffering discrimination.

What happens if the business can no longer receive back all employees when their furlough leave ends?

Employers will need to make a decision, depending on the business situation at that time, whether all employees can return to their duties.

If the business is not in a situation to receive employees back when their period of furlough leave ends, it will be necessary to consider termination of employment through a fair and reasonable redundancy process.

It is not yet clear whether the furlough leave scheme will allow people to alternate periods of work, with periods of furlough leave. If this is the case, obviously the flexibility will help employers and employees alike.

Please contact us by email or phone, number below, if you need advice or you want to discuss what to do next. We are here to help.

For more information or queries about issues discussed in this article, please contact by email.

To speak directly with Richard or any other of The Legal Partners team of specialist business and HR lawyers based at our Richmond UK office, or our partner lawyers in Singapore or Guanzhou, please call +44 203 755 5288

This article explains the main legal issues and common situations to consider. It is not a substitute for legal advice. Please get in contact to discuss your particular issue or queries.