Employment Law Update: Coronavirus Job Retention Scheme

The information contained in this article is correct as at 17th April 2020.


The Coronavirus Job Retention Scheme was announced by the Government on 20 March 2020 in response to severe economic concerns arising from the COVID-19 pandemic and largely due to the fact that significant redundancies were expected in the immediate aftermath of the outbreak. Justin Kelly, Head of Corporate and Commercial Law and Employment Law Specialist answers commonly asked questions on furlough leave.

Which Employers are covered?

Under the furlough scheme, UK employers, regardless of size or sector, can claim a “grant” (not a loan) from HMRC to cover 80% of the wages costs of employees who are not working (see later) but who are kept on the payroll of up to £2,500 a calendar month for each employee or PAYE worker, plus the associated employer national insurance contributions on that wage.

What does “Furlough” mean?

The term “furloughed” was to most people (even employment lawyers) unknown until last month but is now recognised by almost everyone in the country. In general terms, for employees it means that they have been put on a period of leave during which they are not required to (and in fact are not permitted to) work for the employer that has placed them on furlough leave.

When did the scheme start and when will it end?

 The scheme is backdated to 1 March 2020 and open for at least three months, i.e. to the 31st May 2020. The Government have said that it will be extended if necessary. However, recent reports suggest that the amount being claimed by employers is in the region of three times more than the government anticipated and so it remains to be seen if the government do (or can afford to) extend and it may be that non-renewal is tied in to and explained by a reduction in lock down restrictions.

When can employers claim?

HMRC are reported to be working to set up the new system of reimbursement, and, it has recently been reported that the claims portal should open on the 20th April with the first payments being paid by the 30th April. However, it seems highly likely that given the number of claims being anticipated that the system may experience problems and that delays will follow.

Which employees are covered by the scheme?

The scheme covers the following whether they are employees or workers provided that they were employed/engaged by a UK Company and on that company’s PAYE payroll on or before 19th March 2020:

  • Employees on agency contracts.
  • Employees on flexible or zero-hour contracts.
  • Apprentices (provided that they are paid at least the applicable apprenticeship national minimum wage rate for all the time they spend training).

What if the employee has more than one job?

Where an employee has more than one job, their employments will be treated separately for the purposes of furlough pay; the reimbursement cap applies to each employer individually.

Is anyone else covered by the scheme?

Furlough pay provided by employers can be reclaimed for the following (provided they are paid via PAYE and have been since 28/2/2020):

  • Office holders, e.g. company directors (subject to a number of requirements).
  • Salaried members of limited liability partnerships (LLP) provided they are paid via PAYE, e.g. salaried partners.

What about employees on reduced hours?

Many employers had acted quickly in response to the reduced workloads experienced as a result of COVID-19 and had placed employees onto reduced hours (and of course pay).

Employers will not be able to seek repayment of wage costs for employees who are still working on reduced hours. Whilst the government guidance remains in a number of respects unclear, it is clear that employees on furlough must not to any work at all for their employers.

We would anticipate that this may be one area of the scheme that the government may reconsider particularly when the lockdown and social distancing guidelines are relaxed because at that point, employers may have more work for their employees but not enough to afford full time pay and some form of grant for topping up pay would seem sensible to avoid further redundancies which is of course the aim of the job retention scheme. However, there has been no suggestion to date that the scheme will be adjusted in that regard.

What about employees on long term sick leave?

As these employees would not be working in any event, such employees who are on sick leave or self-isolating should receive statutory sick pay (SSP). Once their sick notes expire and assuming they are at that point ready and willing to work then they can be furloughed.

Measures required to place employees on furlough

If you decide to place employees on furlough leave and pay them 100% (i.e. top up from the 80% you can reclaim) then it seems highly unlikely that you would need employees consent to do this (and in any event they are unlikely to complain and will suffer no loss). However, if you are asking staff to agree to be paid the 80% of pay (subject to the cap at £2500) then this will amount to a variation of their terms (as to pay) and so their agreement will be needed. Our experience is that the vast majority of employees will agree to the reduction, not least given that the alternative may well be large scale job losses.

Steps to be taken:

  1. Decide which employees to designate as furloughed employees. Be careful not to discriminate – the decision will usually be based on needs of the business.
  2. Notify furloughed employees of the intended change and seek to agree the change with the furloughed employees.
  3. Confirm the employees’ amended terms and obtain their agreement to these in writing. This is an eligibility requirement for accessing the subsidy, and a record must be kept of this correspondence for five years. The government direction to HMRC has confirmed that e-mail will satisfy the need for agreement “in writing”.

Where possible, ask the employees to enter into a “furlough” agreement. Our team can provide agreements tailored to your specific circumstances.

Ultimately, an employer would then submit information to HMRC about the employees that have been furloughed through the new proposed online portal (see above) which is expected to be open by the 20th April with first payments being made by the end of April (although as mentioned above it would seem optimistic to expect many employers to receive monies by the end of April).

Remember: employees must not carry out any further work for the employer whilst on furlough leave (except voluntary work and in some cases by obtaining other additional employment to top up their pay).

Can you rotate employees – take on and off furlough?

In short – no, at least not outside of 3 week blocks.  This seems unfair to some staff who will be working and only receiving 20% more pay than employees on furlough leave. However, remember that employees must be furloughed for a minimum period of three weeks.

Once staff have been furloughed for 3 weeks you can then rotate and perhaps bring in staff who have been on furlough and furlough those that have continued working.

Can payment of wages to employees on furlough be deferred (e.g. to assist with cash-flow)?

Inevitably some businesses (e.g. closed restaurants and bars) may be unable to pay employees on the usual salary date. If this is the case the employer should seek to reach agreement with the employees that payment of their salaries will be deferred until reimbursement is received via the HMRC Portal. Whilst this is unlikely to be popular with employees who have mortgages and bills to pay, it would be hoped that they would see this as better than the alternatives e.g. redundancy. It would be a good idea for employers to discuss any assistance that might be open to the employees, for example the possibility of a mortgage repayment holidays

Does annual leave (holiday) continue to accrue holiday during any period of furlough?

In short the answer is yes, at least in relation to the statutory 5.6 weeks’ leave under the Working Time Regulations 1998.

In respect of any “contractual leave” over and above the 5.6 weeks it will be a matter for the employer and employee to negotiate any change in contractual terms so that any annual leave over and above statutory leave does not accrue

Can an employee forward unused annual leave to next year?

Yes they can, to a certain extent anyway. Legislation relaxing the restriction on carrying over the statutory four weeks’ leave derived from the Working Time Directive permit the carry-over of any untaken leave where it was not reasonably practicable to take it in the leave year and this was as a result of the effects of COVID-19.

However, as it seems highly unlikely the lockdown (or indeed the Job Retention scheme) will be extended into (or much beyond) the summer. It seems likely that most employees (at least where their holiday year follows a calendar year) will have time to take annual leave later in the year. Indeed, employers can tell employees when to take holiday (subject to certain notice requirements) and so to avoid excessive holiday leave in 2021 you can ask your employees to take all holidays in the current holiday year.

Can an employee take holiday whilst furloughed (and what about bank holidays)?

At the time of preparing this Q and A (17th April), unhelpfully the position is not clear and it is hoped that government will issue updated/amended guidance on this soon.

The difficulty of course for employers is that if they permit employees to take such leave, HMRC could then say that there was a “break” in the minimum 3 week furlough requirement and refuse to reimburse for any of the period.

At present this seems unlikely and we can only summarise what we understand as follows:-

  • The government updated guidance issued Saturday 4th April still did not mention whether holiday can be taken whilst furloughed. The Government direction to HMRC issued in the last few days still doesn’t address the point.
  • Until around 1 week ago ACAS guidance said taking holiday was inconsistent with furlough. Last week that guidance changed and ACAS now says it is not inconsistent but the holiday days would need to be topped up to 100% however ACAS guidance is not “law”.
  • HMRC responded to a tweet (8/4) on the issue and suggested holiday could be taken whilst on furlough but again that isn’t supported (yet) by any government guidance.

This will present difficulties for bank holidays given the period we are presently in. At this stage a cautious approach may be preferable in not paying employees for the days they would not have worked (i.e. bank holidays) or paying holiday pay but write to all employees and say that this is to safeguard the position on furlough and that if/when the government confirm holidays can be taken whilst on furlough the staff will be paid in next payroll run for those days and the days will be deducted then from their holiday entitlement. 

an image of Justin Kelly, a Butcher & Barlow LLP employee

Justin Kelly


We appreciate that there may be a number of questions that are not covered in this brief Q and A given this is a new/novel scheme and will impact on many aspects of established employment law. If you have any questions please contact Justin Kelly – jkelly@butcher-barlow.co.uk






Please note that the information and any commentary on the law contained in this article is provided free of charge for guidance only. Whilst all  reasonable effort is made to make the information or views accurate at the time of preparing  no responsibility for its accuracy or for any consequences of relying on it, is assumed by the author or by Butcher and Barlow LLP.

The information does not, and is not intended to, amount to legal advice to any person in any specific case and you are strongly advised to obtain specific, legal advice from a suitably qualified lawyer about your case and not to rely on the information or comments set out in this article.