COVID-19 EXPERT LEGAL INSIGHTS

The Coronavirus Job Retention Scheme:
FAQs for UK Employers

Last updated: 21 May 2020

The situation is moving very rapidly. We will seek to update these FAQs as further developments occur and as the Government produces any new regulations and further guidance or new legislation.

Current Government guidance is available on their website and ACAS guidance can be found at hereIn addition, on 15 April 2020 the Treasury issued a Direction to HMRC, which forms the legislative underpinning for the Scheme and can be found here. However, there remain many questions and uncertainties. Here, we do our best to help by filling in as many gaps as possible.


The questions and answers in these pages are for general information only and must not be used as a substitute for legal advice. You should always take legal advice which is tailored to your specific circumstances.

What does “furlough” mean and what's it for?

Furlough” basically means temporary leave of absence. The underlying purpose of the Coronavirus Job Retention Scheme (CJRS) is to incentivise employers to retain employees on paid temporary leave, rather than make them redundant, in order to protect the UK economy. Through HMRC, the government is offering to subsidise the earnings of furloughed employees (up to 80% of earnings, capped at £2,500 per month per employee).

For the purpose of the CJRS, an employee is only treated as being on furlough if:

  • the employee has been instructed by the employer in writing (and the employee has agreed) to cease all work in relation to their employment – including with any connected employers;
  • there is a written record of the employee’s agreement (which should be kept for 5 years) – although according to the HMRC Guidance, the employee’s agreement itself does not have to be in writing.
  • the period for which the employee has ceased (or will have ceased) all work for the employer is 21 calendar days or more; and
  • the instruction is given by reason of circumstances arising as a result of coronavirus or coronavirus disease.

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Which employers are eligible to apply?

The scheme is open to all UK employers (small, large, charitable, non-profit and for-profit) which were operating a PAYE payroll scheme on or before 19 March 2020. In principle, all employers are eligible to claim under the scheme. Although the guidance refers to “employers whose operations have been severely affected by coronavirus” it goes on to say that the government recognises that different businesses will face different impacts from coronavirus.

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What if the company has gone or is going into administration?

The administrator is potentially able to access the CJRS in the same way as other employers. The guidance adds that administrators are only expected to access the scheme if there is a “reasonable likelihood of rehiring the workers”, for example on future sale of the business.

Putting employees on furlough and claiming in respect of them under the CJRS will involve adopting the contracts of employment of those employees. Furlough agreements between the company (in administration) and the employees should reflect that.

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What about the public sector or organisations with employment costs funded through the public sector?

According to government guidance, where public or private sector employers receive public funding for employment costs, and that funding is continuing, employers are expected not to furlough employees. This is because the majority of public sector employees are continuing to provide essential public services and/or contributing to the response to the coronavirus outbreak.

However, where organisations are not primarily funded by government, and staff cannot be redeployed to assist with the coronavirus response, then the scheme may be applicable “in a small number of cases… for some staff”. Precisely where (and how) this line will be drawn remains to be seen.

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Which employees can be included?

Furloughed employees must have been on your PAYE payroll (and notified to HMRC on a RTI (Real Time Information) submission) on or before 19 March 2020. They can be on any type of contract, including:

  • full-time employees
  • part-time employees
  • workers on agency contracts (note: only if they are on your PAYE payroll)
  • employees on flexible, variable hours or zero-hour contracts
  • apprentices (note: they can receive training while furloughed, but must be paid at least the Apprenticeship Minimum Wage/National Living Wage/National Minimum Wage (as applicable) for any time they spend training)
  • office holders (eg company directors and LLP members) if they are paid through PAYE for the income they receive for holding that office. In such cases the furlough arrangements should be adopted formally as a decision of the company or LLP
  • salaried company directors – again, the furlough arrangements should be formally adopted by the company
  • salaried LLP members (note that this may require a formal variation of the terms of the LLP agreement)
  • workers paid through PAYE who are not employees, but who provide a personal service (other than to a customer or client in the course of a business or professional practice) – so-called “Limb (b) workers”.

    If an individual has more than one PAYE job then each job is treated separately, so the employee could for example be furloughed by one employer but continue working for their other employer. They could also be furloughed in both and the financial cap applies to each employer individually. An employee can even start a new 2nd job during their furlough leave (if permitted by their employment contract, which might require their employer’s consent).

    You can make claims for employees who were made redundant (or otherwise stopped working) for you on or after 28 February 2020, but who are then re-employed and put on furlough. This applies even if they are not re-employed until after 19 March 2020.

    However, any re-employed employees must have been on your payroll as at 28 February and notified to HMRC on an RTI submission on or before 28 February 2020.

    As well as agreeing to re-employ any such employees and put them on furlough, it may also be necessary to agree to reverse any redundancy payments, payments in lieu of notice and/or severance payments already made.

    If an employee has had multiple employers over the past year, has only worked for one of them at any one time, and is being furloughed by their current employer, their former employer(s) should not re-employ them, put them on furlough and claim for their wages through the scheme. You should therefore ask any former employees if they are being employed and/or furloughed by any other employers before agreeing to re-employ them.

    To be eligible, while on furlough, employees must not undertake any work for you or any connected employer. This includes providing services and/or generating revenue. It excludes training activities directly relevant to an employee’s employment agreed between you and the employee before being undertaken. You should therefore ensure that any training activities undertaken by furloughed employees is agreed with the employees in advance and documented in writing.

    New joiners since 19 March 2020 are not eligible, unless they are transferred in under TUPE. If a TUPE transfer takes place after 19 March, the new employer will potentially be eligible to claim under the Scheme for some or all of the transferring employees. This applies even if the new employer did not have a qualifying PAYE scheme on 19 March, provided that the employees were included in a qualifying PAYE scheme of the former employer immediately before the transfer.

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What about employees on unpaid leave, sick leave, self-isolating or shielding?

If an employee started unpaid leave after 28 February 2020, they are eligible to be furloughed under the CJRS. However, employees who started unpaid leave on or before that date (e.g. on an unpaid sabbatical) cannot be furloughed until the date it was agreed they would return.

Employees on sick leave or self-isolating should be eligible for Statutory Sick Pay (and may also be eligible for additional contractual sick pay). They should not be treated as furloughed under the scheme when they are on sick leave or are self-isolating but may then be furloughed for any period after they would otherwise have returned to work.

Employees who are shielding in line with public health guidance (because they have a specific condition which makes them clinically extremely vulnerable to COVID-19) can be placed on furlough. This also applies to employees who need to stay home with someone advised to shield. Although the HMRC guidance states that this applies if the employee is unable to work from home and you would otherwise have to make them redundant, we do not think there is any additional need in such cases to prove the employee would otherwise be redundant, when this is not a general requirement for CJRS claims.

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How do we apply?

The Government provides access to the scheme through an online portal. You can only submit one claim every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated to any date from 1 March onwards, but only if the employees concerned have not been carrying out any work for you in the interim period.                                                             

You will need to calculate the amount you are claiming (see What can we claim? below). HMRC will retain the right to retrospectively audit all aspects of your claim.

To make a claim, you will need:

  • to be registered for PAYE online
  • the Government Gateway user ID and password you got when you registered for PAYE online
  • your UK bank account number and sort code
  • the billing address on your bank account
  • your employer PAYE scheme reference number
  • the number of employees being furloughed
  • each employee’s National Insurance number
  • each employee’s payroll or employee number (optional)
  • the start date and end date of the claim
  • the full amount you’re claiming for including employer National Insurance contributions and employer minimum pension contributions
  • your phone number
  • contact name.

You will also need to provide either:                                        

  • the employer’s name
  • your Corporation Tax unique taxpayer reference
  • your Self Assessment unique taxpayer reference; or
  • your company registration number.

If you have more than one qualifying PAYE scheme, you must make a separate claim in relation to each scheme, and the amount of any payment under the CJRS will be calculated separately in relation to each PAYE scheme.

If you have fewer than 100 employees to be furloughed, you should enter details for each employee individually into the new system. For 100 or more employees, you should upload the information to the CJRS via a file, rather than inputting the information directly.

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Can we contractually require employees to be furloughed?

In short, for the purposes of CJRS, no.

HMRC’s guidance states that to be eligible for the subsidy an employee is only treated as being on furlough if the employee has been instructed by the employer (and the employee has agreed with the employer) to cease all work in relation to their employment.

You should keep a written record of the employee’s agreement for 5 years – although according to HMRC’s Guidance, the employee’s agreement itself does not have to be in writing.

Trying to impose furlough for the purposes of the CJRS without employees’ agreement is not advisable. In the absence of a written record of genuine agreement, claims are likely to fail or to be subject to claims for repayment by HMRC.

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What can we claim?

For those paid regular wages, 80% of each furloughed employee’s regular monthly wage, up to a cap of £2,500 per employee, based on wages for the last pay period prior to 19 March 2020.

“Regular wages” must disregard any performance-related or discretionary bonus, any conditional payments (for example where a threshold must be met) and any non-financial benefits.

In addition, you can claim the associated Employer National Insurance Contributions and 3% minimum automatic enrolment employer pension contributions payable on the subsidised wages paid to furloughed employees.

Employer National Insurance Contributions and pension contributions on any additional top-up salary (i.e. the top 20% or any amount over £30,000 PA) will not be funded through the scheme. Nor will any voluntary pension contributions above the minimum mandatory employer contribution of 3%.

If, based on previous guidance, you have calculated your claim based on salaries as at 28 February 2020 (and this differs from salaries in the last pay period prior to 19 March 2020) you can choose to still use this calculation for your first claim.

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What about employees whose pay varies?

For employees who have been employed for a full twelve months prior to the claim, you can claim (based on the same 80% calculation up to a cap of £2,500) in respect of the higher of either:

  • the same month’s earnings from the previous year
  • average monthly earnings from the 2019-20 tax year

For employees who have been employed for less than a year, you can claim for an average of their monthly earnings since they started work.

If the employee only started in February 2020, you can claim based on a pro-rata calculation of their earnings so far.

Previously there was some uncertainty surrounding commission and variable paid employees. The latest guidance says that employers can calculate their claims with reference to any regular payments they are obliged to pay. This includes wages, past overtime and compulsory commission payments. However, any discretionary bonus or commission payments, including tips and non-cash benefits, should be excluded.

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Will income tax, NICs and pensions contributions be affected?

Wages paid to furloughed employees will be subject to Income Tax, National Insurance contributions and (if applicable) pensions deductions as usual.

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Do we have to pay furloughed employees the balance of their normal earnings (above 80% and/or above £2,500 per month)?

Not under the scheme itself. However, if you wish to pay furloughed employees less than their full contractual earnings then the safest course of action will be to reach agreement with them, otherwise there will be a risk of breach of contract/deduction from wages and/or unfair dismissal claims. The government guidance notes that employers should discuss with their staff and make any changes to the employment contract by agreement.

In practice, given the risks of redundancy and the lack of alternative employment across most sectors, many employees will consent to have their earnings reduced. However, some may not.

Contracts of employment cannot usually be varied – even temporarily for 3 months – without employee consent. It may be found to be “fair” (for unfair dismissal purposes) to dismiss those employees who refuse to agree to a pay cut provided the consultation process is fair, particularly if you offer to re-engage dismissed employees on the temporarily reduced wages available under the scheme. However, this cannot be guaranteed and could depend on the balance of a number of factors, including the financial impact on the business and the impact on the employee. For example, if your business has very substantial financial reserves, you are less likely to be able to show that requiring employees to accept reductions in wages was fair.

The fairness of the process will also be highly relevant. You should seek to consult with employees to the extent that this is practicable. Where 20 or more employees at one establishment are involved, collective consultation rules may also apply, requiring you to inform and consult with recognised trade unions or employee representatives.

See also: How do we select which employees to furlough? below.

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What if 80% of pay is less than the National Living Wage/National Minimum Wage?

Employees are only entitled to the National Living Wage/National Minimum Wage for the hours they are working. Furloughed employees will not be working. So, you could potentially reduce their pay to 80% even if based on their normal hours that would bring it below the National Living Wage/National Minimum Wage. However, you should bear in mind that these employees are likely to very vulnerable economically.

If employees are required to undertake training (such as online training) while on furlough, they must be paid at least the National Living Wage/National Minimum Wage for their training time.

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When does the scheme start and how long will it last?

The scheme was backdated to 1 March 2020 and the Chancellor has announced that it will continue until the end of October 2020. From 1 August, new flexibility will be introduced “to get employees back to work” but it is not currently clear how this will work.

Although the furloughed workers will continue to receive at least 80% of their salaries, up to £2,500 per month, from 1 August employers will be expected to pay a percentage towards the furlough salaries. Again, the details of this are not yet clear.

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How quickly is money paid to employers under the scheme?

The Government’s aim is that the majority of verified claims will be paid within 6 working days. In practice, speed of payment varies.

If your SME business needs short term cash flow support, you may be eligible for the Coronavirus Business Interruption Loan Scheme. There is also a new Large Business Loan Scheme for firms with an annual turnover of between £45 million and £500 million. Bank of England support is potentially available to the largest companies.

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Can we delay making payments to furloughed employees until we have received funds from HMRC under the scheme?

The government guidance does not address this issue and there are potential risks with regard to breach of contract and/or deductions from wages claims, but in some cases it may be possible to agree delayed payment with furloughed employees.

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What about employees currently or prospectively on maternity, paternity, shared parental or adoption leave?

The normal rules on statutory leave and pay will still apply, in parallel with the scheme. For example, employees who qualify for statutory maternity pay will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower).

The scheme does not allow you to pay any less than the relevant statutory pay (even if the relevant employees agree), but (where applicable) the amount of any additional enhanced contractual maternity (or paternity, shared parental or adoption) pay can be included in wage costs that you can claim through the scheme.

No claim under CJRS may include amounts of specified statutory benefits payable or liable to be payable in respect of an employee (whether or not a claim to the relevant benefit is actually made) during the employee’s period of furlough and the amount of the claim must be correspondingly reduced.

The specified benefits are:

  • Statutory Sick Pay
  • Statutory Maternity Pay
  • Statutory Adoption Pay
  • Statutory Paternity Pay
  • Statutory Shared Parental Pay
  • Statutory Parental Bereavement Pay

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What points should a furlough letter cover?

A non-exhaustive list is as follows:
  • Start date of the temporary furlough leave of absence (including backdating if relevant, where no work has been carried out by the employee).
  • Minimum period of 21 calendar days.
  • In cases of employees having already been made redundant (or having otherwise already ceased work), agreed withdrawal of termination of employment by reason of redundancy and, if relevant, repayment of any redundancy payments, payments in lieu of notice and/or severance payments already made.
  • Mechanism for the employer to end the furlough leave: probably a very short notice period.
  • Instruction and agreement that the employee will not be required or allowed to carry out any work for the employer (or any connected employer) during their furlough, other than pre-agreed training activities.
  • Provision for agreeing in writing and in advance any training activities to be carried out during the period of furlough.
  • Any steps to be taken to reduce the risks of employees carrying out work during the period of furlough, such as diverting work-related emails form employees’ email accounts.
  • Pay during the leave of absence, including (if relevant) agreement by the employee to accept a specified level of pay, lower than normal.
  • Provision of up-to-date contact details for the employee; agreement by the employee to remain contactable.
  • Provision for the furlough agreement to be varied unilaterally by the employer (subject to consultation with the employee) to reflect any legislation or changes to the scheme which may be introduced.
  • Acknowledgement that, subject to the terms of the furlough agreement, the express and implied terms of the contract of employment remain in force. With this in mind, you should check the contract of employment for any additional terms which may need to be temporarily varied.

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How do we select which employees to furlough?

You will need to assess your requirements for employees to carry out work of particular kinds over the coming months. In some cases, where the business essentially needs to be temporarily closed, your requirements are likely to be only for a very small skeleton team. In other cases, where substantial business is likely still to be coming in and can be conducted safely and viably, you may only wish to furlough a small proportion of your workforce.

You should seek to apply fair and reasonable selection criteria, along the lines of a redundancy exercise, although rapidly executed. The selection criteria should usually be based on retaining the skills and experience that you need to keep going, with those employees that you do not anticipate needing in the next few months being put on furlough leave.

You should seek to consult with employees to the extent that this is practicable. Where 20 or more employees at one establishment are involved, collective consultation rules may also apply, requiring you to inform and consult with recognised trade unions or employee representatives.

We are seeing many cases where non-furloughed employees are required to work from home. Whilst it would in our view be reasonable to take into account the extent to which the nature of their role means that employees may not be able to work effectively from home, there are obvious potential discrimination risks in taking into consideration whether any particular employees have caring responsibilities at home (unless such employees volunteer for furlough leave of their own accord). You should not assume, for example, that female employees with young children will be unable to work from home effectively, or that they will necessarily be the primary carers.

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Can we partially furlough employees under the scheme if we still need them to carry out some work (even from home)?

Not under the scheme for the period up to the end of July 2020. The Chancellor has announced that after the end of July, the scheme will be amended to allow greater flexibility to allow employees to get back to work (but with obligations on employers to fund a percentage of the furloughed salary). The details of the amended scheme are not yet available.

Employees furloughed under the existing scheme cannot carry out any work for you (or any connected employer) during the furlough period.

There remains some uncertainty over how strict a view HMRC are going to take and how far they may be inclined to check whether furloughed employees are carrying out any work for their employers. We believe that common sense ought to prevail if, for example, it is necessary to contact an employee on furlough leave to ask them a work-related question that only they know the answer to. However, any rogue employers who abuse the scheme by claiming back wage costs from HMRC knowing that their employees are still working for them are likely to be dealt with very firmly indeed, up to and including criminal prosecution for fraud. (Similarly, any failure by employers to pass on the full benefit of successful claims from HMRC to furloughed employees is likely to result in enforcement action.)

We would suggest that employers should consider taking steps to reduce the risks of employees carrying out work while on furlough, for example by diverting work-related emails from their email accounts and work-related calls from their mobile phones. Being able to show that you have taken such steps may prove useful in the event of later enquiries by HMRC.

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Do we have to identify all employees to be furloughed in one go or can we add more in later? Also, can we “un-furlough” employees if they are required to work for a while and then “re-furlough” them?

You can submit a maximum of one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. So, it will be possible to move employees in and out of furlough on a 3 weekly (or longer) basis. In practice this may not be an attractive option.

You should also bear in mind that substantial numbers of employees could become ill or need to self-isolate. You should take this into account with a view to ensuring that you have enough non-furloughed employees with the required skills available at any one time.

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Can employees insist on being furloughed?

No. The decision as to which employees are to be designated as furloughed under the scheme (and which are not) is for you as the employer. However, as far as possible you should seek to consult employees before making decisions of this kind. It is already clear that there is a great deal of scope for employment disputes to arise in connection with furlough leave and the pandemic.

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What about the employees we require to keep on working? Is it fair on them when their furloughed colleagues are being paid substantial amounts to do nothing?

At least arguably, the scheme is not fair from that perspective. However, non-furloughed employees will continue to receive full pay and may be heartened to some extent by the knowledge that they are considered to be essential to the employer’s business. This would tend to suggest that if (as seems likely) economic conditions remain difficult after the scheme has ended, they are less likely to be selected for redundancy.

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What about fixed term employees whose term expires during the life of the scheme?

Originally the guidance did not cover this issue. However, the purpose of the scheme is to keep people in paid employment and reduce the level of redundancies. The expiry and non-renewal of a fixed term contract amounts to a dismissal for statutory purposes. The guidance now makes clear that employees on fixed term contracts can be furloughed. Their contracts can be renewed or extended during the furlough period without breaking the terms of the scheme.

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Can furloughed employees carry out voluntary work or training?

A furloughed employee can take part in voluntary work or training, provided that any such activities do not provide services to, or generate revenue for, your organisation.

If employees are required by you to undertake training (such as online training) while on furlough, they must be paid at least the National Living Wage/National Minimum Wage during that time, even if that is more than the level of their 80% subsidised pay under the scheme.

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What about agency staff?

Under the scheme, you may furlough agency staff who are paid through your PAYE payroll, but not otherwise.Where they are employed by an agency and paid through the agency’s PAYE payroll, they may be furloughed by the agency.

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What about self-employed consultants and other independent service providers?

Assuming they are not on your PAYE payroll then the CJRS will not apply to these categories of workers, but they may be eligible to apply for support under the Coronavirus (COVID-19) Self-employment Income Support Scheme.

Workers providing personal services to your business (other than through a business or profession), who are not your employees but are paid through your PAYE payroll, may be furloughed under the CJRS.

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What about partners/LLP members in professional services and other firms?

The scheme will be based on PAYE earnings. So, it will not apply to “true” partners and LLP members who are treated as self-employed and not paid through the PAYE payroll. However, salaried partners who are paid through the PAYE payroll will be eligible.

Self-employed partners with taxable profits below the £50,000 annual threshold may be eligible to apply for support under the Coronavirus (COVID-19) Self-employment Income Support Scheme.

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What about director-shareholders who are paid partly or mainly in dividends?

Directors can potentially be placed on furlough but any claim must be based on their PAYE earnings: it will not apply to dividend payments.

The HMRC guidance states that during furlough leave, company directors will be entitled to carry out their duties where reasonably required to fulfil the statutory obligations they owe to their company, provided they do no more than reasonably necessary for that purpose.

The Treasury Direction frames the exception even more narrowly, as only applying where the work is “to fulfil a duty or other obligation arising by or under an Act of Parliament relating to the filing of company accounts or provision of other information relating to the administration of the director’s company”.

Company directors on furlough should be very careful not to cross the line by carrying on their normal work. In practice furlough might only be a realistic option for directors in certain companies whose business simply cannot continue during the crisis.

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In the light of the scheme, can we still make redundancies?

Potentially yes. You may take the view that, even after taking into account the overall level of Government support, your business (or part of it) is no longer viable with the current numbers of employees.

You may consider making redundant those employees who have no work to do and who refuse to agree to being furloughed and/or who refuse to accept a reduction in pay. See also: Do we have to pay furloughed employees the balance of their normal earnings (above 80% and/or above £2,500 per month)? and How do we select which employees to furlough?.

However, you should think very carefully before implementing any redundancies in the current climate. From a legal perspective, the Courts and Tribunals do not usually scrutinise an employer’s underlying business reasons for redundancies. However, in view of the Government support available, the fairness of the way in which you implement any redundancies is likely to be very closely examined. In addition, the level of any compensation awarded for unfair dismissal (in circumstances where the employment market has collapsed) is likely to be higher than usual.

Apart from any legal considerations, there are obvious morale and reputational risks associated with making redundancies in the current circumstances.

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Will furloughed employees be gaining continuous service (for the purposes of statutory rights such as unfair dismissal and redundancy payments) while on furlough?

Yes. The rules relating to “temporary cessations of work” will not apply because the contract of employment will remain in place throughout the furlough period. Employees will therefore remain in continuous service for statutory purposes if they are placed on furlough leave.

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Will furloughed employees continue to accrue annual leave, and can they take, or be required to take, their annual leave while on furlough despite the impossibility of a normal holiday? 

Furloughed employees continue to accrue leave as per their employment contract.

You can agree with employees to vary holiday entitlement as part of the furlough agreement. However this cannot go below the statutory entitlement of 5.6 weeks per annum.

Taking the HMRC guidance into account, the position on annual leave and pay for furloughed employees can be summarised as follows:

  • Employees can take holiday whilst on furlough, without breaking the period of furlough. To do so, they should give you notice of their holidays in the usual way.
  • For periods of holiday while on furlough, employees are entitled to full holiday pay based on 100% of their usual pay, even if they have agreed to receive reduced pay while on furlough.
  • You have the ability to restrict when holiday can be taken if there is a business need to do so.
  • You can require employees to take holiday while on furlough and the usual notice requirements will still apply.
  • However, before doing so you should consider whether in reality, in view of restrictions, such as the need to socially distance or self-isolate, they would be able to rest, relax and enjoy leisure time.
  • Where a furloughed employee would have usually worked on a bank holiday, their furlough will be unaffected by the bank holiday.
  • Where, under the contract, the employee would usually have taken the bank holiday as annual leave, there are two options:
    • the employee takes the bank holiday as annual leave and is paid full holiday pay for that day; or
    • by agreement, the day’s holiday is deferred until a later date, but the employee still receives their full holiday entitlement (including full holiday pay) on a deferred basis.

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Are there additional issues to consider if I want to furlough an employee who is sponsored under Tier 2 of the immigration system?

Please see our UK Immigration FAQs. These also cover the temporary provisions currently in force on right to work checks. 

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