On Friday 20th March 2020 the Chancellor Rishi Sunak announced a welcome measure for employers who are unable to pay staff. 

In order to avoid redundancies and encourage employers to keep staff on the payroll the government will pay 80% of wages (up to a maximum of £2,500 per month) for employees who are temporarily laid off with no work. 

Many employers and business owners I had been speaking to prior to the announcement had been working hard to find ways to keep as many staff as possible in employment and pay during this time. No one wanted to make redundancies or put staff on unpaid leave and therefore the news that businesses can keep staff on the books and in pay up, to 80% (100% if employers want and are able to pay the difference) was a huge relief. 

Following the original announcement came numerous questions about how the scheme would work in practice and what would happen in a variety of scenarios. 

Since the original fairly short guidance was published there have been several updates and the latest was published on the 15th April 2020.

Whilst there are some unresolved issues that us employment lawyers are still grappling with I am not sure that there will be any further revision to the guidance given the fact that the portal to make claims will open on Monday 20th April (all being well!). If there are changes I will of course add the details and update this page.

If you have any other questions please let me know: alison@realemploymentlawadvice.co.uk or for a free initial telephone call contact the office on 01983 897003, 023 8098 2006, 01722 653001 or 020 3470 0007.

Key points to note about the scheme

New qualifying date

The qualifying date for employment for the furlough scheme has been changed from the 28th February 2020 to the 19th March 2020. This means that anyone employed on or before the 19th March 2020 and which were notified to HMRC on an RT1 submission on or before the 19th March 2020 are now eligible for the scheme.

The original date of the 28th February 2020 was set to prevent fraudulent claims, but after many stories emerged of people who fell into this ‘limbo’ period having started work between 28th February – 20th March (when the scheme was announced), the government have extended it.

If you have someone who falls into this timescale of starting work for you and you have terminated employment or put on unpaid leave then you can now re-employ them and furlough them and make a claim for 80% of their pay (as long as you had completed the RT1 for HMRC before the 19th March 2020).

When I first read this change I thought that it would be helpful for a lot of people, however having spoken to several business owners today it seems that most file their RT1 around the same time as processing payroll, which is, for the majority, at the end of the month. Therefore many employees will miss out on the furlough scheme because of the requirement to have filed the RT1 on or before the 19th March 2020.

Directors can be furloughed

A director can be furloughed but must not undertake any work, unless it is to fulfil a statutory obligation.

The guidance states:

‘Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, i.e. they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

This also applies to salaried individuals who are directors of their own personal service company (PSC).’

I recommend that sole Director companies proceed with caution if furloughing the Director as you will need to ensure that no work is undertaken in the furlough period, save for legal duties, which are limited.

Put the details in writing to the Employee

The guidance states that in order to be eligible for the grant employers must confirm in writing to their employee that they have been furloughed. You must keep a record of this for 5 years.

Annual Leave

The relationship between annual leave and furlough has not been clarified and there is no detail in the guidance about it.

I attended a webinar on Wednesday 15th April 2020 run by HMRC about  the scheme and in the questions box there were numerous questions about annual leave which were answered by HMRC staff with the same response ‘you will need to check this with ACAS’.

HMRC tweeted on their official twitter account last week that employees can take annual leave during the furlough period and it would not break furlough. This therefore seems fairly straightforward, if an employee requests annual leave during the furlough period they can take it and you would be required to pay 100% of pay for that annual leave period. The ACAS guidance is consistent with this.

The main issue that has arisen is whether employers can stipulate that annual leave must be taken during the furlough period. Unfortunately my fellow employment lawyers and barristers are divided on the legal implications of annual leave and furlough and therefore I fear the issue will only be resolved in the future when someone makes a claim and it makes its way through the Tribunals and Courts. Which of course will be too late for many employers!

In light of this uncertainty I recommend that you discuss your situation and seek specific advice before taking action. This way you can weigh up:

  1. the commercial/financial risks,
  2. the potential legal risks, and
  3.  implications for employee relations

of any action that you wish to take.

What you need to make your claim when the portal opens

The details you will need have also been expanded in the latest guidance and it now states:

To claim, you will need:

1. your employer PAYE reference number
2. the number of employees being furloughed
3. National Insurance Numbers for the furloughed employees
4. Names of the furloughed employees
5. Payroll/employee number for the furloughed employees (optional)
6. your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
7. the claim period (start and end date)
8. amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
9. your bank account number and sort code
10. your contact name
11. your phone number
12. You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.

If you have fewer than 100 furloughed staff you will be asked to enter details of each employee you are claiming for directly into the system – this will include their name, National Insurance number, claim period and claim amount, and payroll/employee number (optional).

If you have 100 or more furloughed staff you will be asked to upload a file with the information rather than input it directly into the system. We will accept the following file types: .xls .xlsx .csv .ods

The file should include the following information for each furloughed employee: name, National Insurance number, claim period and claim amount, payroll/employee number (optional).

You should retain all records and calculations in respect of your claims.

You will need to keep all records, including the letters and communications with staff for 5 years.

Frequently Asked Questions

1. Will the payments be calculated on gross or net pay?

You will pay employees in the normal way through the payroll and then you will recover up to 80% of usual monthly wage costs from HMRC (capped at £2,500 per month).

In addition employers can claim Employer NI contributions and minimum automatic enrolment pension contributions.

So if you decide that you can pay staff the additional 20% then you pay as normal and recover 80% from HMRC.

2. Will you be able to furlough some employees now and some later on?

Yes, you do not have to furlough everyone and you can keep some employees on to undertake work.

If things change and you need to furlough later on you will be able to do so.

You need to keep records of who has been furloughed and when.

I recommend you set up a spreadsheet to record the details. If you have more than 100 furloughed employees you will need to submit this to HMRC when making your claim. If you have less than 100 furloughed employees you need to add the information manually so will need the information in an easy access format.

You also need to keep a copy of the letters you issue to staff to inform them of the furlough period as this will form your evidence if you need it for HMRC.

The minimum length of time that an employee can be furloughed is 3 weeks.

3. I have made an offer to someone who is due to start employment with me on the 1st May 2020 I will not be able to afford to employ them and there is no work for them but they have given notice to their current employer what do I do?

You cannot furlough and claim for employees who have not yet started work for you.

You have a couple of options with new starters if you have no work for them and/or cannot afford to pay them at this time:

a) agree a delayed start date with them;

b) agree to pay them a retainer i.e. an amount less than their normal pay;

c) agree for them to start but lay-off on unpaid leave.

In the circumstances the employee may be able to agree to extend their notice period with their current employer who could furlough them and recover 80% of pay. If they are on the employer’s payroll system then they will be able to claim and repay.

There is of course no obligation on an outgoing employer to agree an extension of notice or to keep the employee on.

If you are going to withdraw an offer of employment or delay the start date it is important to check the offer letter and any contract issued to ensure that you are not at risk of a breach of contract or claim for notice pay. If you are in this situation you should seek specific advice about your situation.

4. Do I need to close the business to access the scheme?

No you can remain open and operating but furlough some staff only.

Many businesses will need to keep some staff on to keep the business ticking over.

In small businesses it will probably be the Directors who keep working and are not furloughed.

Directors are only eligible to reclaim earnings from their salary as put through the PAYE system and not dividends under the furlough scheme.

5. I need some staff to stay on and work how can I decide which staff stay on and which are furloughed?

This is a tricky one and you need to be approach with caution to avoid:

a) Discrimination

b) Resentment among staff

c) A general feeling of unfairness

The simplest way to start is to identify which departments or particular areas of the business are critical and those where you can make cut backs and then ask for volunteers from that group.

If everyone volunteers then the fairest way is to come up with a selection criteria of sorts and apply this. We have created an example criteria to give you some ideas about what to do and it is included in our Furlough Support Package which you can download HERE for £50 plus VAT.

You may also decide to incentivise or reward those staff who are remaining at work by offering:

  • Extra pay for example by giving them an enhanced hourly rate for the hours they are working;
  • Reduce their hours of work but keep pay the same;
  • Offer a bonus payment in the future to reward them for their work;
  • Give them additional holiday to be taken in future when the business is back to normal.

6. If someone becomes sick or is in self-isolation during the time they are furloughed do I switch them to statutory sick pay?

The HRMC guidance says that employees on sick leave or self-isolating should get SSP and can then be furloughed after this.

If an employee becomes sick during the furlough period it is up to you to decide whether to move them onto statutory sick pay or to keep them on furlough at the furlough rate. If you do switch from furlough to sick leave you cannot claim the furloughed salary under the scheme for this period.

I suspect that once employees are furloughed they are not going to tell you they are sick unless it impacts their return to work. This is especially the case if they think it could impact their pay, so it probably will not arise, if it does and you are unsure what to do please seek advice.

7. If someone was going to leave anyway what do I have to do? They have given notice and are due to leave, can I furlough them?

As above you can if you wish to keep them on as your employee and furlough them, noting of course that you have to pay them and recover the money later on.

If you do not want to keep them on after the agreed termination date then you do not have to do so and the employment relationship will end in the same way as it would have before the job retention scheme was introduced.

8. What do I do if they have booked holiday during the furlough period?

The holiday would proceed as normal and it is advisable to pay the employee full pay for this period (unless you agree otherwise with the employee).

You can however agree for the employee to cancel their holiday and take it at a later date if you wish.

9. Does an employee who has been furloughed continue to accrue holiday during this period of no work?

Yes they continue to accrue holiday and their normal rights apply.

10. Can I still make redundancies in the time someone is furloughed?

Yes if you need to make reductions the normal redundancy rules and procedures apply.

I would however recommend that you consider carefully the decision making and justification for redundancies whilst the furlough scheme is available. It may be prudent to wait until the scheme is coming to an end before starting consultations. This is important in respect of potential unfair dismissal claims and the reputation of your business.

I strongly recommend that you seek advice before starting the redundancy process so you can make a fully informed decision.

11. I cannot afford to top up the wages to 100% will this cause any problems for me?

Only in so far as employees object to the reduction in pay they could:

  1. Make a claim for their loss as a result of the breach of contract.
  2. Claim unlawful deductions from wages.
  3. Resign and make a claim for constructive unfair dismissal (if they have been employed for 2 years or more).

Given the extraordinary circumstances we all find ourselves in it is low risk but is still possible.

My view is that you need to weigh the commercial risk v legal risk and in the current situation if paying the additional 20% means that you are likely to go out of business or be unable to pay anyway you are better to take the legal risk.

The way to reduce the risk is to communicate with staff and explain the reason you are doing this. If they understand that it is to keep jobs and to ensure the business is sustainable in future then they are less likely to object.

12. If I have some work in the furlough time, for example if a contract comes in and I need some staff temporarily, can I bring them back to do some work and then furlough them again?

Yes this is possible as long as the furlough period is for a minimum of 3 weeks.

13. Can an employee do any work for me in the furlough time?

No they must not undertake any work during the furlough period.

14. Can an employee work for someone else when they are furloughed?

If they have another job already then they can continue in that job, or be furloughed by both employers.

They can also start a new job whilst furloughed if they have your consent to do so and it will not impact on their furlough pay.

15. Do I have to pay pension contributions during the furlough period?

Employer contributions must still be paid in the normal way, but this can be included in the claim to HMRC.

Employee’s can of course opt out of the pension if they wish during this time in the normal way.

16. Do my employees retain company benefits during the furlough period for example company car and/or private healthcare?

All normal contractual benefits would remain in place and I would not advise you to remove them, unless of course you need to do so in order to make cuts to overheads, and then this is best done by agreement with employees.

17. Will I have to pay my employees and claim it back or will it be paid directly from HMRC to the employee?

You will need to pay the employees and then make a claim to recover the money from HMRC. This is where having sufficient cash flow to pay in the interim is very important.

You can access some of the other support and funding available for this reason. https://www.businesssupport.gov.uk/coronavirus-business-advice/

18. Should I suspend the disciplinary and/or grievance procedure and investigations if an employee is furloughed?

You can continue with these processes in the furlough period if you wish but it may be difficult given social distancing.

If you decide to place them on hold make sure you communicate this clearly to the employees involved.

Again you may wish to get specific advice about the particular situation before making a decision.

19. Do I need to extend an employees probation period if they are being furloughed?

This may be advisable and you would do this by notifying the employee and confirming in writing.

You will need to ensure that appropriate mechanisms and processes are in place when they return to work to pick up and perhaps retrain or refresh with them.

20. What happens with employees on maternity, adoption or parental leave?

They remain on leave as normal and the same rules regarding leave and pay apply.

If they give notice to return from leave and you need to furlough them then they would be furloughed in the same way as others.

21. How can I or should I stay in touch with employees who are furloughed?

It is important to maintain regular contact with employees during this time and therefore try to agree the best method of communication.

As long as they are not undertaking any work there is no reason why you cannot have a call or email with them to catch up.

22. An employee has asked to be furloughed rather than take unpaid parental leave (as they have to stay home to care for their children) can I agree to this?

Yes you can agree to this and an employee can be furloughed in these circumstances.

23. An employee has asked to be furloughed because they are worried about the risk to them and their family of the coronavirus, can we do this?

Yes if you agree then you can furlough them.

24. If someone is due to go on maternity leave can they be furloughed?

Only until their normal maternity leave would start. Employees must take a minimum of 2 weeks off work (4 weeks if they work in a factory or workshop) immediately after giving birth. After this they can give notice to return to work and could then be furloughed.

It is unlikely that an employee would wish to do this and bring their maternity leave to an end early just to benefit from the furlough scheme as once things are back up and running they would have to return to work and could not ‘start up’ again with the maternity leave.

25. Are we able to have a rolling program for furloughed staff depending on the requirements of the business? On the shop floor, staff build different products depending on the orders coming in, if orders reduce can we have some staff in for two weeks then furlough them, then have them back when the next order comes in (in the area they build in) and so on?  Or do we have to select some staff to furlough for the entire duration?

You can rotate the furlough period among staff as long as each period is for a minimum duration of  3 weeks.

26. Can we claim anything for the two employees we have on maternity?

Small businesses can normally recover statutory maternity pay anyway.

If you pay enhanced (earnings related) maternity pay then the HMRC guidance states that ‘this is included as wage costs that you can claim through the scheme.’

27. Are there any other rules for apprentices or do the same apply?

The same rules in terms of pay and furlough apply to apprentices.

There is more specific guidance in respect of apprentices available HERE

28. How does this affect zero hours and people who work irregular hours, will it be calculated on a 12 week average?

The method for calculating pay for those whose pay varies is set out as follows:

‘If the employee has been employed for 12 months or more, you can claim the highest of either the:

  • same month’s earning from the previous year
  • average monthly earnings for the 2019-2020 tax year

If the employee has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work until the date they are furloughed.

If they have been employed for less than a month, work out a pro rata for their earnings so far, and claim for 80%.’

29. This monthly wage that will come from HMRC, up to 80% of monthly wage, will employers have to pay HMRC back these wages later when this is all over?

There is no provision for paying it back in the future, it is clear that this is a grant.

Unless of course HMRC retrospectively audit the claim and determine you have been overpaid or your claim is out of the scheme rules, then they could seek to recover what has been overpaid to you.

30. Do you have to identify all employees at the same time or can you stage them? For example we might identify half of each department like installers, sales but then depending on business need to then add some of customer services and more sales and installers?

No, you can furlough some now and some in future if you need to. As long as they are furloughed for a minimum of 3 weeks.

31. What happens about the National Minimum Wage?

You do not have to pay the national minimum wage if the employee is furloughed and not doing any training.

The guidance states:

‘Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW)/ Apprentices Minimum Wage (AMW) for the hours they are working or treated as working under minimum wage rules. This means that furloughed workers who are not working can be paid the lower of 80% of their salary or £2,500 even if, based on their usual working hours, this would be below their appropriate minimum wage. However, time spent training is treated as working time for the purposes of the minimum wage calculations and must be paid at the appropriate minimum wage, taking into account the increase in minimum wage rates from 1 April 2020. As such, employers will need to ensure that the furlough payment provides sufficient monies to cover these training hours. Where the furlough payment is less than the appropriate minimum wage entitlement for the training hours, the employer will need to pay the additional wages to ensure at least the appropriate minimum wage is paid for 100% of the training time.

Where a furloughed worker is paid close to minimum wage levels and asked to complete training courses for a substantial majority of their usual working time, employers are recommended to seek independent advice or contact Acas.’


HMRC guidance:  https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Government updates:



ACAS guidance: https://www.acas.org.uk/coronavirus

 Support from the RELA Team

DIY Furlough Support Package available to download for £50 plus VAT includes:

  1. Letter/notice to all staff asking for volunteers and notifying staff of proposal.
  2. Example Selection criteria form.
  3. Letter notifying staff that they are being furloughed – agreement included within.
  4. Letter notifying staff that they are being furloughed – agreement separate.
  5. Furlough agreement.
  6. FAQ’s sheet to issue to employees.
  7. Spreadsheet to record furlough details.

You can purchase the documents here: HERE

Business Support from a Solicitor: For a fixed fee of £250 plus VAT we can provide:

  1. Review of your employment contracts to check relevant applicable clauses that may assist in your decision making.
  2. Providing advice on options available at this time in respect of staff during the current situation including:
    • Furlough
    • Reducing hours
    • Redundancy
    • Lay-off
  3. Up to 1-hour of telephone calls to discuss and answer questions.
  4. Template letter depending on your choice of action.
  5. FAQ’s document for furloughed employees.
  6. Automatic updates when available of if there are changes to the scheme.

For more information or to access these offers for employers please contact us on 01983 897003 or by email: alison@realemploymentlawadvice.co.uk

Don’t forget getting advice from a Solicitor does not have to be complicated or costly!

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The information contained in this blog post is provided for guidance and is a snapshot of the law at the time it is written. It is provided for your information only and should not be used as a substitute for obtaining legal advice that it specific to your particular circumstances.

The guidance should not be relied upon in any decision making process. It is strongly recommended that you seek advice before taking action.

Solicitor in Eastleigh | Solicitor in Salisbury | Solicitor Isle of Wight |Solicitor in Portsmouth

If you have any questions or would like to stay up to date, please contact us.

 Alison Colley at Real Employment Law Advice.

Phone: 023 8098 2006 Email: alison@realemploymentlawadvice.co.uk

Albert Bargery at Real Employment Law Advice

Phone: 01983 897003 Email: albert@realemploymentlawadvice.co.uk

 Miranda Amos at Real Employment Law Advice

Phone: 01722 653001 Email: miranda@realemploymentlawadvice.co.uk