Coronavirus Job Retention Scheme (Furlough)

A brief summary of the government guidance on Furloughing employees.



All businesses registered and operating PAYE and with a UK bank account as of 19th March 2020 can apply.

Employees must have been on PAYE as of 19th March 2020. Those made redundant between 28th February and 18th March 2020 are eligible to be furloughed if re-hired and placed on Furlough.

They can be full time, part time, agency, flexible or zero hours contracts, apprentices (who can continue to train), company directors and LLP members if salaried. Directors can carry out their statutory obligations (narrowly defined) whilst furloughed.  Employees who are working reduced hours or reduced wages do not qualify for the furlough scheme by doing so. Those who cannot work because they are shielding or have care responsibilities can be furloughed.

The employee must have been instructed by the employer “to cease all work in relation to their employment”. Working for a person connected with the employer or working indirectly disqualifies the employee from being treated as furloughed. The instruction must be given “by reason of circumstances arising as a result of coronavirus or coronavirus disease”.

The instruction must be given by the employer in writing and written agreement must be obtained from the employee. This is extremely important and employers should ensure that they get employees’ written agreement.

Employees can still carry out training or voluntary work. They can also work in another job if contractually permitted and continue to be paid whilst furloughed. Employees on unpaid leave or SSP cannot be furloughed until they were due to return. You can bring employees in and out of furlough although the minimum furlough period is 3 weeks.

The maximum amount to be paid by the government is 80% of regular wages including legally enforceable fees and commission (but not discretionary commission or bonuses or non-monetary benefits such as a car) or £2,500, whichever is the lower. If employees’ wages vary then the employer can apply the same month’s earnings from the previous year or the average of the past year (whichever is the higher). HMRC will pay that amount plus employer’s NI and employer’s minimum automatic enrolment pension contributions. There is no minimum wage when an employee is furloughed. The employees will be taxed on the amount paid to them.

Employers are not obliged to top up the additional 20% of wages, however, usual employment law applies, so any changes to the contract must be agreed and are subject to the Equality Act 2010.

There will an HMRC portal on to submit the claim. This is expected to be up and running by 20  April 2020.  Employers need to calculate the amount that they are entitled to recover. HMRC will make BACS payments directly to employers.

The payments need to be included in the company’s accounts as revenue.

Mike Magee
Head of  Employment Team
Fenners Chambers