• At a glance - Coronavirus Job Retention Scheme: a cash grant that is designed to allow employers to retain staff who would otherwise be laid off.

    • Employers may claim a grant of up to 80% of the salaries of employees who have been laid off during this crisis. This is subject to a cap of £2,500 per month.
    • Employers must designate affected employees as ‘furloughed workers' and notify the employees of this change.
    • To qualify for this scheme: workers should not undertake work while furloughed.
    • Employers submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal.
    • HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.


    What does the government mean by furloughing and who does it apply to?


    • 'Furloughing' is an alternative to laying people off.
    • Employees are kept on the payroll instead of dismissing them as redundant or laying them off without pay.
    • It is relevant for employees who are not off sick. Sick workers are instead eligible for government support under the Statutory Sick Pay (SSP) rules.


    How does it work?


    HMRC will reimburse 80% of the wages costs of furloughed employees, subject to a cap of £2,500 per month per employee. We assume this is gross but await clarity from the government.


    Payment is by a grant provided by HMRC.


    It applies for three months from 1 March 2020 but may be extended.


    There are no details as yet about whether any conditions must be satisfied for the rules to apply.


    It is up to you whether you pay the 20% difference so that your employees receive their full pay.


    If the cap applies, the difference may be more than 20%. Again it is up to you whether to top up the employee’s pay, either to their full pay or some other amount. This is a decision for you as an employer and may be a matter of negotiation with your employees.


    The employees you furlough must not work for you during the furlough period. They remain your employees. It is not clear whether they are allowed to take temporary work elsewhere during the furlough period, but it may be that their employment contract currently forbids it.


    Do not forget about employment law. This is for your protection as an employer (against claims by employees once this is all over) as well as the protection of your employees.


    We are unable to give employment law advice but have included some suggestions below which should help manage your risk here. If in doubt you must seek independent legal advice.


    Steps to take when furloughing workers


    • Decide which employees are to be furloughed and designate them as such. If this is not all your employees, you should ensure you use a fair selection process*:
      • You could start with any employees who cannot work from home, if this is appropriate, or those who need to stay home to look after children.
      • Ask for volunteers.
      • You could adopt the same sort of process you would if making people redundant, using pooling and selection criteria.
    • Decide whether you will top up the amount being reimbursed by HMRC and if so by how much.
    • Decide whether you are furloughing employees for a fixed period e.g. the full three months or whether you need to keep it flexible. This means less certainty for everyone but allows you to call employees back if the situation changes and restrictions on working are lifted.
    • Decide whether you would agree to employees taking temporary work elsewhere during the furlough period. You may wish to only address this if asked by your employees.*
      • If their contract currently forbids this, you should advise them of your decision in writing.
      • If the contract does not forbid this it would seem, unless the government advises otherwise, that employees are free to do this.
    • Monitor your cashflow position to see if you have sufficient funds to pay your employees until the HMRC grant comes in, likely to be sometime before the end of April. If you do not, you may wish to consider a business interruption loan or deferring your VAT payment.
    • Check the employment contract for each employee you intend to furlough.
      • If you intend to top up their payments to maintain their normal pay you should not need the employees’ consent as you are not deviating from their contractual terms.
      • If you do not intend to top up their payments then you will need the employees’ consent unless their contract allows for you to reduce or stop their pay when there is no work for them to do. If in doubt you may wish to take legal advice.
    • Notify the designated employees that they are furloughed. Tell them whether you are topping up their wages or whether they will just get the 80% amount reimbursed by HMRC/£2,500 per month, whichever applies. It is advisable to do this in writing.
    • If required obtain consent from the employees, in writing, to be furloughed.
    • If you do have sufficient funds, make payments to your furloughed workers accordingly.
      • This should go through the payroll as normal with tax and employee NICs being deducted as normal. It is not yet clear whether the employer NIC must be paid. We await guidance from HMRC on this.
    • It is not yet clear how the grant will work for employers who are unable to pay their furloughed workers until the grant comes in and whether they can delay wages payments until HMRC pay them.
    • Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. This is not yet available and we do not have details of what information will be required.


    We assume that once information has been submitted you will receive your grant from HMRC. More details are awaited on this.

Coronavirus Job Retention Scheme

  • At a glance
  • Furlough vs. Redundancy
  • Letter to employee
  • Employee response form







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