Last night, the government published guidance on access to the Job Retention Scheme.  This scheme is absolutely essential to businesses at the moment as they continue to strive to survive these worrying and incredibly difficult times. 

What is extraordinary if the speed at which the government have been able to put in place such a wide-ranging scheme to support business and jobs. 

Of course, no system is perfect.  The differences between the scheme for the self-employed and this scheme have already been subject to some criticism.  We trust that our analysis of the guidance below will help inform employers about the use of this scheme for their employees.



1 March 2020 to 31 May 2020.

What can employers claim?

(i) 80% of “usual monthly wage costs” up to £2,500 per month

(ii) the associated Employer National Insurance contributions

(iii) the minimum automatic enrolment employer pension contributions on that wage

How do we calculate the monthly wage?

If the employee has been employed for a full 12 months prior to the claim, the following can be claimed:

(i) the same month’s earnings from the previous year

(ii) average monthly earnings from the 2019-2020 tax year

If the employee has been employed for less than 12 months, you calculate the average pay by calculating the average since the commencement of their employment. 

You will see that this calculation is not the weekly wage calculation of the last 12 weeks as some commentators were anticipating. 

More guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live.

Gross or net

£2,500 is the maximum amount that the Government pay. It follows that any employee who is paid more than £37,500 will receive less than 80% of their normal pay.  The payment that is made to the employee by the employer is subject to deductions for tax and national insurance.  

One of the issues that was very unclear from the original announcement was whether the intention of the scheme was to ensure that the net payment that employees received was £2,500 or whether that £2,500 would be subject to deductions.  It is now (finally) clear that deductions will need to be made and therefore the amount that employees receive on a net basis will be lower than the £2,500 cap.

Information to be provided

To claim you will need to provide:

  • Your ePAYE reference number
  • The number of employees being furloughed
  • The claim period(s)
  • Amount claimed
  • Your bank account number and sort code
  • Your contact name
  • Your phone number

Who can we claim for?

There were rumours before yesterday that those who were not on the PAYE of companies before the 1 March 2020 would be excluded.  Unfortunately for some people, this has proved to be correct.  In fact, it is a day earlier than feared.  Only those who were on the payroll on 28 February 2020 can be included in an employer’s claim under the scheme.  New hires since this date (whether already started or due to start shortly) are not covered.  This is likely to result in employers giving serious consideration to termination of those new hires, albeit by giving the required contractual notice. 

The scheme does provide for:

  • Part time employees
  • Employees on agency contracts who are not working
  • Employees on flexible or zero hours contracts

What if we have already made people redundant?

If you have made employees redundant since 28 February 2020, you are able to rehire them and then Furlough them under the scheme.

What about those who are self-isolating and only on £95pw SSP?

If an employee is on unpaid leave they do not qualify for the scheme unless they were put on unpaid leave after 28 February 2020.  If unpaid leave started after this date, you can now furlough these employees.  This will be particularly welcomed by those employees who feel that they have been ‘forced’ into taking unpaid leave to look after their children after the closure of all the schools.

If an employee is already self-isolating because they are sick, have the listed symptoms (new continuous cough or temperature) or because they live with someone who is diagnosed or has the symptoms, they will only receive SSP. They qualify for SSP under the new SSP regulations and cannot be furloughed.  However, this period only lasts for 14-days (unless they remain unwell) and at the end of the 14 days they can then be furloughed.  If they remain unwell, they continue to receive sick pay and cannot be furloughed.

What about those who are vulnerable and are socially distancing and are advised to stay at home?

If you are “shielding” then you can be furloughed.  Note the new language here.  The meaning of “shielding” is for those employees who are at very high risk of severe illness from coronavirus (COVID-19) because of an underlying health condition, and for their family, friends and carers.  This is for extremely vulnerable individuals.  These people are:

1. Solid organ transplant recipients.

2. People with specific cancers:

  • people with cancer who are undergoing active chemotherapy or radical radiotherapy for lung cancer
  • people with cancers of the blood or bone marrow such as leukaemia, lymphoma or myeloma who are at any stage of treatment
  • people having immunotherapy or other continuing antibody treatments for cancer
  • people having other targeted cancer treatments which can affect the immune system, such as protein kinase inhibitors or PARP inhibitors
  • people who have had bone marrow or stem cell transplants in the last 6 months, or who are still taking immunosuppression drugs

3. People with severe respiratory conditions including all cystic fibrosis, severe asthma and severe COPD.

4. People with rare diseases and inborn errors of metabolism that significantly increase the risk of infections (such as SCID, homozygous sickle cell).

5. People on immunosuppression therapies sufficient to significantly increase risk of infection.

6. Women who are pregnant with significant heart disease, congenital or acquired.

Furlough is being made available to this extremely vulnerable group because they need to comply with the following measures:

  1. Strictly avoid contact with someone who is displaying symptoms of coronavirus (COVID-19). These symptoms include high temperature and/or new and continuous cough.
  2. Do not leave your house.
  3. Do not attend any gatherings. This includes gatherings of friends and families in private spaces, for example, family homes, weddings and religious services.
  4. Do not go out for shopping, leisure or travel and, when arranging food or medication deliveries, these should be left at the door to minimise contact.
  5. Keep in touch using remote technology such as phone, internet, and social media.

This is different to the list of vulnerable people who were originally identified as need to socially distance themselves.  Those groups of people are:

1. aged 70 or older (regardless of medical conditions)

2. under 70 with an underlying health condition listed below (ie anyone instructed to get a flu jab as an adult each year on medical grounds):

3. those who are pregnant

There is nothing in the guidance that enables you to furlough anyone in the “vulnerable” group.  You can only furlough those in the “extremely vulnerable” group.

What about flexibility of the scheme – can people start and stop and start again?

The scheme does have some flexibility in this regard but not quite as much as we had hoped for.  Once of the problems of the scheme is that it tends to incentivise closure / shut down.  But where businesses are still trying to operate, they clearly need staff.  This cannot be done by having employees working part time under the scheme because they must do no work at all whilst furloughed (subject to volunteering point below). 

Employers are then in an unenviable position of choosing who to furlough – who will then stay at home, do not work and get paid 80% - and those who must continue to work and receive only 20% more for doing so.  One of the fairer ways for employers to be able to deal with this would have been to operate a form of rota.  Whilst this can be done under the scheme, it can only be done on a three-weekly basis.  You cannot chop and change on a weekly or fortnightly basis. 

Where you are operating a skeleton (or significantly reduced level of staffing) this could obviously cause a problem also if those who are working for you then get sick.  If you then need to call back into work those who you have already furloughed, you will not be able to claim for them if they have been furloughed for less than 3 weeks.  You therefore may find it more appropriate to stagger the start of furlough for groups of employees to ensure that you can always be in a position to recall employees if you need to.

Can your employee do any work whilst furloughed?

Your employee cannot do any work for you.  If they do, all entitlement to claim under the scheme ceases.  It is not pro-rated in any way. 

The one exception to this is “volunteer work or training”.  They can do volunteer work or training for you (their employer) as long as it “does not provide services to or generate revenue for, or on behalf of your organisation”.  They can therefore complete activities such as online training courses whilst furloughed.  Just to complicate matters a little more, they must receive at least the National Minimum (Living) Wage for the hours that they are training, even if this is more than the 80%. 

Can my employee work for someone else although I have furloughed them?

The guidance does not specifically address whether an employee can get another job with another employer after being furloughed.  However, there is nothing in the guidance to indicate that they can’t.  In fact, the guidance states that “If your employee has more than one employer they can be furloughed for each job.  Each job is separate, and the cap applies to each employer individual”.  This implies that people can have other work for other employers whilst on furlough. 

Sick Leave, Maternity Leave and Shared Parental Leave

  • Maternity leave

The guidance states that If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.

However, there is provision in the scheme for you to be able to use the furlough leave scheme to bridge the gap between the statutory maternity pay scheme.  It is not clear to us from the guidance quite how this would work and what limits are in place. 

For example, if you pay 100% pay for 3 months, can you make a full claim to bridge the gap between SMP and the 100% or is that limited to a maximum of 80%.  Logic and fairness would suggest the latter.  The same rules apply for enhanced adoptive leave pay, shared parental leave pay or paternity leave pay.

Timing and logistics of payment

It appears from the scheme that there is not an expectation that employees will be paid before reimbursement is received from the scheme.  Some companies were in fact avoiding furloughing because of the cash flow issues that it presented to them – paying the money out and then awaiting reimbursement. 

However, employers need to be very clear that in order to do this the furlough agreement will need to provide for this delayed payment appropriately and this may effect the ability of the employer to be able to easily obtain agreement from its employees as this approach simply pushes the cash flow issue directly to the employee.  And in the absence of the agreement it may be that the employer would then need to move to a redundancy situation in any event. 

Most employers that we have spoken to have indicated to us that they intend to make the payments and then claim the amount back from the government under this scheme.

Holiday entitlement

As we have already advised, statutory holiday accrual occurs in the usual way whilst someone is on furlough leave.  However, in a further announcement today, the government has committed to amending the Working Time Regulations 1998 to allow annual leave to be carried over into the next two leave years in circumstances where a worker or employee has not been able to take their all their statutory leave due to the COVID-19 crisis.

Tax Treatment of the Coronavirus Job Retention Grant

Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.

Please contact us for further advice and assistance. 

Matthew Huggett, Partner

07496 126 266 / 0117 332 8333 / 0292 167 1990