COVID-19 - Coronavirus Job Retention Scheme - updated Government guidance

United Kingdom

In this Law-Now we discuss the updated Government guidance on the Coronavirus Job Retention Scheme. Although this contains useful clarifications, several uncertainties remain, particularly around the interaction between furlough and holidays. We consider who can claim under the Scheme, which employees are covered, what employees can do during furlough, what employers can claim for, and record keeping requirements.


Amid many uncertainties and concerns around the details of the Coronavirus Job Retention Scheme (the “Scheme”) as published on 26 March 2020 (see our earlier update here), the Government has updated its guidance over the weekend.  The updated guidance (“New Guidance”):

  • introduces some changes to the original guidance, including in relation to the payment of “past overtime, fees and compulsory commission” as part of “wage costs”;

  • gives greater clarity in areas which were previously unclear, such as the availability of furlough for foreign nationals; and

  • confirms some of the things we had assumed, such as the ability to rotate staff in and out of furlough and to make them redundant during furlough; but

  • fails to address other areas of ongoing uncertainty, for example whether an employer can compel an employee on furlough to take a concurrent period of holiday, whether an employer who has transferred under the Transfer of Undertakings (Protection of Employment) Regulations 2006 will be deemed to have been on the incoming employer’s payroll as at 28 February 2020 if they were on the outgoing employer’s payroll at that date, and what is the scope of the Government’s “claw back” ability in relation to fraudulent and erroneous claims under the Scheme (which is only mentioned in FAQs not the guidance itself)?

Who can claim?

Employers who “cannot maintain their current workforce”

In his original announcement on 20 March 2020, the Chancellor made clear that the purpose of the Scheme was to protect the jobs of employees who, as a result of the impact of coronavirus on their employer’s business, would otherwise be at risk of redundancy (or of being “laid off” as he put it).  However, the Government guidance issued on 26 March 2020 seemed to suggest otherwise, simply stating that the Scheme “was designed to support employers whose operations have been severely affected by coronavirus (COVID-19)”. 

At first glance you would be forgiven for assuming that the New Guidance has been amended to make it abundantly clear that the Scheme only applies to employers who would have otherwise had to make their staff redundant, with statements like:

  • If you cannot maintain your current workforce because your operations have been severely affected by coronavirus (COVID-19) you can furlough employees”;

  • the Government would not expect an administrator to furlough unless there was “a reasonable likelihood of rehiring the workers” (see below); and

  • those who are shielding (or need to stay at home with someone who is shielding) can be furloughed “if the employer would otherwise have to made them redundant”. 

However, the New Guidance also states that “all employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus”, retaining at least an element of doubt as to whether redundancies have to be the inevitable consequence of not furloughing.

The Scheme is also now stated to apply to all employers including individuals who employed others (such as nannies) on or before 28 February 2020 through a payroll.

Public sector organisations and administrators

In the New Guidance, whilst the Government acknowledges that different businesses will face different impacts from coronavirus, it:

  • retains its expectation that public sector organisations (or non-public sector employers which receive public funding for staff costs) will not generally take advantage of the Scheme –  although special provisions apply in respect of payments to suppliers of contingent workers, where those services are provided to a Central Government Department, an Executive Agency of a Central Government Department or a Non-Departmental Public Body; 

  • (as we anticipated) makes clear that, whilst administrators will be able to access the Scheme in respect of a company under their management, the Government would not expect an administrator to do so unless there was a reasonable likelihood of “rehiring the workers. For instance, this could be as a result of an administration and pursuit of a business sale.”  Although the use of the word “rehiring” is confusing (and seems to assume all employees will have been dismissed on the appointment of the administrator, which is not necessarily case), we assume it also covers a reasonable likelihood that employees could be retained until the point of a sale.

Employees who employers can claim for

Employees on your payroll on or before 28 February 2020, workers and directors

The New Guidance clarifies that the Scheme covers employees on the employer’s payroll on or before 28 February 2020 (presumably to capture zero hours/casual workers who may not have received a payment in February) and this includes anyone on any type of employment contract as well as “limb (b) workers” (namely those who are not employed under a contract of employment but are otherwise paid through PAYE), as well as agency workers who are employed by umbrella companies.  Those working in the “gig” economy will therefore potentially be covered if they are on a PAYE payroll.  It remains the case that employees “hired” after 28 February are not covered.

Interestingly, employees on fixed-term contracts can be furloughed and the New Guidance specifically states that their contracts can be renewed or extended during the furlough period.  It doesn’t seem to matter that they might not otherwise be required.  However, there is no obligation to renew or extend a fixed-term contract.

The New Guidance also confirms that company (executive) directors can be furloughed. They can still perform their “statutory duties” but cannot perform other work for the company.  Office holders, and salaried members (partners) of an LLP, can also be furloughed. In all cases this should be recorded formally as a decision of the company or LLP.

Employees who ceased working on or after 28 February 2020

It was already clear that employers could choose to re-employ anyone made redundant on or after 28 February 2020 and put them on furlough leave. 

However, more surprisingly, the New Guidance now states that the Scheme also applies to those who “stopped working” for their employer on or after 28 February 2020. This seemingly allows employers to take back anyone whose employment had been terminated (whether by the employer or the employee) on or after 28 February 2020, regardless of the reason for the termination – although they are not under any obligation to so do.  Employers contemplating re-employing individuals in these circumstances will need to consider issues such as when this should be backdated to, whether continuity of service will be preserved and, if so, whether the employee will have unfair dismissal rights when the period of furlough is over.


The New Guidance spells out that apprentices can be furloughed in the same way as other employees and can continue to train whilst furloughed.  However, any training time must be paid at the relevant National Living Wage/National Minimum Wage rate (taking into account the increases from 1 April 2020) and the employer will need to pick up any shortfall.

Foreign nationals

Amid concerns about the position of foreign nationals whose visas prevent them from accessing public funds, the New Guidance and the guidance issued separately by UK Visas and Immigration (the “UKVI Guidance”) seems to confirm that all foreign nationals are eligible to be furloughed (see below). But uncertainties in relation to sponsored visa arrangements, such as whether the employer would need to top up the furlough payment to ensure the employee’s wage does not take them below the minimum earnings threshold that requires to be met in order to retain their visa status, have not been directly addressed in the guidance so far.  However, there have been no indications from UKVI that the minimum earnings threshold for sponsored migrants will be suspended in a furlough situation.  Further clarification on this point is urgently required from UKVI. 

Aside from the New Guidance, the UKVI Guidance states: “you can temporarily reduce the pay of [your] sponsored employees to 80% of their salary or £2,500 per month, whichever is the lower.  Any reductions must be part of a company-wide policy to avoid redundancies and in which all workers are treated the same.  These reductions must be temporary, and the employee’s pay must return to at least previous levels once these arrangements have ended.”  This would appear to be a reference to the Scheme and a confirmation that sponsored migrants are eligible for furlough, although the UKVI Guidance falls short of a specific reference to sponsors reclaiming migrant salaries under the Scheme.  The UKVI Guidance is also silent on whether there will be any suspension of the minimum earnings threshold for sponsored migrants who have been furloughed.

It is also worth noting that the UKVI Guidance confirms that particular reporting duties that usually apply to sponsors have been temporarily suspended.  Specifically, migrant absence due to COVID-19 (whether due to illness, self-isolation or travel restriction, or home working) will not be reportable.  The requirement for sponsorship to be withdrawn if a sponsored migrant is absent from work without pay for more than 4 weeks in a calendar year has also been suspended. 

Employees who are self-isolating or on sick leave

The New Guidance clarifies that employees who are self-isolating or on sick leave are entitled to statutory sick pay (SSP) and employees can be “furloughed and claimed for once they are no longer receiving” SSP. However, the position where an employee falls sick or needs to self-isolate remains unclear. Do they continue as furloughed employees, or should they become entitled to SSP only? What incentive would employees have to notify their employer/the Government of this change in status and how can that be policed?

Employees who are shielding, staying home with someone who is shielding or with caring responsibilities

The New Guidance not only allows those who are shielding to be furloughed, but also those who need to stay home with those shielding where they cannot work from home – although only if the employer “would otherwise have to make them redundant”.

The New Guidance also provides that employees who cannot work due to caring responsibilities arising from coronavirus can be furloughed, for example those who need to care for children due to school closures.  It is not clear whether such carers also have to be otherwise redundant – but the New Guidance does not state this when it certainly could have. Perhaps this is deliberate in light of the Government’s imposed restrictions, including the decision to close schools?

What can employees do during furlough?

Work and training for the employer

It was already clear that employees cannot perform any work for their employer whilst furloughed, where that work generates revenue for the organisation, although they can undertake volunteer work and training.   

The New Guidance specifically states that employees should be encouraged to undertake training.  However, any training that the employer requests an employee to undertake must be paid at the relevant rate of National Living Wage/ National Minimum Wage rate (and again the employer will need to pick up any shortfall).

Furthermore, an employer can agree to find a furloughed employee new work or volunteering opportunities whilst on furlough if this is in line with public health guidance.  This is likely to be employer/industry specific.

Rotating in and out of furlough

Helpfully the New Guidance expressly confirms that an employee can be furloughed multiple times, provided each separate instance of furlough is for a minimum period of three consecutive weeks, so it is possible to rotate employees in and out of furlough.  We understand this to mean that employers can swap individual employees and groups of employees in and out of furlough.

Work for a different employer

Whilst the original guidance made clear that an employee with two jobs could be furloughed by one employer and remain working for the other, it was not clear whether a furloughed employee could take up new employment with a different employer.

The answer to that in the New Guidance is a resounding “yes”, provided it is “contractually allowed”.  Presumably this means an employer which can insist on exclusive service may or may not choose to enforce that contractual right.  That decision may turn on whether or not the employer is topping up the employee’s salary, and it may wish to impose restrictions for example on working for competitors.  The new employer is responsible for notifying the Government that the person is already furloughed.

Holiday during furlough

Regrettably, the New Guidance is completely silent on holiday during furlough.  It simply states “Your rights as an employee are not affected by being on furlough, including redundancy rights.”

The latest version of the ACAS guidance says that if an employee is furloughed they “can still request and take their holiday in the usual way” – and tweets from HMRC appear to confirm that.  Presumably employers could also request that employees take their holiday during furlough “in the usual way”. However, it remains unclear whether holiday pay can be claimed under the Scheme, and whether the usual principles for calculating holiday pay continue to apply during furlough.

What can an employer claim for?

Start of the claim

The New Guidance states that claims “should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they written to (sic) confirming their furloughed status”.

Presumably “starts furlough” simply means “finishes work” (or “finished work” where the claim is back-dated). 

Salaried employees

The New Guidance is explicit that the employer can claim for 80% of the employee’s gross salary as of 28 February 2020.

Employees whose pay varies

For those who have at least 12 months’ service, the employer can claim for 80% of the greater of either their earnings in the same month in the previous year or the average of their monthly earnings in the 2019/2020 tax year.  For those who have less than 12 months' service, the amount that can be claimed is 80% of their average monthly earnings since they started work. 

It is still not clear what comprises “earnings” for these purposes, but presumably it would include things like shift allowances. 

Past overtime, fees, commission, discretionary payments etc

The New Guidance clarifies that employers can claim for any “regular payments” they are “obliged” to pay their employees. This includes “wages, past overtime, fees and compulsory commission payments” but excludes “discretionary bonus (including tips) and commission payments and non-cash payments”.  It therefore appears that service charge/tronc payments cannot be claimed unless they are guaranteed.

Benefits in kind and salary sacrifice schemes

The New Guidance expressly states that the costs of benefits in kind are not claimable and “where the employer provides benefits to furloughed employees this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme”.  Presumably employees could agree to waive their right to receive benefits (other than the minimum pension auto enrolment contributions) under the terms of a furlough agreement though.

Benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay also cannot be included in the employee’s reference salary.  However, HMRC has confirmed that COVID-19 counts as a “life event” entitling an employee to switch freely out of a salary sacrifice scheme.

Tax/NICs and other charges

It was clear from the original guidance that income tax and National Insurance contributions would be deductible from furlough payments.

The New Guidance clarifies that the apprenticeship levy and student loans should also continue to be paid as normal, and grants from the Scheme do not cover these.


The New Guidance reiterates that employers must confirm in writing to their employees that they have been furloughed to be eligible under the Scheme, and states that a record of this confirmation must be kept for five years.  Employers still have to agree with their staff that they will be furloughed if there is no provision for lay-off in the contract of employment.