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The Coronavirus Job Retention Scheme – What Does it Mean for Employers?


On 20 March 2020, the UK Government announced the introduction of the Coronavirus Job Retention Scheme for all UK employers, regardless of their size or sector.

The scheme will help employers to carry on part-paying salaries for those employees who otherwise would be “laid off” due to the Coronavirus crisis. These employees could now be kept on the employer’s payroll, preventing potential redundancies and periods of unpaid lay-off.

The scheme will be backdated to 1 March 2020 and run for three months, with a potential extension, if necessary.

Employers will need to decide which employees will be “furloughed”, notify them of this change to their employment, and then inform HMRC via a new online portal which has not yet gone live. In return, HMRC will reimburse employers 80% of the furloughed employees wages, up to a maximum of £2,500 per employee per month. Employers can top-up the 80% salary payment from HMRC but they are not obliged to do this.

Whilst the package is welcome news for employers who are struggling to cope with the financial strains caused by the current pandemic, there are still some key questions that remain unanswered:

  • Is the £2,500 cap gross or net?

It has been reported by the BBC that it is most likely to be gross, but the government has not yet confirmed this.

  • Do employees have to give their consent to being furloughed? Or can employers impose furlough upon employees without their consent even if this would technically breach their contract of employment?
    If an employer puts an employee on furlough leave without their consent, which results in the reduction of their salary, they could face a claim for the unlawful deduction of wages.
  • How will employers fairly select who to furlough?

Employers may need to consider that if they do not get any volunteers, they may have to consider a process of pooling and selection. If the process is not carried out properly, there is a risk of claims (including discrimination claims) being brought by employees.

  • Which workers can be furloughed?

The government has yet to confirm whether the scheme will extend to those on the PAYE system with “worker” status as well as those who are defined as “employees” under legislation.

  • Whilst an employee cannot work for an employer who has furloughed them, would they be able to carry out work for other employers during any period of furlough?

If the scheme is applicable to casual workers, they are likely to want to retain the right to seek work elsewhere if the 80% salary from one employer would not be enough pay to live on.

It is also difficult to predict whether the announcement of this scheme may disrupt any ongoing negotiations between employers and employees in relation to redundancies or temporary pay cuts. Staff may be more reluctant to agree on terms if they think they might instead be eligible for furloughing in the upcoming weeks.