We set out current known facts concerning the potential furloughing of staff during the outbreak, with some practical advice

Here is what the government are currently saying:

Support for businesses through the Coronavirus Job Retention Scheme

Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those that would otherwise have been laid off during this crisis.

This applies to employees who have been asked to stop working, but who are being kept on the pay roll, otherwise described as ‘furloughed workers’. HMRC will reimburse 80% of their wages, up to £2,500 per month. This is to safeguard workers from being made redundant.

The Coronavirus Job Retention Scheme will cover the cost of wages backdated to 1 March and is initially open for 3 months, but will be extended if necessary. HMRC will set out more details shortly.


All UK businesses are eligible.

How to access the scheme

You will need to:

  • designate affected employees as ‘furloughed workers’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)

HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.

Rules as outlined in official statements released at 23 March 2020

  1. Furloughed members of staff must not work for the employer during the period of furlough.
  2. Furlough is from 1 March 2020, so is to be backdated. It will last for at least 3 months and will be extended if necessary. Note that while the scheme is backdated to the beginning of March as
  3. it is intended to support all those employed then, a firm will only be eligible to claim the grant once they have agreed the furlough with their staff and staff have stopped working for the employer. This will of course be subject to employment law in the usual way.
    It is available to employees on the payroll at 28 February 2020.
  4. All UK businesses are eligible, ‘any employer on the country, small or large, charitable or non-profit’ to use the Chancellor’s words.
  5. The scheme pays a grant (not a loan) to the employer.
  6. The grant will be paid to the employer through a new online system which is being built for this purpose.
  7. The employer will pay the employee through payroll, using the Real Time Information (RTI) system as usual, as required by the employment contract. This contract may be renegotiated but that is a matter for employment law. So RTI system reporting of payroll will continue as normal.
  8. Scheme will be administered by HMRC:
    • Relevant employees must be designated as furloughed employees.
    • Employers will submit information to HMRC through a new online portal.
    • As this will take time to build, businesses should look to the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime. The narrative used in the information released so far says ‘if your employer cannot cover staff costs due to COVID-19 they may be able to access support…’. This is a conditional phrase which may relate to existing funds available to the employer. We do not yet know how these might be determined, nor whether there is a bar of some description.
  9. Maximum grant will be calculated per employee and is the lower of:
    • 80% of ‘wages’. The notes published so far, use the phrase ‘wage for all employment costs up to a cap of £2,500 per month’. It is our understanding that this includes employers’ NIC and pension contributions. Wages will be determined by reference to a defined period (yet to be announced).
    • £2,500 per month.

What if you are an owner/managed company?

Many owner managed company director/shareholders pay small salaries and the balance of income as dividends. The scheme does not extend to dividends. Only the salary is relevant to the scheme.

To be furloughed the owner would need to stop all work for the company and therefore this may well be impractical for many.

How is payment going to work in practice?

We understand that the employer will pay the contractually agreed amounts as required by the employment contract in the usual way. This will involve paying the employee, and HMRC the PAYE and both primary and secondary National Insurance Contributions. The grant will be paid directly to the employer.
Employers will claim the grant through a new separate portal to be built by HMRC.

If Bayliss Ware operate your payroll, we will endeavour to deal with the above processes for staff on furlough, including requesting the grant through the new portal.

What is the £2,500 maximum grant based on?

The £2,500 monthly grant covers all employment costs, ie, salary, employer pension contributions required by auto enrolment (if applicable), and employer NIC.

Will entitlement to other employment benefits continue during the period of furlough

The rules for the grant will not displace the existing employment contract. So for example, we would expect the entitlement to holiday and sick pay would depend on the contract.
Employees eligible.

Can workers move in and out of furlough?

This has yet to be clarified, but it is considered likely that they will. The scheme is being designed to allow for flexibility so that furloughed staff can be brought back to work to replace those still working who later become sick.

Who can I choose to furlough?

The matter of which employees an employer decides to furlough will be a matter for negotiation with staff and employment law.

What if an employee refuses to be furloughed

An employee does not have to accept furlough if offered, but the employer could then make the employee redundant instead using the usual employment law procedure.

Can staff study while being furloughed?

We understand the answer to that is yes.


  • Furloughing should be considered if you have no work for some or all employees
  • You should retain any staff on their normal contract required to allow the business to continue or from whom you can continue to employ to generate income for the business
  • Some businesses may choose to do that even if they do not have full-time work for the individual as long as they remain available full-time for when work arises
  • Furloughing should be considered as a potential 3 month decision or longer, if extended, notwithstanding the opportunity to bring staff back from furlough if work arises or other non-furloughed staff become sick
  • You do not have to make up the 20% not paid by government grant or subject to the £2,500 per month overall limit. However BE CAREFUL. The government have made it clear that furloughing is subject to normal employment law. If you don’t make up the difference, you are varying their contract as we understand it and should ask furloughed staff to agree the new furloughed pay in writing (presumably an email will be sufficient) if you pay them less than their full contracted pay on furlough, e.g. you only pay them the 80%.

The above comments represent practical advice and cannot be relied upon as compliant with employment law. We are making these practical suggestions to assist clients. We are not trained or regulated to give legal advice. If in doubt please consult your own HR facility, help line or solicitor.

  • 80% pay may not be so bad for furloughed staff as they can apply for a three month mortgage holiday or ask their landlord to suspend their rent for a period. The government have stated that no tenant who cannot pay their rent will be evicted during this 3 month period. Also, while in lockdown everyone is saving money on social and entertainment expenditure among others.
  • We do have a template letter to staff from the HR helpline that our clients who sign up to our fee protection service have access to. We can provide a copy on request. However naturally we can accept no responsibility for your use of it, or whether it would be appropriate or lawful for you to use in your particular circumstances.
  • You do not have to decide to furlough all staff now. You can furlough others later if matters worsen in the Job Retention Scheme period March to May.


Best wishes to everyone and stay safe

MARCH 2020