Coronavirus Job Retention Scheme: Guidance for law firms

Legal disclaimer

This guidance is the Law Society’s view on the Job Retention Scheme as of 18 June 2020. It is not legal advice. If you wish to use the scheme you should read all the government guidance before deciding how best to proceed. You may need to seek independent legal advice from an employment lawyer, especially if you are considering changing employment contracts.

About the scheme

The Coronavirus Job Retention Scheme (the scheme) is a financial package which helps all UK employers pay the wages of workers in organisations that would otherwise have to reduce their workforce due to the coronavirus pandemic.

Changes to the furlough scheme were announced on 29 May, and these changes are covered under Flexible furlough, in the FAQs and in the hypothetical scenarios below.

The government wants to help organisations to keep as many workers as possible on their payroll until the longer-term economic impact of coronavirus, and the associated suppression measures, are known.

Through the scheme in June and July you can claim a grant to cover 80% of a worker’s salary, up to £2,500 per month, who you’ve furloughed. For June and July, the grant also covers associated employer national insurance and minimum auto-enrolment employer pension contributions.

From August 2020, the level of the grant will be slowly tapered. For more information see Employer contribution to wages below.

You can choose to top up the grant if you wish, for example to ensure that the worker receives their full salary.

The scheme does not cover discretionary fees, commission and bonuses, although you can claim for any regular payments you’re obliged to pay your employees. This includes:

  • wages
  • past overtime
  • fees
  • compulsory commission payments

The scheme is backdated to 1 March 2020 and will run until the end of October, though it was shut to new entrants after 10 June. After then you may only furlough workers who have already been furloughed. The only exception to this is that employees returning from family leave may be furloughed on their return.

There is no legal definition of furlough leave, but colloquially “to furlough” a worker means to put them on a paid leave of absence. The scheme does not directly change the employment relationship between employer and worker, which means that you may need to agree a contractual change with those who are furloughed.

View more information and updates on the scheme

Eligibility

The scheme was open until 10 June to all UK organisations that:

  • had a PAYE payroll system on 28 February 2020
  • have a UK bank account

Those you furlough can be on any kind of employment contract, although they must have been paid through your PAYE system.

Some restrictions have been placed on the furloughing of public sector workers, including those who work for non-governmental bodies but have their salary directly funded by the government. The Ministry of Justice has confirmed that staff at criminal legal aid firms are not classified as public sector workers, and can have their wages covered by the scheme.

The final date an employer can furlough an employee for the first time was 10 June, in order for the current three-week furlough period to be completed by 30 June.

From 1 July the scheme will only be available to employers that have previously used the scheme in respect of employees they have previously furloughed. From this point onwards, employers will only be able to furlough employees that they have furloughed for a full three-week period prior to 30 June.

Claiming a grant

HM Revenue & Customs (HMRC) has created an online claims portal for the scheme, through which employers can make claims.

The HMRC has also published guidance on how organisations can claim a worker’s wages through the scheme (the guidance).

Only those workers who were on your PAYE payroll on or before 28 February 2020 are eligible for being furloughed. Until the end of June they must also not do any work for your organisation during the time you claim the grant for. This will change from 1 July. For more information see Flexible furlough below.

Workers who joined your organisation after 28 February 2020 cannot be furloughed.

HMRC also requires you to write to all those you’ve furloughed, confirming their new situation, and to keep a record of this communication. 

Employer contributions to wages

From August 2020, the level of the grant will be slowly tapered.

In August, the government will pay 80% of wages up to a cap of £2,500 and employers will pay employer national insurance contributions (NICs) and pension contributions for the hours the employee does not work.

In September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee does not work. Employers will pay employer NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500.

In October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will pay employer NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500. The cap will be proportional to the hours not worked.

Flexible furlough

Bringing employees back to work part-time or temporarily

From 1 July, employers can bring back to work employees who have previously been furloughed for any amount of time and any shift pattern, while still being able to claim the grant for their normal hours not worked.

This means that an employee on furlough can carry out some work for their employer while on furlough. In these circumstances the employer will need to enter into a new agreement with the employee (unless there is a recognised trade union in which case terms can be collectively agreed).

The employer will need to pay the employee in full for the hours they work and will be able to claim back a percentage of the employee’s wages (up to a pro-rated cap) for the time spent on furlough. The employer will also need to keep detailed records of actual hours worked and ‘usual’ hours.

Operating flexible furlough in practice

Operating flexible furlough is more complicated than running a standard furlough process. You should familiarise yourself with the government’s guidance on preparing claims for flexible furlough before negotiating new working arrangements with your staff.

Employers will need to determine the length of their claim period. A claim can be made before, during or after running payroll but you should not make the claim until you know exactly how many hours a flexibly furloughed employee will work.

Worked hours and furloughed hours for a worker moved onto a flexible furloughing arrangement are calculated by reference to the employee’s “usual hours”. The method of calculating usual hours is set out in the guidance for preparing claims. The government has published some examples of how to do this calculation.

The new rules say that the total number of workers furloughed in one claim period after 1 July cannot exceed the maximum number of employees furloughed in a single claim period before 30 June. For example, if an employer had previously made two claims for 10 and five employees during different months, the maximum number of employees they can furlough in one claim period after 1 July is 10.

We recommend reading the government’s guidance on steps to take before calculating your claim using the Coronavirus Job Retention Scheme before taking up the option of flexible furlough.

Frequently asked questions

No, not for the time people are furloughed up until the end of June. This will change from 1 July. For more information see Flexible furlough above. Note the scheme has closed to new entrants.

You can still reduce costs by temporarily reducing the hours of some or all of your remaining workers, and so reducing your salary bill, but you will not be able to apply to the scheme to fund the lost wages. This would be a significant change to the employment contract so can only be done with the worker’s agreement.

Yes. Up until the end of June those furloughed had to be away from work for a continuous period of at least three weeks.

From July 1, the minimum furlough period of three weeks will be removed so you will be able to furlough an employee for a shorter period of time. The government wants employers to be able to bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim CJRS grant for the hours not worked.

From 1 July, flexible furlough allows you to share the need to furlough among a wider pool of staff and keep more workers involved in the organisation while you consider the financial implications of coronavirus.

If you’re going to operate a roll-on/roll-off furlough scheme you should consider how this will operate in practice and clearly explain this to your workers.

Technically you do not have to give workers notice that you’re recalling them from furlough, but you should consider whether they have enough time to make necessary arrangements to be able to work. The guidance says that to still be eligible for the grant, employers must agree with their employee any new flexible furloughing arrangement and confirm that agreement in writing.

See also How can I recall a worker who has been furloughed?

Yes. If this happens you can explain to the worker that the alternative is redundancy, if that is the case. The worker will still have their statutory rights protecting against unfair dismissal, so if such a decision necessitates for business reasons a reduction in staff numbers you would still need to follow a fair redundancy process.

Yes, although you must follow legal redundancy processes, such as consultation, as furloughed workers maintain all of their employment rights.

If you decide to automatically make redundant those on furlough without going through a proper redundancy process you may be judged to have instigated an unfair selection process.

Workers are not allowed to do any work while they are on furlough leave, though they can still have contact with the organisation.

You should think about how best to keep those who are furloughed in touch with how the business is operating and offer them the same opportunities to update their skills as those who continue to work. This is especially true for those workers who will not from 1 July start working part-time.

When furloughed workers may still be able to:

  • attend (virtual) social events
  • be consulted on any changes happening in the organisation
  • take part in formal HR duties, such as giving evidence in disciplinary investigations

What’s important is that they do not work for the organisation during the time they are on furlough leave, including doing anything that creates revenue.

It’s best to develop a clear policy about how furloughed workers can stay in contact with the organisation, so everyone understands where the boundaries are.

The government does not prohibit those who are furloughed from earning a salary from another employer while on furlough leave. If your worker did this, it would not affect your ability to receive the grant.

In reality the employment contract you have with your worker will demand a certain level of exclusivity. You may want to consider whether these terms could be modified while the worker is furloughed, especially if they have agreed to a salary cut. For example, you could say that you’ll allow those furloughed to take up a role with a non-competing business, with your prior consent, as long as they can respond to a request to come back to work in an agreed timeframe.

The government explicitly says that those who are furloughed can volunteer while on leave, but this again could be constrained by in the terms of the employment contract.

You may wish to consider whether any restrictions on volunteering should be lifted while the worker is furloughed – as long as any volunteering activity does not make money or provide services for your organisation.

The government has not provided guidance on how to end a furlough period. Most employment contracts require a person to be available for work during a certain time if their employer asks them to be, so it’s unlikely that a furloughed worker will be able to turn down a request to return to work.

It’s good practice to develop a policy that states how furloughing ends so everyone understands the process from the outset. This might include a reasonable period of notice, for example one week. The furloughed worker might have to change some of their personal arrangements, such as caring arrangements, before they can return to work.

If there is a furlough agreement with the employees, then the furlough should be ended in accordance with the furlough agreement, as per the Job Retention Scheme Direction.

If there is no furlough agreement, then it is best to give reasonable notice to the employee in writing that their furlough is ending. You should consider what other steps may be required, such as reasonable adjustments or health and safety consultation.

Yes. While on furlough leave all their contractual arrangements remain the same, and workers maintain their rights under the Working Time Regulations 1998.

You may face a challenge when furloughing ends as those who are furloughed may want to use their accrued holiday just as your workload is increasing. You may wish to offer to buy back the annual leave that is in excess of statutory leave.

A new regulation has been introduced, allowing those who cannot take their full annual leave entitlement because of coronavirus to spread out their extra leave over two years.

You should consider whether it would be sensible to create a new holiday policy, such as capping the amount of leave a worker can take in a three-month period to three weeks, to manage this challenge.

In most circumstances, no. Furloughed employees who become ill must be paid at least the amount they would have received in statutory sick pay (SSP). Employers should make it clear to furloughed workers that they do not need to report sick days while furloughed, unless their salary is below £95.85 per week.

From a legal point of view, it could be argued that it’s not technically possible to be sick while furloughed as your worker’s condition does not stop them from fulfilling their duties during that time. The worker would not be ready, willing and able to work when they are sick, but this is not relevant until the furloughing arrangement ends. The government says that it is up to employers to decide whether to move workers onto SSP or to keep them on furlough.

The guidance states that the normal rules for maternity and other forms of parental leave pay apply. You can claim through the scheme for any enhanced maternity pay that you offer for maternity or paternity leave, subject to the £2,500 and 80% caps.

If a maternity/paternity leave period comes to an end while the scheme is in operation you can furlough that worker, as long as they meet the standard criteria of the scheme.

Yes, as long as they meet the standard criteria of the scheme.

The Solicitors Regulation Authority (SRA) has stated that trainees can be supervised remotely and that it is the firm’s responsibility to make suitable arrangements. Therefore, working from home does not need to mean that a trainee should be furloughed.

You can find more information about education and training on the SRA website.

No. The government has said that to be eligible for the grant, employers must agree with their employee any new flexible furloughing arrangement and confirm that agreement in writing. Employers will be able to agree any working arrangements with previously furloughed employees, but it must be an agreement. It is a good idea to discuss potential new working arrangements with those you have furloughed as soon as possible, as they may need to rearrange care commitments.

The one exception to this is if you wish to end the furlough arrangement. At this point the employee has to return to their old contractual arrangements, as they are still committed to be willing and able to fulfil this agreement.

Scenarios to explain how flexible furlough will work

Example A

Firm A has two employees, called X and Y. X has been furloughed prior to 10 June, whereas Y hasn’t. This means that going forward:

  • Y will not be able to be furloughed at all, no matter what happens after 10 June
  • X will be able to be brought back part-time from 1 July, and have the rest of their wage covered by the Scheme. They will also be able to be brought back to work, then placed on furlough (either full or part-time), then brought back to work numerous times up until the end of October. The employer will have to agree working patterns with the employee

Example B

Firm B has two employees, called V and W. Both of V and W have been on furlough at earlier stages, but by the start of June they are both working full time. Can Firm B re-furlough these employees, either full-time or part time, after 1 July?

Yes, provided these employees were previously furloughed for a consecutive three-week period at any time between 1 March and 30 June. Employees will be eligible for flexible furloughing from 1 July if they were previously furloughed for a continuous three-week period at some point prior to 30 June (unless they are returning from maternity leave or other family leave). There is no demand for workers to be furloughed at a particular point in time to be able to be furloughed again between July and October.

Firm B will need a new written flexible furloughing arrangement with their employees. The agreement will need to cover the hours they will be working and the hours they will be furloughed. From 1 July, the minimum furlough period of three weeks will be removed so you will be able to furlough an employee for a shorter period of time.

Firm B will need to pay the employees in full for the hours they work and will be able to claim back a percentage of the employee’s wages (up to a pro-rated cap) for the time spent on furlough. The employer will also need to keep detailed records of actual hours worked and ‘usual’ hours.