Coronavirus Job Retention Scheme: guidance for law firms

Legal disclaimer

This guidance is the Law Society’s view on the Job Retention Scheme as at 6 November 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 who would otherwise have been made redundant due to the coronavirus pandemic.

The scheme will remain open until the end of March, though the government will assess in January whether employers should be asked to make a higher contribution to furloughed workers’ wages.

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, you can claim a grant to cover 80% of the normal hours not worked by an employee, up to a cap of £2,500.

All of this grant must go to the employee and you will need to cover national insurance and pension contributions.

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 will run until England comes out of national lockdown. At that point it will be replaced by the Job Support Scheme.

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 changes the employment relationship between employer and worker, which means that you will need to agree a contractual change with those who are furloughed.

Eligibility

The scheme is open to all UK organisations that:

  • have a PAYE payroll system
  • have a UK bank account

It does not matter if you have never used the scheme before: you can still furlough employees for the first time.

The scheme is also open to you whether your organisation remains open or closed.

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 unworked wages covered by the scheme.

Claiming a grant

HM Revenue and Customs (HMRC) has published guidance on how organisations can claim a worker’s wages through the scheme.

Only those workers who were on your PAYE payroll on 30 October 2020 are eligible to be furloughed.

Those who were also on the PAYE payroll on 23 September, but have not been paid since, are also eligible. This flexibility allows organisations to re-hire those they've made redundant and place the employee on furlough, though there is no legal obligation to do this.

You can claim the grant for the hours your employee does not work in a claimed-for period, calculated by reference to their usual hours worked.

HMRC will ask you to report the hours worked and the usual hours an employee would be expected to work in a claimed-for period.

If you're unsure how much you can claim the government has provided guidance on the steps to take before calculating a claim.

For worked hours, employees will be fully paid by their employer as outlined in their employment contract.

Choosing who to furlough

The government does not offer any advice on selecting staff to be furloughed, although they have suggested that discussing the scheme with staff is good practice.

Employment and equality law applies to this process, and that this includes coming to an agreement with workers if the employment contract needs to be changed.

If you have an agreement with an employee to go onto the Job Support Scheme, you will still need to ask them specifically to confirm that they agree to be furloughed instead.

It’s good practice to create an objective selection procedure to govern how you decide who to furlough. This will ensure you’re fair and consistent, limiting the risk of falling foul of discrimination law.

Direct discrimination occurs when a person is treated worse than another person because of a protected characteristic. For example, if you chose a woman because you assume that she would not be able to do her job as well as a man because she is a parent, you’re likely to be guilty of sex discrimination.

Indirect discrimination occurs when a policy applies in the same way for everybody but disadvantages a group of people who share a protected characteristic. For example, if you selected people on a ‘last-in, first-out’ criteria you risk discriminating against workers based on age, because the criterion is likely to unfairly target young people.

You must ensure that the decision on who to furlough is not based on something discriminatory, unless you can justify this. For example, you may be able to justify giving preference to those in vulnerable groups because you cannot meet your duty of care towards them if their job requires them to break social distancing guidelines.

In some cases, the job role will determine who is selected. If you wish to furlough only a percentage of those who perform certain roles, you should consider asking for volunteers first – while making no guarantees that they’ll be selected.

Getting agreement from workers

You should get the worker’s agreement to being furloughed as you’ll be making a significant change to their employment contract.

The government’s guidance states that to be eligible for the grant you must have confirmed in writing to the employee that they've been furloughed.

You need to state the number of hours your employee should work, compared to their previous hours. If this changes during the period claimed for, you'll need to confirm this change in writing.

HMRC mandates that employers must:

  • make sure that the agreement is consistent with employment, equality and discrimination laws
  • keep a written record of the agreement for five years, and
  • keep records of how many hours their employees work and the number of hours they are furloughed for six years

If you do not get an agreement, then you risk HMRC asking you to pay back the grant, plus workers bringing claims for breach of contract and unlawful deduction of wages.

Frequently asked questions

Yes. Flexible furloughing will be allowed in addition to full-time furloughing.

You can claim the grant for the hours your employees are not working, calculated by reference to their usual hours worked in a claim period.

HMRC will ask you to report hours worked and the usual hours an employee would be expected to work in a claim period. They may ask for further evidence of usual hours, such as a copy of the employee’s employment contract, if they decide to audit your claim.

For worked hours, employees will be paid as normal.

Yes. You’ll be able to claim the grant for any working arrangements, but it’s important to remember that ways of working that are outside the normal employment contract need to be agreed with employees.

If you’re planning on varying the hours of those you furlough, it’s good practice for there to be a clear understanding as to how and when hours are set.

Those with caring responsibilities may need space to make appropriate arrangements if their actual working hours increase.

When claiming the CJRS grant for furloughed hours, you’ll need to report and claim for a minimum period of seven consecutive calendar days.

Yes. If this happens, you can explain to the worker that the alternative could be redundancy, if that’s the case.

The worker will still have their statutory rights protecting against unfair dismissal, so if they refuse to accept the changes, and your organisation can no longer afford its wage bill, a fair redundancy process will need to be followed.

Yes, though the furlough grant cannot be used to fund redundancy pay.

If you have commenced a redundancy situation it's possible that during the consultation it will be suggested that employees should be furloughed in the first instance, and the organisation should wait until the scheme ends before making a decision.

Such a suggestion is most relevant if the reason for redundancy is mainly to do with the financial impact COVID-19 has had on the organisation.

Workers can still have contact with your organisation, but you should pay their full wages for the time worked. 

The scheme defines work as an activity that makes money or provides services for an employer or any organisation linked or associated with their employer.

While on furlough employees can:

  • take part in training
  • volunteer for another employer or organisation (if contractually allowed), and
  • work for another employer (if contractually allowed)

It’s best to develop a clear policy on acceptable contact while on furlough, so everyone understands where the boundaries are.

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 full-contracted 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.

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.

The government has confirmed that employees can be furloughed where they are unable to work because they:

  • are shielding in line with public health guidance,
  • need to stay at home with someone who is shielding, or
  • have caring responsibilities resulting from coronavirus, including employees that need to look after children

The scheme is not intended for short-term sick absences. If, however, you want to furlough someone for business reasons and they are currently off sick, you can.

Furloughed employees who become ill must be paid at least Statutory Sick Pay (SSP).

It's up to employers to decide whether to move the employee onto SSP or to keep them on furlough. In most cases it will be administratively simpler and financially beneficial for the employee to remain on furlough.

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’s the firm’s responsibility to make suitable arrangements.

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.

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