The Job Retention Scheme

The Job Retention Scheme

As the nation continues to respond and deal with the ongoing impact of the Coronavirus, the UK Government has announced in the Spring Budget 2021 that the Job Retention Scheme will be extended to the end of September 2021.

In this insight article, we answer some of the key questions from employers and employees alike concerning the Job Retention Scheme and take account of the most recent developments. We’ll continue to update this page as developments are announced.

Our employment team is available by phone and email to answer your questions about the Job Retention Scheme, or other areas of employment law, through our free online clinic.

We are also offering a range of bespoke virtual training to clients, covering employment and HR matters. If you would like to discuss our virtual training packages in more detail, please contact Andrew Brown or Mandy Armstrong.

What is the scheme?

We’ve become familiar with this temporary scheme which was initially open to employers from 1 March until the end of October 2020 and has now been extended to the end of September 2021. It allows employers to obtain some reimbursement from the UK Government for wages paid to employees in relation to any periods where their employees are not working.

This article outlines the provisions of the scheme based upon the available information on 15 April 2021, covering the position for claims relating up to 30 September 2021.

Claims up to 31 October 2020

Until 30 November 2020, employers will be able to continue to claim for periods ending on or before 31 October 2020.

In relation to any such claim:

  • The employee claimed for must have been previously furloughed for a period of at least three consecutive weeks, taking place any time between 1 March 2020 and 30 June 2020, and the employer must have claimed for this period by 31 July 2020.
  • Employers must pay employees for hours worked.
  • In relation to any furloughed hours, employers are required to pay at least 20% of the employee’s normal pay, subject to a cap of £1, 875 per month (based on the employee being on furlough 100% of the time) or a pro rata amount if the employee works part time.
  • The Government will pay up to 60% of the normal pay for the furloughed hours.
  • Employers have to pay the employer’s NI contributions and pension contributions.
  • The number of employees which can be claimed for in any single claim period starting from 1 July 2020 to 1 November 2020 cannot exceed the number of employees claimed for under any claim that was made before 30 June 2020.

Claims from 1 November 2020

The key points to note for claims from 1 November 2020 onwards are:

  • Employers will be able to claim 80% of an employee’s usual salary for hours not worked, up to a maximum of £2,500 per month.
  • Employers will be required to contribute 10% of the 80% in July 2021 and 20% in August and September 2021.
  • For claims from November 2020 to 30 April 2021, employers can claim for employees who were employed as at 30 October 2020, provided a PAYE submission notifying a payment of earnings for that employee was made to HMRC between 20 March 2020 and 30 October 2020.  Where an employee was made redundant or stopped working for the employer on or after 23 September 2020, they can be re-employed and placed on furlough.  This applies provided the employee was employed on payroll on or before 23 September 2020.
  • For claims from 1 May 2021 to 30 September 2021, employers can claim for employees who were employed as at 2 March 2021, provided a PAYE submission notifying a payment of earnings for that employee was made to HMRC between 20 March 2020 and 2 March 2021. Whilst the most recent Treasury Direction (15 April 2021) does not deal with the issue of employees who were made redundant or stopped working between 1 May 2021 and 30 September 2021, it would appear that an employee who was made redundant or dismissed on or after 23 September 2020 cannot be re-employed and put on furlough on or after 1 May 2021. The employee would need to have been re-employed on or before 2 March 2021.
  • There is no requirement for employees to have been furloughed previously.
  • There is no maximum number of employees who can be claimed for.
  • Employers must have confirmed to the employee in writing that they have been furloughed.  The employee does not however have to provide a written response.  Agreements may apply retrospectively, to cover the period from 1 November 2020.  However any claim for the period from 1 November must be supported by a Furlough Agreement that was put in place before midnight on 13 November 2020.
  • Employers can furlough employees for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked.  This means that employees can be fully furloughed, or flexibly furloughed.  There is no minimum furlough period.
  • Employers have to pay the employer’s NI contributions and pension contributions.
  • From December 2020, HMRC will publish the names of companies which have made claims under the Scheme, along with a ‘reasonable indication’ of the amount claimed.

The guidance published on 10 November 2020 stated that the Government was reviewing whether employers should be eligible to claim for employees serving contractual or statutory notice periods in relation to claim periods from 1 December onwards.  The Government subsequently confirmed on 13 November that for claim periods starting on or after 1 December 2020, employers cannot claim for any days on or after 1 December 2020 during which the furloughed employee was serving a contractual or statutory notice period for the employer (this includes people serving notice of retirement or resignation).

If an employee subsequently starts a contractual or statutory notice period on a day covered by a previously submitted claim, the employer will need to make an adjustment to the claim.  This is an important change to the way in which the Scheme will operate after 1 December 2020 and suggests that even if notice is served prior to 1 December 2020, the employer will not be able to claim in respect of the employee if any of the notice period is served on or after 1 December.

How is the payment for employees calculated?

How you calculate the claim will depend on what category the staff fall under. For instance, there are different methods for those whose pay varies, those who have been employed for less than a year and potentially for those who are on different kinds of leave. The claim reference period can also be weekly or monthly.

When determining the amount due to the employee, this will require looking back at the employee’s normal hours and pay for the same work in 2019, rather than 2020. This is to reflect the fact that employees on furlough in 2021 may also have been on furlough in 2020.

Non-monetary benefits, such as the value of health insurance or a car, cannot be claimed. Future fees, commission and bonuses should also not be included. Benefits provided through salary sacrifice schemes should also not be taken into consideration when calculating the employee’s regular wage.

However, when calculating the employee’s regular wage, the employer should include overtime, fees and contractual commission payments that had been paid to the employee over the relevant period.

Employees who have multiple employers can be furloughed for each job. The cap applies to each employer separately.  And so that means that an employee could be paid £5,000 per month if they are a high earner with more than one employer.

Do employers have to top up pay?

Employers may elect to top up salaries but there is no obligation to do so if the employee is receiving 80% of normal pay (subject to the caps referred to above) in relation to the furloughed hours.  However, agreement must be reached with the employee where employers are not topping up salaries.

How do you claim?

It is for the employer to make payment to the employees and then claim under the scheme, through the online portal. The employer must provide:

  • Its ePAYE reference number
  • The number of employees being furloughed
  • The claim period (start and end date)
  • Amount claimed
  • Its bank account number and sort code
  • Its contact name
  • Its phone number

It is up to the employer to calculate the amount claimed but HMRC has the right to retrospectively check the claims.

Employers claiming for 100 or more furloughed employees can upload a file with the information rather than input the data for each employee. Employers with fewer than 100 furloughed employees will be asked to enter details of each employee being claimed for directly into the system.

The sixth Treasury Direction (25 January 2021) covers the provisions for claims from 1 February to 30 April 2021, and the seventh Treasury Direction (15 April 2021) covers claims from 1 May 2021 to 30 September 2021. Although the vast majority of the provisions remain the same in both Directions, changes have been made to the deadlines to submit claims. The deadlines are as follows:

Period claimed for Deadline for submission of claim
February 2021 15 March 2021
March 2021 14 April 2021
April 2021 14 May 2021
May 2021 14 June 2021
June 2021 14 July 2021
July 2021 16 August 2021
August 2021 14 September 2021
September 2021 14 October 2021

There is also strict deadlines for the amendment of claims.

Does the scheme cover all employers?

The scheme is open to all UK employers with a UK bank account and UK pay-as-you-earn (PAYE) payroll scheme.

This includes businesses, charities, recruitment agencies, public authorities etc. Even public sector organisations are included – although the UK Government doesn’t expect many of them will utilise the scheme. This is because many of their operations are deemed essential and/or they receive public funding for staff costs.

The latest policy statement from the UK Government states that the payment is for those employers who ‘cannot maintain’ their workforce because their operations have been affected by coronavirus.   That is different to previous guidance which stated that the payment is to support ‘employers whose operations have been severely affected by coronavirus’ and the Government’s initial statement which said that it is to support those who ‘would otherwise have been [made redundant]’.

And what if HMRC does not accept that the employer’s operations have been affected by coronavirus?  On reading the guidance we have, so far, it could mean that furlough pay ultimately wouldn’t apply.  Indeed the UK Government has recently suggested that employers who have not been affected by coronavirus but who have used the scheme might be guilty of fraud.

Which employees are covered?

For any claim relating to the period up to 31 October 2020, any employee claimed for must have been furloughed previously for a period of at least three consecutive weeks, taking place any time between 1 March 2020 and 30 June 2020 and a claim for that previous furlough period must have been submitted by 31 July 2020.

For any claim relating to the period from 1 November 2020 to 30 April 2021, the extended scheme applies to all employees who are on the PAYE system on or before 30 October 2020 and there is no requirement for the employee to have been furloughed previously. The employer must have made a PAYE submission between 20 March 2020 and 30 October 2020. The only exception to this is employees who were made redundant, or stopped working for the employer on or after 23 September 2020. Those individuals can be re-employed and placed on furlough, provided they were on the payroll on or before 23 September 2020. It is also possible for employers to claim for workers who have transferred under TUPE on or after 1 September 2020, where certain conditions are met.

For any claims relating to the period 1 May 2021 until 30 September 2021, the extended scheme applies to all employee who are on the PAYE system on or before 2 March 2021 and there again is no requirement for the employee to have been furlough previously. The employer must have made a PAYE submission between 20 March 2020 and 2 March 2021. The most recent Treasury Direction (15 April 2021) does not deal with the issue of employees who are made redundant or stopped working between 1 May 2021 and 30 September 2021, it would therefore appear that an employee who was made redundant or dismissed on or after 23 September 2020 cannot be re-employed and put on furlough on or after 1 May 2021. Those employees would need to have been re-employed on or before 2 March 2021. It should be noted that it is also possible for employers to claim for workers who have transferred under TUPE on or after 1 January 2021, where certain conditions are met.

The scheme covers the wages for:

  • Full time and part time employees (including those on any category of visa)
  • Apprentices and trainees
  • Workers who are not working (including seasonal workers) providing they are not on ‘unpaid leave’ (see below)
  • Some of those on zero hour contracts
  • Some agency workers

The self-employed are not included and will receive support through a separate system (the Coronavirus Self-employment Income Support Scheme).

How do employers get agreement?

The scheme makes it clear that ordinary rules of employment law apply. You cannot ‘put’ an employee on furlough leave, especially if you are going to reduce their wages. You need their agreement, even if they will not be financially disadvantaged.

The latest guidance makes clear that employers must have confirmed to their employee in writing that they have been furloughed and notes that collective consultation obligations may be triggered.

While the guidance suggests that collective consultation might apply if sufficient numbers of staff are involved, that isn’t the end of the story. Where there is a recognised trade union involved, bypassing the union and going straight to the employees with an offer of furlough or part time furlough could expose the employer to punitive Tribunal awards of up to £4,917 per trade union member. 

How do employers select employees for furlough leave or flexible furlough?

Selecting employees for furlough leave may not be particularly easy. It’s possible that some employees, including those with children for example, might want to take furlough leave. Equally, those with caring responsibilities might also want to take furlough leave. In such a situation, an employer may need to select one over the other. Issues could arise in relation to indirect sex discrimination as compared to indirect age discrimination in cases such as that.

Equally, employers may have employees who do not want to take furlough leave. This will likely apply to those who are in higher paid jobs and/or those whose domestic outgoings might not easily allow for such a drop in salary. If the alternative is potentially redundancy however, furlough leave might be more attractive. But they might well, now or later, ask “why me?” and bring a claim for discrimination.

Some employers might wish to take into account what an employee intends to do with their furlough time when deciding who to pick. Will they be undertaking some charitable work to help us all through this? But, again, those with caring responsibilities might struggle more than others to do that. And there are certain restrictions on what employees can do during furlough leave (see below).

It might be that different protected characteristics of employees effectively compete with one another. In such situations, employers have to be clear about why they are making the decisions they are and ensure that they are behaving proportionately.

Can employers swap employees during furlough leave?

It is possible for employers to rotate periods of furlough leave. Employees can be furloughed multiple times.  From 1 July, the 21 day minimum furlough period has not applied (other than in a small minority of cases where the Furlough period started before 1 July).  For claims from 1 November onwards there is no minimum furlough period.

What can be done during furlough leave?

Charity work?

Employers will need to be careful that any requirement or encouragement to work does not amount to the employee ‘working’ for their employer. The question could arise: is the employee undertaking activities which would otherwise be performed by the employer under the banner of ‘corporate social responsibility’?

The employee cannot provide services to or generate revenue for, or on behalf of the employer.

There are some delicate nuances here.

Director duties? Trustee duties?

Company directors can still perform their statutory duties while on furlough leave. They are also permitted to do what is necessary to pay wages to an employee or make a claim under the Scheme.

Carrying out of duties as a trustee or manager of an occupational pension scheme is also permitted with some exceptions.

Directors are not permitted to carry out any other work for the company while on furlough leave.


Some employers may request that their employees undertake some training while furloughed, e.g. completing online training courses. While HMRC recommends that furloughed employees should be encouraged to undertake training, there will be risks associated with putting too much pressure on staff.

Furloughed employees can study or undertake training if it is to improve an employee’s effectiveness in the employer’s business or the performance of the employer’s business so long as such training does not provide a service to the employer or the business activities or contribute to business activities, generate income or profit, or significantly contribute to the production of goods or services for sale by the employer or ‘a person connected with the employer’.

Staff must be paid at least the National Living Wage or National Minimum Wage, even if this is more than the 80% of their wage that will be subsidised during any period of training.

Apprentices on furlough leave can continue their training as long as it does not provide services or generate revenue for their employer.  Employers still need to pay the apprenticeship levy in the usual way.

Another job?

Employees can get another paid job during furlough leave as long as the new employer is not a ‘linked’ or associated organisation. This will mean that many employees might be better off than they were previously.

Redundancy consultation? Disciplinary or grievance processes?

There’s something of a misapprehension that employers can’t speak to individuals who are on leave. It’s true that some might choose not to participate, but the pressure on everyone is such that many employers would be able to persuade an employment tribunal that, if it came to it, they had acted reasonably in making decisions on the basis of the information they had available where an employee refuses to participate.

It’s our view that consultations taking place during furlough leave would not amount to ‘work’. The HMRC guidance notes as updated on 12th June 2020 note that ‘normal redundancy rules apply to furloughed employees’.

Can annual leave be taken during furlough leave?

In terms of the Working Time Regulations 1998, employees are entitled to 5.6 weeks’ paid leave per year. This even applies, generally speaking, to those who only work part of the year – providing they remain employed throughout. Payment for a week’s leave is calculated based upon an average of pay received previously. So employers will potentially still be faced with an accruing obligation to provide paid annual leave at some point in the future.

Workers on furlough can take holiday without disrupting their furlough. Such holiday pay should be calculated in line with current legislation based on usual earnings. Where this calculated rate is above the pay the worker receives while on furlough, the employer must pay the difference. In other words, where the employee has agreed to 80% pay during the furlough period, the employer must pay them at 100% during any period of holiday. That being said, employers can still only claim 80% from HMRC, not 100%.

There are various obvious advantages to employers of requiring employees to take annual leave during furlough. However, there are also advantages to the employee, as some employers were put off the scheme, and opting for redundancy, when they were concerned about the accruing holiday pay costs.

While the guidance sets out a summary of how employers might be able to require employees to take leave, some care is needed as there can be particular contractual obligations regarding the setting of holiday dates and regarding holiday pay.

There is new legislation now entitling employees to carry some leave over into the next two years where it has not been possible to take it in the holiday year.

Employers who are tempted to put their employees onto flexible furlough just so that the employees can take annual leave and the employer claim it back, should take some care.  While it might be possible to explain a proportionate share of the leave taken during furloughed hours, if it all falls within furloughed hours then that might be an abuse of the scheme.

Sick leave? Statutory Sick Pay (SSP)?

Employees who are not on furlough leave are still entitled to SSP if they meet certain criteria.  But, for most, this will pay them less than they would be paid if they were on furlough leave.

There are risks for employers who put people on furlough leave when they are unfit for work. The Treasury Direction dated 22 May 2020 indicates that the employee cannot be furloughed until they are fit to work if they have been receiving SSP or were due to receive SSP, but that appears to conflict with other official guidance.  Employers should exercise particular caution and seek advice when proposing to furlough employees who are otherwise unable to attend work, whether or not they are in receipt of SSP.

Employers can furlough those who are clinically extremely vulnerable or at the highest risk of severe illness from Coronavirus. An employer does not need to be facing a wider reduction in demand or be closed to be eligible to claim for these employees.

What about those on unpaid leave?

Under the 15 April 2020 Treasury Direction, those who were on unpaid leave were not eligible for furlough leave (unless placed on unpaid leave after 28 February 2020).  However, the rules are complex and were changed by the Treasury Direction of 22 May 2020, which meant that each case of unpaid leave required to be considered separately to determine whether the individual could be placed on furlough leave.  The latest guidance does not specifically address the issue of unpaid leave.

What about maternity leave and sick leave?

Excluding those on longer term sick leave or on maternity leave (for example) could give rise to discrimination claims, and the employer’s decision may or may not be justifiable. Those returning from leave (of any description) could be put on furlough leave in the same way as others.

Employers might find that those who are on unpaid leave will say that they intend to return early. However, there are certain complex provisions which seek to limit the extent to which individuals can move from unpaid leave to furlough leave.


Where a company is being taken under the management of an administrator, it is possible to access the Job Retention Scheme if there is a reasonable likelihood of retaining the workers.

Transferring Employees

For claims up to 31 October 2020, new employers can claim in respect of employees transferred under TUPE provided the employees claimed for were previously claimed for by the prior employer.  For claims from 1 November 2020, new employers can claim for transferred employees provided those employees were employed by the previous employer on or before 30 October 2020 and transferred to the new employer on or before 1 September 2020.

Other options

For some employers furlough leave is not suitable. For example:

  • They might still need the employees, but for less hours
  • They might still need the employees 100%, but cannot afford to pay them 100%
  • They might not be able to afford to pay the employees if reimbursement is uncertain

These scenarios can perhaps be addressed using ‘flexible furlough’.

Negotiation of reduced pay and reduced hours remains possible. If necessary, redundancy is still possible. Again however, process and consultation will be important even where timescales are tight, and especially where there are 20 or more individuals involved.

Even after current restrictions are lifted and furlough leave comes to an end, few businesses will return to normal immediately. Many employers will, understandably, not wish to operate on the hope or assumption that they will.


There’s a lot to think about. Employers will need to act very carefully at this stage to ensure that they and their employees can benefit from furlough without storing up too many problems for the future.

Considering contracts will be crucial. Consultation will be crucial. Fair selection processes will be crucial. Trying to reach agreement will be crucial. Different employers will have different options here. Furlough agreements, settlement agreements and paper trails could become very important in the future. Of key importance is retaining as much flexibility as possible.

Legal disclaimer

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