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Furloughing staff and the Coronavirus job retention scheme

author/source: Holly Jade O'Leary

The Coronavirus Job Retention Scheme (“the CJR Scheme”) will apply retrospectively from 1st March 2020 for at least 3 months until 30th June 2020, unless extended.


This will allow all UK employers with employees on a PAYE scheme to designate employees as furloughed workers. Whilst on furloughed leave, employees cannot take work on behalf of their employer.  The CJR Scheme will apply to any employee who would otherwise have been laid off  with support to continue to partially pay these employees salaries, and protect employees from redundancy.  The updated Guidance says that employees can be furloughed for a minimum of 3 weeks. This means that employers could rotate employees in and out of furlough leave, 3 weeks on, 3 weeks off. Employees that were made redundant on or after 28th February 2020 due to conditions experienced by COVID-19 may be rehired and furloughed.

Employees with two or more employers can be furloughed for each job separately but the £2,500 cap refers to each employer individually. Therefore an employee can be furloughed by one employer, but continue to work agreed hours for another employer. Employers can be furloughed from one job, and receive 80% of their salary from that role, and work for another employer during those hours they would usually be working for the employer that has furloughed them.

If furloughed employees work for another employer during the hours they would usually be working for the employer who has furloughed them, payments by HMRC will be paid even while the employee picks up other work. The employee will receive furloughed payments from the first employer and their normal wages from the new employer.

An employee with 2 jobs can be furloughed by both employers and receive 80% of their salary reimbursement from both employers, up to a value £5,000. However, the policy only applies to employees who were on the payroll on or before 28th February 2020, and the normal legal principles apply. An employee may be in breach of contract if they pick up work elsewhere. Equally it may be a breach of mutual trust and confidence if an employer unreasonably refuses consent refuses to consent to an employee working elsewhere whilst on 80% furloughed pay.

The procedure for advising employees

 Employers should:

  • Design a furlough process
  • Considering a similar criteria selection matrix to redundancy procedures based on skills, productivity and previous appraisals in cases where a certain amount of workers may be retained.
  • Agree and publish a furlough policy.
  • Decide whether to supplement the 80% salary provided by HMRC with full salary top up payments.
  • Gain the employees’ written consent even if contractual provisions cover lay-off, express agreement is advised. This is advisable to protect employers if a salary is not being topped up.
  • Stop the employees from working.
  • Check communication details with employees and company procedure on volunteering, working elsewhere, discretionary payments.
  • Calculate the amounts they are claiming from HMRC.
  • Keep a record of furloughed employees for 5 years.

The employer will have to consult with the employee who will have to agree to be furloughed. Changing the status of employment is subject to usual employment law and equality and discrimination laws apply, therefore employers will need to consider these and not lay off disproportionate amounts of men or women, or those with disabilities, as they could be subject to discrimination claims later.  If there is no lay off provision in the existing contract, employers will need to agree with employees in writing that they are being furloughed because there is no existing work available. Employers should consider negotiation, for instance some employees may be resentful that they are placed on furloughed leave whilst other employees are retained. A matrix, such as those applicable to redundancy procedures, based on skills, productivity and previous appraisals should apply.

Most employees will agree to this as the alternative is dismissal by redundancy, with the possibility of no redundancy payment for employees who have worked for less than 2 years, or a delayed redundancy payments. If an employee does not agree to be furloughed an employer may dismiss them by reason of redundancy if redundancy procedures are applied and a proper process is followed. 

Employers should formally write to employees with notice of furloughed employment, receive written consent from the employee, and keep a record for 5 years.

 Managing Cashflow

The HMRC has issued guidance that the grant from HMRC will cover the lower part of the employee’s wage of £2,500 per month, pus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage.

 The guidance confirms that employers can choose to provide top-up salary in addition to the grant. However, Employer National Insurance contributions and automatic enrolment contribution on any additional salary will not be funded through the CJR Scheme. 

Employers will be required by HMRC to pay the employees salary in advance of receiving the 80% top up payment from HMRC. Uk government initiatives have been designed to support SMEs and corporations in retaining employees on PAYE.

If the employee has been employed for 12 months or more,  an employer can claim the highest of either the:

  • same month’s earning from the previous year
  • average monthly earnings for the 2019-2020 tax year

If the employee has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work.

If the employee only started in February 2020, work out a pro-rata for their earnings so far, and claim for 80%.


The UK Government have put into place a number of government-funded initiatives to support SMEs and corporations who have been affected by COVID-10. 

The Coronavirus Commercial Financing Facility (CCFF)

The COVID-19 Commercial financing facility (CCFF) is designed for larger corporations. Larger corporations will have stronger, investment grade credits but may be experiencing short term liquidity (cash-flow) problems. The CFF will enable larger corporations to access to access short term financing through issuing Commercial Paper (CP).

 What is Commercial Paper?

Commercial paper is an unsecured, short-term debt instrument issued by a company.  

The Facility will purchase sterling-denominated commercial paper, with the following characteristics:

  • Maturity of one week to twelve months
  • Where available, a credit rating of A-3 / P-3 / F-3 / R3 from at least one of Standard & Poor’s, Moody’s, Fitch and DBRS Morningstar as at 1 March 2020.
  • Issued directly into Euroclear and/or Clearstream  

The CCFF will buy commercial paper of up to one year’s maturity. The facility is intended to provide finance on terms comparable to those prevailing in the market prior to the economic shock experienced due to COVID-19.

During a defined period in each business day, the Covid Commercial Financing Facility Ltd, operated by the Bank of England will purchase newly issued Commercial Paper in the primary market. Purchases will be made by the Central Bank reserves. In order for a company to qualify for the scheme they will need to be an eligible issuer, and for the CP they are issuing they will need to meet the ‘eligible securities’ criteria.

 Eligible issuers

Under guidance issued by the Bank of England, eligible issuers will need to make a material contribution to the Uk economy.  This includes those will foreign national parents. Further guidance can be viewed under:

Eligible securities

 The Bank of England will purchase sterling denominated CP of eligible issuers provided that it meets the following securities:

  • A maturity of one week to 12 months if issued to BoE at issue via a dealer. Drawings can be rolled whilst the CCFF is open, subject to eligibility.
  • Where available, a minimum short term credit rating of A-3/F-3/P-3 from at least one of the credit agencies from 1st March 2020. If an issuer is on the lowest rating it will be reviewed by BoE and HMT on a case-by-case basis.
  • If a short term credit rating is not available, the BoE will consider whether a long term credit rating may be used to assess both eligibility and pricing, or whether it can assess whether that the issuer is of equivalent financial strength.
  • Issued directly into Euroclear and/or Clearstream.
  • Issuers who are subject to a downgrade after 1st March 2020 will qualify.
  • CP which has non-standard features such as subordination or extendibility will not qualify.
  • Securities issued by a finance subsidiary will need to be guaranteed by the parent company in a form acceptable to BoE.

 If you think that you are eligible for Commercial Paper, you will need to contact your bank.

The Coronavirus Business Interruption Loan Scheme (CBILS) 

The British Business Bank will administer funding provided by a variety of lenders to provide a variety of funding options over the short to medium term. The funds are available to micro-businesses, and smaller businesses who would not have previously been able to access the scheme, identifying that insufficient security is no longer a condition to access the scheme. The British Business Bank operates it scheme via accredited lenders, including high street banks such as NatWest.

A lender can provide up to £5million in the form of:

  • Term loans
  • Overdrafts
  • Invoice finance
  • Asset finance

CBILS gives the lender a government-backed guarantee for the loan repayment to encourage more lending. The business borrower remains fully liable for the debt.

 Under the scheme, personal guarantees of any form will not be applicable for amounts under £250, 000.  For facilities above £250, 000, personal guarantees may be required at the lender’s discretion, but:

  • Recoveries of these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of the business assets have been applied.
  • A Principal Private Residence (PPR) cannot be taken as a security to support a personal guarantee or as a security for a CBILS – backed feature.

The Coronavirus Large Business Interruption Loan Scheme (CLBILS)

 This scheme will help large businesses affected by coronavirus (COVID-19) to access loans.

  • Businesses with an annual turnover of more than £45million a year can apply for up to £25million per year in finance.
  • Businesses with a turnover of more than £250million will be able to apply for up to £50million in finance.

 The scheme is available through 40 accredited lenders listed on the British Business Bank website, and will provide lenders with an 80% guarantee on individual loans.

Finance is available in the form of:

  • term loans
  • revolving credit facilities (including overdrafts)
  • invoice finance
  • asset finance

CBILS gives the lender a government backed partial guarantee, 80% against the outstanding balance of the facility. No forms of personal guarantee are required for applications below £250, 000. 

Who can claim? 

The furloughed employees must have been on the employer’s PAYE payroll on 19th March 2020, including:

  • Full-time employees
  • Part-time employees
  • Office holders (including company directors)
  • Salaried members of Limited Liability Partnerships (LLPS)
  • Limb (b) workers
  • Agency employees on agency contracts (provided they are mot working at all)
  • Zero-hour contract workers  (provided they are employees albeit on flexible contracts).
  • Apprentices
  • Individuals, such as nannies

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

Apprentices may continue to train whilst furloughed, however employers must pay apprentices at least the minimum wage whilst they are training. This means that employers must cover the shortfall between the amount that they can claim for the employees wages, and the appropriate minimum wage.

Foreign nationals are eligible for this scheme. For companies entering administration, the administrations may use the scheme to place employers on CJR, this may be particularly relevant there is a reasonable likelihood of rehiring the workers. For instance this could be as a result of a rehire due administration in pursuit of a sale of a business.

 How does a business claim?

The HMRC portal is accessible from 20th April 2020: Apply to HMRC here

Employers will need to claim with their:

  • ePAYE reference number
  • Bank account number
  • Sort code

What does a business claim for?

Employers will need to specify:

  • The number of employees being furloughed.
  • The claim period (start date and end date)
  • The amount claimed (the minimum length of furlough is three weeks)
  • The employer’s name and contact number.

After you have claimed

HMRC will check the claim, and if eligible, pay it to the employer by BACS into a UK bank account. HMRC reserve the right to independently audit any claim. The employer must pay the employee all of the grant received for the gross pay, no fees should be charged from the money which is granted.

Please telephone Alinea on (020) 7101 4242 or email [email protected] with any queries.

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