This Commons Library briefing paper provides answers to a number of frequently asked questions on the Government's Coronavirus Job Retention Scheme. It covers the second Treasury Direction and the new rules for the flexible furlough scheme.

Download the full report

This is a fast-moving area and the paper should be read as correct at the time of publication (16.06.2020).

This information is provided to Members of Parliament in support of their parliamentary duties and is not intended to address the specific circumstances of any particular individual. A suitably qualified professional should be consulted if specific advice or information is required.

On 20 March 2020 the Government announced the Coronavirus Job Retention Scheme.

The purpose of the Scheme is to provide grants to employers to ensure that they can retain and continue to pay staff, despite the effects of the Covid-19 pandemic.

On 15 April the Government published the first Treasury Direction, the formal legislative rules for the Scheme. A second Direction was published on 22 May, extending the Scheme and clarifying certain rules. A further Direction is expected by the end of June.

The Scheme went live on 20 April, although it covered claims going back to 1 March.

Under the Job Retention Scheme, the Government will provide a grant to employers to cover 80% of a furloughed employees ‘reference salary’, up to £2,500 per month. At present, employers must furlough employees for a minimum of three weeks during which time the employee cannot undertake any work for the employer. Employees working reduced hours are not currently covered by the Scheme.

The Scheme is tied to PAYE. Employers can only claim for employees who were a payroll which was notified to HMRC through a real time information (RTI) submission on or before 19 March 2020. Employees who were on a payroll on or before 28 February or 19 March but who stopped working after those dates can be re-employed and furloughed.

On 12 June, the Government published details of a flexible furlough scheme that will run from 1 July to 31 October. Under the revised rules employers will be able to bring workers back on reduced hours while still claiming a grant for any usual hours not worked. Only employees who have been furloughed for a full three weeks before 30 June can be furloughed after 1 July, unless they are returning from family-related leave. From August employers will need to make contributions towards the costs of furloughed employees.

The Job Retention Scheme is simply a mechanism through which employers can claim money from HMRC. It does not alter existing employment law rights and obligations.

Employers will normally be liable under the employment contract to pay employees their full wages, even if they cannot provide any work. In many cases, the employment contract would need to be varied to allow employers to furlough an employee on reduced pay.

It is for employers to decide whether to furlough an employee. This could cause problems for zero-hours workers and agency workers whose employers could simply reduce their work to zero without making a claim under the Scheme.

The Scheme also sits amongst a range of existing statutory employment rights. These include protections from discrimination, protections from unfair dismissal and rights to consultation in cases of collective redundancies. It also includes the rules on statutory sick pay, statutory maternity pay and holiday pay. In some cases, the current Government guidance does not provide an indication of how the Scheme will interact with these rights.

Download the full report