Covid-19: How the Job Retention Scheme works

As part of its crisis management response to the Covid-19 pandemic, employment was one of the first areas to be addressed by the UK government. To support employers and employees in the short term, unprecedented emergency measures have been introduced to mitigate the economic effects of lockdown and stay at home policies.

Hopefully, these will be temporary and most people will soon be able to return to work without any long-term impact. But as the crisis continues to affect people’s working lives in the immediate future, there are important considerations for employees and businesses alike in relation to employment.

Job Retention Scheme

Designed to support employers whose operations have been severely affected by Covid-19, the Coronavirus Job Retention Scheme (the Scheme) is open to all UK employers for at least three months starting from 1 March 2020. It introduces the concept of furlough leave and provides for employers to recover a proportion of pay from HMRC.

Employers can claim for 80% of furloughed employees’ usual monthly wage costs up to a maximum of £2,500 a month, plus the associated employer National Insurance (NI) contributions and minimum automatic enrolment employer pension contributions. The online service that can be used to claim is not yet operational, but is expected to be available by the end of April 2020.

Employees covered

The scheme covers the following individuals, provided that they were on the employers’ PAYE payroll on 28 February 2020, regardless of their contract type:

  • Full-time employees.
  • Part-time employees.
  • Employees on agency contracts.
  • Employees on flexible or zero-hour contracts.

For some employees, 80% of pay will be less than national minimum wage (NMW) based on normal working hours. In this situation, employees on furlough leave do not need to be paid the NMW, but if they undertake any online training then they must be paid the NMW in respect of those training hours.


Employees who have been made redundant since 28 February 2020 can qualify if they are re-engaged by their former employer. Since the scheme is backdated to 1 March 2020, it would theoretically be possible for an employer to propose to employees who are still employed, but have been given notice of redundancy or placed on unpaid leave after 28 February 2020, that they be put onto furlough leave instead.

Risk of redundancy

The exact circumstances in which an employer can put employees on furlough leave and claim reimbursement through the Scheme remains unclear. More detailed government guidance on the scheme is anticipated. At present, it appears likely that the Scheme is intended to cover employers who would otherwise need to drastically cut their payroll as a result of the crisis, either through lay-off or redundancy. However, until further guidance is available, it is not yet possible to state with any certainty when the scheme will apply.

Employers: 20% top up

Employers are entitled to continue paying full pay during furlough leave, but they are not obliged to do so. If they do top up the remaining 20% of pay, then they can only claim back employer NI contributions and minimum auto-enrolment payments up to the cap.

Withholding 20% of an employee’s salary will, however, amount to breach of contract and unlawful deduction of wages unless the employee gives their consent. It is expected that the majority of employees will consent since furlough leave is a much better alternative than unpaid leave, lay-off or redundancy.

Health and well-being

The primary focus of any employer is to ensure the health and wellbeing of its employees: the fundamental duty of care that every employer has to ensure that appropriate measures are taken to safeguard the health and safety of their employees in their place of work.

Working from home during lockdown creates a different set of challenges. Mental health, depression and disability obligations are important factors for employers to consider. Managing this remotely is both challenging and difficult in terms of an employer’s legal obligations and responsibilities, as well as their capacity to intervene.

This article does not constitute legal advice and businesses are encouraged to take specific legal advice on the scenario they face. This update is a statement of the current position as at the time it is written.