Government measures introduced so far include deferring VAT and income tax payments, deferral of IR35 (for larger businesses), a 12 month business rates holiday and a change in statutory sick pay.

Furlough leave – the new measure announced last night

This will enable employers to obtain support to pay salaries of staff who would have otherwise been laid off. All types of businesses can benefit – limited companies, sole traders, charities etc.

The suggestion is that employers will need to designate affected employees as “furloughed” workers and notify them of the change. The government has made it clear that any changes to an employee’s status will be “subject to existing employment law and may be subject to negotiation”.

How can employers take advantage of the help offered?

If the employment contract allows the employer to remove work and pay (known as a lay-off or short-time working clause (ie. a LOST clause) the employer can just notify the employee that there will be no work and ask the employee to stay at home or work short time. However, LOST clauses are usually only found in contracts in the manufacturing sector.

Following the Government’s announcement, an employer can ask the employee to agree to be furloughed. As mentioned above however, the vast majority of staff are likely to agree to this as, for businesses in difficulty due to COVID-19, the only other options are likely to be redundancy or working without pay. Employers should obtain the employees’ agreement in writing – both to being furloughed – and to paying 80% of wages (if the employer intends to reduce pay in line with the government subsidy). Note that employers will still need to continue to pay wages but will be able to claim the government subsidy via a new HMRC portal which is currently being set up. The hope is that this will provide employers with cash by the end of April, but this is uncertain until we receive further news about the scheme.

How do employers claim the benefit?

Employers will submit information through a new HMRC portal about the employees who have been asked, and have agreed, to be furloughed as well as information about their wages. HMRC will then reimburse 80% of wage costs up to cap of £2,500 per month (£30,000k per year) per employee. Employees should not work whilst furloughed.

The suggestion is that the government will cover all employment costs up to the cap, including pension costs for example. The employer can choose to top up the salary to 100%, but it looks as though this will not be compulsory.


Further information will be provided as and when this is available. If you have any questions on the above please speak to Caroline Banwell at Harmony HR Solutions Ltd.