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Furlough Pay

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Is an employer required to use the formula set out in the Coronavirus Job Retention Scheme (CJRS) to calculate the amount of furlough pay owing to an employee even though they had reached an alternative agreement as to the calculation of such pay?

No, held the EAT in Mones v Lisa Franklin Limited.

The Claimant was furloughed during the pandemic. She received a letter setting out the terms of her furlough, including pay. The Claimant’s furlough pay was then calculated and paid in accordance with the terms set out in the letter. This resulted in a lower payment than if her pay had been calculated in accordance with the formula set out in the CJRS. The Claimant claimed the difference by way of an unlawful deduction from wages claim. The EAT found that there had been no unlawful deduction.

The EAT held that the CJRS detailed the obligations between employers and HMRC. It didn’t create any statutory or contractual obligation between the employer and its employee requiring it to calculate furlough payments in a certain way. In this case there was an express contractual agreement reached between the employer and the employee as to furlough pay. This set out the Claimant’s entitlement. The CJRS did not cut across that and impose any higher obligation.

Interestingly, the EAT noted that the position may have been different if there had been no written agreement covering furlough pay. In those circumstances, there may have been an argument that there was an implied term that the employer would calculate furlough pay in accordance with the formula set out in the CJRS.