Directors who are contracted permanent employees of a company on or before
19th March 2020, will qualify for furlough under the
Government’s Coronavirus Job Retention Scheme (the Scheme). Note that as
with other qualifying employees, they must be on the PAYE scheme and
therefore directors who are paid a nominal salary but receive the bulk of
their rewards through dividends will only be entitled to receive 80% of
their nominal salary (if they qualify).
This template form of letter can be used to furlough a director in line
with the Scheme. This letter requires the relevant director to formally
agree to being furloughed.
Once a director is furloughed, they must not continue to provide any
further “commercial” service to their employer (the company). However,
unlike other employees, directors have Companies Act 2006 duties to
maintain and this letter refers to the reasonable necessity to fulfil these
duties. This form of “part” furlough will be different for each company and
must be given serious consideration before the decision to furlough is
made. This template letter refers to a director’s Companies Act 2006
obligations and the “part” furlough involved.
This template has been updated to reflect the extension of the Scheme until 31st July 2020. In addition, employers will be able to bring back furloughed employees from August 2020 until 31st October 2020. The Government will provide more details in relation to this.
This document is duplicated in the
Directors’ Service Contracts
subfolder, which is in the Corporate Folder. There are also information
coronavirus and private limited companies
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