Furlough of Directors

Director’s Coronavirus Job Retention Furlough LetterUpdated

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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 in its current form until 31st July 2020. Note however that employers will be able to bring back furloughed employees on a part-time basis from 1 July 2020. In addition, from 1 August 2020, the Government will start paying less towards those employees on furlough. The Government will provide full details in relation to both these points in due course. The Scheme will close in its entirety on 31st October 2020.

New entrants (that have previously not been furloughed) must be on furlough by 10th June 2020 to ensure eligibility for the scheme after 1 July 2020.

This document is duplicated in the Directors’ Service Contracts subfolder, which is in the Corporate Folder. There are also information pages regarding coronavirus and private limited companies .

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