Furlough Explained: Definition, Employee Rights and How It Works

Furlough is a temporary arrangement in which an employee is placed on leave from work but remains formally employed. The employee does not carry out their duties during the furlough period and may receive reduced pay or no pay depending on the scheme and jurisdiction. Furlough gained widespread attention during the COVID-19 pandemic, when the UK’s Coronavirus Job Retention Scheme and similar programmes in other countries allowed employers to retain staff during periods of reduced business activity rather than making redundancies.

Key Takeaways

• Furlough is a temporary suspension of employment duties, not a termination of the employment relationship
• The UK’s Coronavirus Job Retention Scheme paid up to 80% of wages during the pandemic, but the scheme ended in September 2021
• Employees on furlough retain their employment rights, including the right not to be unfairly dismissed and the accrual of statutory benefits

What Does Furlough Mean?

Furlough refers to a period of authorised leave from work during which the employee remains on the employer’s payroll but is not required to work. The concept is used as a temporary measure during periods of reduced business activity, economic uncertainty or emergency situations. Rather than making permanent redundancies, employers place employees on furlough with the intention of bringing them back to work when conditions improve.

During the COVID-19 pandemic, furlough became the primary mechanism for governments to support employment. The UK’s Coronavirus Job Retention Scheme (CJRS), launched in March 2020, allowed employers to claim reimbursement for up to 80% of an employee’s wages, capped at £2,500 per month. At its peak, the scheme supported nearly 9 million jobs. The scheme was gradually reduced and closed on 30 September 2021.

Similar schemes were introduced in other countries. Germany’s Kurzarbeit (short-time work) scheme had been in operation for decades before the pandemic and provided partial wage replacement during economic downturns. Australia’s JobKeeper programme, which ran from March 2020 to March 2021, provided a flat payment of A$1,500 per fortnight to eligible employees. The US did not have a formal furlough scheme but saw widespread employer-initiated furloughs, particularly in the hospitality, aviation and retail sectors.

Furlough is distinct from redundancy, layoff or garden leave. In redundancy, the employment is terminated. In layoff, the employee is typically sent home without pay until recalled. In garden leave, the employee remains employed and paid but is required to stay away from the workplace. Furlough sits between these — the employee is not working but remains employed and may receive partial pay.

Who Is Eligible for Furlough?

United Kingdom

The CJRS has ended, but employers can still use furlough as a contractual arrangement with employees. There is no statutory right to be furloughed, but employers and employees can agree to temporary furlough as an alternative to redundancy. Employees on furlough retain all statutory rights, including the right to redundancy pay, unfair dismissal protection and the accrual of annual leave and pension contributions.

Australia

During the JobKeeper programme, eligibility required the employer to have experienced a decline in turnover of at least 30 percent for businesses with turnover under $1 billion, or 50 percent for larger businesses. The programme has ended, but employers may still furlough employees by mutual agreement as an alternative to termination. The Fair Work Act does not provide a specific furlough entitlement.

United States

There is no federal furlough programme. Employers may furlough employees unilaterally in most states, provided the furlough does not violate employment contracts or collective bargaining agreements. Furloughed employees may be eligible for unemployment insurance benefits depending on the state. The WARN Act requires employers with 100 or more employees to provide 60 days’ notice of mass layoffs or plant closings, which may apply to large-scale furloughs.

Furlough Entitlements by Country

Country	Scheme Status	Pay During Furlough	Key Detail
UK	CJRS ended Sept 2021	Contractual, no statutory minimum	Employee retains all employment rights
AU	JobKeeper ended March 2021	Contractual, no statutory minimum	Mutual agreement required
US	No federal scheme	Contractual, unemployment may apply	WARN Act notice may be required

How to Request Furlough

1. Discuss with your employer — furlough is typically initiated by the employer, but employees can request it as an alternative to redundancy or unpaid leave.
2. Understand the terms — clarify the duration, pay arrangements, benefit accrual and any conditions attached to the furlough period.
3. Get it in writing — ensure the furlough arrangement is documented in a written agreement signed by both parties.
4. Check benefit entitlements — confirm that annual leave, pension contributions and other statutory benefits continue to accrue during furlough.
5. Stay available — employees on furlough should generally remain available to return to work when required.

Employer Obligations for Furlough

• Obtain employee consent — furlough generally requires the employee’s agreement, though some contracts may contain furlough clauses
• Pay at least the statutory minimum — during the CJRS, this was 80% of wages capped at £2,500 per month; contractual arrangements may differ
• Continue to accrue benefits — annual leave, pension contributions and other statutory entitlements must continue to accrue during furlough
• Communicate clearly — keep furloughed employees informed about the expected duration and any changes to their arrangements
• Review regularly — furlough should be reviewed periodically to assess whether the employee can return to work

Common Mistakes

• Treating furlough as a mechanism to avoid redundancy consultation obligations
• Failing to obtain written agreement from the employee before placing them on furlough
• Not continuing to accrue annual leave and pension contributions during the furlough period
• Selecting employees for furlough in a way that is discriminatory or not based on objective criteria
• Failing to plan for the employee’s return to work at the end of the furlough period

FAQ

What does furlough mean?

Furlough is a temporary leave of absence where an employee remains formally employed but does not work and may receive reduced pay. It is used as an alternative to redundancy during periods of reduced business activity.

Is furlough the same as being made redundant?

No. Furlough is temporary — the employee remains employed and is expected to return to work. Redundancy is permanent termination of the employment relationship, usually with a redundancy payment.

Can my employer furlough me without my consent?

In most jurisdictions, furlough requires the employee’s agreement unless the employment contract contains a specific furlough clause. Employers should consult with employees and obtain written consent before implementing furlough.

Will my annual leave accrue during furlough?

Yes. In the UK, annual leave continues to accrue during furlough as if the employee were working. The same applies to pension contributions and other statutory benefits. This was confirmed by ACAS guidance during the CJRS period.