The Treasury was “reluctant” to say the scheme could be used this way, emails from a civil servant suggest.
Employers can claim from the furlough scheme for staff who are self-isolating.
The entitlement exists despite government guidance stating it is not what the scheme is intended for.
The little-known entitlement was first reported by Politico magazine after emails from civil servants complaining about government guidance were leaked.
One email from a civil servant said the Treasury was “reluctant” to say the scheme could be used in such a way.
“Furlough can be used to cover self-isolation, but HMT [the Treasury] are reluctant to say this explicitly in guidance because it could lead to employees being furloughed who do not need to be,” Politico quoted one of the emails as saying.
“Incentive payments are too low to incentivise employees to take tests due to risk of loss of income.”
The emails quoted by the magazine said a senior official was concerned people might avoid taking tests because if they had to self-isolate, their incomes would drop to statutory sick pay level.
The Treasury said that far from hiding anything, it was there “in plain English” that employers could choose to furlough self-isolating staff.
Statutory sick pay requires employers to pay at least £96.35 per week when staff are off sick for more than four days, whereas the furlough scheme, also known as the Coronavirus Job Retention Scheme, pays 80% of an employee’s normal wages up to £2,500 per month.
A section in the government guidance on business support titled “If your employee is self-isolating or on sick leave”, says employees self-isolating or on sick leave as a result of Covid “may be able to get statutory sick pay”.
It adds that the Job Retention Scheme “is not intended for short-term absences from work due to sickness” and “short term illness or self-isolation should not be a consideration when deciding if you should furlough an employee”.
However, the guidance states if employers “want to furlough employees for business reasons and they are currently off sick, they are eligible to do so, as with other employees”.
The guidance also states employers “can furlough employees who are clinically extremely vulnerable or at the highest risk of severe illness from coronavirus”.
“It’s up to employers to decide if they will furlough these employees. An employer does not need to be facing a wider reduction in demand or be closed to be eligible to claim for these employees,” it says.
Treasury officials argue the guidance makes it clear that employers can choose to put staff on sick pay or use the furlough scheme.
A Treasury spokesperson said: “It has always been clear that the purpose of the furlough scheme is to support jobs – we’ve been upfront about that from the start.
“The guidance sets out that the scheme is not intended for short-term absences from work due to sickness or self-isolation. We have a specific support package in place for those self-isolating due to coronavirus, including one-off payments for those on low incomes.
“If an employer wants to furlough an employee for business reasons and they are currently off sick then they are eligible to do so as with other employees. This has been set out in guidance since April last year.”
Bridget Phillipson, Labour’s shadow chief secretary to the Treasury, called the news “shocking”.
“The government were advised time and time again how crucial a proper self-isolation system is for curbing the spread of infection, and protecting people’s lives and livelihoods,” she said.
“It is shameful and reckless that the chancellor ignored professional advice and put countless people and workplaces at unnecessary risk when he had the opportunity to help.”
Rachel Harrison, national officer at the GMB union, said: “Suppressing advice on furlough eligibility during self-isolation is scandalous and incompetent.
“Lives will likely have been lost and higher infection rates will cost the NHS and employers far more in the long run.
“We need to know whether ministers approved the decision to withhold this advice. An urgent investigation should be established with accountability to Parliament.”