Coronavirus Job Retention Scheme

On the 20th of March 2020, the Chancellor of the Exchequer announced a significant aid package for employers forced to close down as a result of COVID-19, otherwise known as Coronavirus. On the 26th March 2020, the first update including details on how the scheme will operate was issued.

The aid package is known as the Coronavirus Job Retention Scheme (CJRS) and its aim is to provide assistance to businesses and their employees in the UK to prevent the need for making individuals redundant during this difficult time with a process known as ‘furlough’.

CRJS Timing

HMRC expect the scheme to be up and running by the end of April. However, at this time, the online portal to deliver this is still in development. The scheme itself runs from the 1st March 2020 for three months.

CRJS Eligibility

The scheme is open to any UK organisation who has employees including businesses, charities, recruitment agencies (where workers are paid through PAYE), and Public Authorities.

To be eligible:

  • The business must have created or started a PAYE scheme on or before 28th February 2020 and have a UK bank account.
  • Employees must have been on the organisation’s payroll at 28th February 2020. This includes part time workers and those on zero hour contracts.
  • Employees must be furloughed.

Who can be furloughed?

All employees including full and part time employees, employees on flexible or zero hours contracts, and employees on agency contracts with the following exceptions:

  • Employees hired after 28th February 2020.
  • Employees on unpaid leave unless they were placed on unpaid leave after 28th February 2020.
  • If an employee is on Statutory Sick Pay (SSP) then they can be furloughed when SSP ceases.

Employees shielding in line with public health guidance can also be furloughed. This is a change to the original guidance given when SSP and furlough was announced.

The scheme also covers employees who were made redundant since 28th February 2020, if they are rehired by their employer.

What does it mean to be furloughed?

Furlough is a new term in the UK but it is essentially a change to an employee’s contract of employment. Under furlough an employee can not undertake work for or on behalf of the organisation, including providing services or generating revenue with the exception of training.

If an employee is working, albeit on reduced hours, they will not be eligible for the scheme and the employer must continue to pay that employee and process the pay as normal through the payroll.

Volunteer Work or Training

A furloughed worker can undertake voluntary work or training, as long as such work or training does not generate revenue for the business.

If employees’ are undertaking training whilst furloughed, the business must pay the worker at least National Minimum Wage (NMW)/National Living Wage (NLW) even if it is more than 80% of their wage that will be subsidised.

Steps for employers

Communication is imperative to ensure that workers know what is happening and why. Many businesses have had to close through no fault of their own or their employees. Therefore employers must:

  • Discuss the situation with their staff.
  • Make any changes to employment contracts, if applicable, by agreement with staff. Please note that this is a temporary measure, we will return to normal in the near future.
  • Ensure equality and discrimination laws are strictly adhered to when staff are furloughed.
  • Employers’ must write to all employees who are to be, or who have already been furloughed, confirming that they have been furloughed but not made redundant.
  • Ensure that both the employer and employee have a record of the decisions made.

You may wish to seek professional advice on changes to your employee contracts. Please get in touch if you would like to speak with our experts in legislation and compliance.

What can employers claim?

A claim will need to be made to access the grant. The amount is the lower of:

  • 80% of an employees’ regular wage.
  • Or £2500.

In addition, an employer can claim any associated Employers National Insurance (NIC) and minimum level automatic enrolment Workplace Pension costs. Further guidance is expected on NIC and Pension before the scheme goes live.

How is the 80% calculated, are there any date references?

Each job is treated separate for furlough purposes. The £2500 cap applies to each job. Bear in mind, this is PAYE reference driven.

Important: If an employee has more than one job, the employee must be on different PAYE schemes.

For full and part time employees, the employees’ actual salary before tax, as at 28th February 2020 is used to calculate the 80%.

Important: Fees, commission and bonuses should not be included. Basic salary only is used to establish the calculation.

If an employees pay varies, for instance overtime or shift payments are made, providing the employee has been employed for a full twelve months prior to the claim, the employer can claim the higher of:

  • The same month’s earnings from the previous year.
  • Average monthly earnings over the 2019/2020 tax year.
  • For employees employed less than a year, the average over the length of employment.
  • For employees commenced in February 2020, pro rata the worker’s salary to get a monthly average.

Do employers have to top up the remaining 20% of wages?

The employer can top up an employee’s salary beyond the 80% grant but are not obliged to do so under this scheme.

Important: Any employers NIC or Pension contributions on the top up applied are not recoverable.


Wages for furloughed employees will be subject to Income Tax and NIC in the normal way.

Income Tax will be calculated based on the current tax code in operation at the time and any tax refunded will be dealt with through payroll.

Where an employee was a member of a pension scheme, employee’s pension contributions should also be deducted before arriving at the net amount payable to the individual.


NMW/NLW only applies to individuals who are working. As furloughed employees are not working normal NMW/NLW rules do not apply. Furloughed workers can be paid the 80% of salary or £2,500 even if this would under normal working pattern take the employee below NMW/NLW.

Important: Please bear in mind what we have said above about training. If training is completed whilst an employee is furloughed, they must be paid NMW/NLW, even if this is more than the 80% being subsidised.

Making a Claim

Although the portal is not yet available, employers will need the following to make a claim:

  • PAYE reference number.
  • Number of employees being furloughed.
  • Claim period, start and end date.
  • Amount claimed.
  • Bank account number and sort code.
  • Contact name.
  • Telephone number.

Important: It should be borne in mind that HMRC retain the right to retrospectively audit all claims. HMRC’s RTI system also has the facility to check average pay that has been used in the calculation.

The Claim

The online portal is not yet in place. Claims therefore cannot be made at this time. HMRC expect to have the portal in place to provide funds to employers by the end of April 2020.

Claims can be backdated to 1st March 2020 and should generally be made in accordance with actual payroll amounts, at the point when a payroll is run or in advance of an imminent payroll.

HMRC will pay the amount claimed by BACS into the employers’ bank account.

Important: The employer must pay the employee the full grant, no fees can be deducted for processing the application or for bank charges.

Return to Work

When we have reached the other side and things are returning to normal, employees furloughed will have the same employment rights as they did previously.

Maternity, Paternity, Adoption and Shared Parental Leave

Individuals taking or planning to take such leave must take at least 2 weeks off work immediately following the birth (4 weeks for factory workers). This is led by Health and Safety requirements.

Normal SMP or maternity allowance rules apply, they are entitled to claim up to 39 weeks of statutory payment.

Employees qualifying for SMP will still be eligible for 90% of their average wage for the first 6 weeks, followed by 33 weeks at 90% of their average wage or the statutory flat rate whichever is lower. The statutory flat rate is currently at £148.68 a week, rising to £151.20 a week from April 2020.

Important: If employees are paid enhanced contractual pay during maternity leave, this is included as wages costs and claimable through the scheme.

Public Authorities

While the public sector can access the scheme too there are some special provisions.

The majority of the public sector already receives funding for wages and staff costs, and as that funding is continuing, there is no expectation that any workers should or would be furloughed.

If public organisations are not primarily funded by Government, and staff cannot be redeployed to assist with the coronavirus response, the scheme will apply for those workers.

What we don’t know

At the moment there are still several points that are yet to be clarified. We will provide further updates once the clarification has been made. Those points are as follows:

  • In education, some employees’ wages are funded from voluntary donations. Will the Government scheme fund such wages?
  • The Government guidance within the public sector refers to organisations not primarily funded by Government. There is no guidance yet on how to classify such organisations.
  • Director’s Salary – Directors may pay themselves a low salary and the rest in dividends. Although we are of the opinion that furloughed Directors pay will be based on salary declared to HMRC, clarity is required from the Government on this point.
  • When an employee’s sick note comes to an end, they are then furloughed but when furlough ends, they obtain a further sick note. How will HMRC view this given they will audit some employers records for compliance purposes?

For more advice on Coronavirus for employers please read our recent blog post ‘Covid-19 Practical Guidance for Employers.’