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15/04/20 Coronavirus Job Retention Scheme

Job Retention Scheme – Details for Employers

On 20 March 2020, the Government announced the Coronavirus Job Retention Scheme to provide support for employers to enable them to continue paying part of their employees’ salaries rather than lay them off for the initial period of the crisis. The scheme will run initially for three months and will be backdated to 1 March 2020.

Workers who are placed within the scheme will be called ‘furloughed’ workers. The purpose of the scheme is to allow businesses to retain staff who will be needed in future to rebuild the business. The scheme provides a grant to employers to enable them to continue to pay some income to furloughed staff. 

Government guidance on the scheme is being updated regularly.
The scheme applies not just to employees but also workers who are paid via PAYE. For consistency, we have used the term employee throughout this guidance.

I am an employer – am I eligible?

According to the updated guidance provided on 4 April 2020, any UK employer will be eligible if they have:

  • a PAYE scheme that had been created and started by 28 February 2020,
  • enrolled for PAYE online and
  • a UK bank account

The scheme covers employers in business, in the public sector, Local Authorities and charities. While designed for employers whose operations have been affected by COVID-19, it is open to all employers because all businesses will be impacted in some manner.

The scheme takes effect from 1 March 2020 and the Government expects it to be up and running by the end of April 2020. The portal for claims is due to open on 20 April and the first monies to be paid out by 30 April 2020.

Concerns have been raised about whether employers who have changed their PAYE scheme will still be eligible or where employees have been transferred from one PAYE scheme to another after 28 February. HMRC have now confirmed that groups of companies who have consolidated their PAYE schemes after 28 February and transferred employees to a new PAYE scheme will be able to apply. Similarly, if an employee was transferred to a new PAYE scheme after 28 February and either the TUPE rules or business succession rules apply, then a claim should still be possible.

How do I furlough an employee?

Affected employees must be notified in writing that they are now furloughed, and a copy of the notification should be kept.It should state the reasons why they are furloughed, and the dates the furlough starts and is expected to finish. The changes to their pay, if appropriate.

The change in the employee’s status is subject to existing employment law (including equality and discrimination law) and, depending on the employment contract, may be subject to negotiation. If sufficient numbers of employees are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.

While on furlough, an employee cannot do any work for their employer or any linked or associated organisations. If an employee is still working, even on reduced pay or hours, then the employer cannot furlough them or make a claim for their wages under the scheme. HMRC will take any abuses of the scheme, such as requesting furloughed employees continue to work, very seriously.

It is important to note that employees retain their usual rights to Statutory Sick Pay, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments during the furlough period.

Who can I furlough?

Employees under any type of contract can be furloughed including full time and part-time employees, those on zero-hours or flexible contracts and those on agency contracts (including workers employed by umbrella companies) and limb (b) workers paid through PAYE.

To be furloughed, an employee must have been on the employer’s payroll at 28 February 2020. This means that an employee or worker who started after this date is not eligible for the scheme.

This requirement will also affect people who started work for their employer prior to 28 February, but who had not been included on the February pay-run – perhaps because they had joined after the cut-off date for internal processing by the payroll department. Employers should check that any staff who joined in February were included on a pay run made before 28 February if they now intend to furlough them.

Employees recently made redundant

You can re-employ any ex-employees who had been made redundant after 28 February 2020 and put them on furlough instead. You cannot furlough any employees who were first employed after 28 February 2020.

Employees on sick leave, shielding or with family responsibilities

Employees can be furloughed at any time. You can furlough the following employees:

  • Individuals on sick leave or isolating due to COVID-19.
  • Individuals who are in a vulnerable group and who are shielding in line with Government guidance (including those who need to stay at home with an individual who is shielding).
  • Employees who cannot work because they have to care for children or other family members.

In respect of employees on sick leave, earlier guidance suggested these employees could be furloughed after they finish their sick leave/isolation. From 9 April, the guidance states that while short-term illness/self-isolation should not be a consideration when deciding who to furlough, if there is a business reason then employees currently on sick leave can be furloughed, in which case they would no longer receive sick pay, but be paid as for any other furloughed employee. A claim for SSP rebate (where applicable) can be made up to the date of furlough – thereafter any claims must be made under the JRS. It is not permitted to make an SSP rebate claim and a JRS for the same employee for the same period of time.

If a furloughed employee becomes sick, then the employer can choose to move them to SSP and pay them according to their statutory SSP rights (in which case the employer will pay their SSP and may be entitled to a two-week rebate), or keep them on furlough at their furloughed rate. In the latter case, the employer can continue to claim support under the scheme.

Office holders and Directors

We have received a number of queries from members wanting to know if company directors – particularly those running family businesses and those with personal service companies (PSCs) can be furloughed. These individuals often receive a modest salary and take the rest of their income as dividends. While some may consider themselves effectively self-employed, they are not actually self-employed from a legal perspective, and are not eligible for the Self-Employed Income Support Scheme.

On 4 April 2020, HMRC confirmed that office holders, including company directors can be furloughed and support is available for the PAYE (i.e. salary) element of their remuneration. There is no equivalent support for any loss of dividend income.

The key consideration is what work the director can do while on furlough, given that any company has ongoing statutory obligations with which it must comply. Companies with two or more directors could choose to furlough some, but not all of their directors, leaving those remaining in work to carry out on their normal duties and ensure that the company‘s statutory duties are complied with.

Where a company has only one director (such as a PSC), or furloughs all of their directors, the guidance permits a furloughed director to carry out particular duties to fulfil the statutory obligations they owe to their company. However, a furloughed director should not do no more than would reasonably be judged necessary for that purpose and they shouldn’t do any work which generates a commercial revenue or provides services to their company, so they will be very limited in terms of what they can do. This may be challenging for some owner managed businesses who are hopeful of continuing to be able to do some work during the coming months in order to keep their business going.

If a director is furloughed under the scheme this should be documented and HMRC’s guidance recommends that, in addition to confirming in writing to the director concerned, that the decision is formally adopted as a decision of the company and noted in the company records.

Fixed term contracts

Employees on a fixed term contract can be furloughed and their contracts renewed or extended without breaking the terms of the scheme. If the decision is taken to end the contract, then the scheme claim will cease at that point.


You can furlough apprentices in the same way as other employees. They can continue to train while on furlough, though you must make sure that they receive at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) as appropriate for the time they spend training. Separate guidance covers how apprenticeship learning arrangements are affected by COVID-19.

Maternity leave and other parental leave

The normal rules for maternity leave, adoption leave, paternity leave or shared parental leave will continue to apply and it will be possible claim back through the scheme for any enhanced (earnings related) payments to furloughed employees.

Individual employers

The guidance confirms that individuals who employ staff such as nannies are also able to access the scheme and we presume this would apply to all domestic staff (cooks, cleaners, etc) provided that the employer is operating a payroll and the furloughed worker was on the payroll by 28 February 2020. On 9 April, it was confirmed that any grant received by an employer who is an individual and not employing staff in the course of a business will not be taxable.

Further guidance on LLPs and contingent workers in the public sector is also available.

For how long can I furlough staff?

While the scheme is running, an employee must be furloughed for a minimum period of three weeks. Staff can also be furloughed and then returned to work and then furloughed again, but each furlough period must be for a minimum of three consecutive weeks.

If an individual is only furloughed for less than three weeks before being called back to work, then it will not be possible to claim any amount under the scheme to cover the pay in that period.

How do I claim?

HMRC is designing a new, online portal for employers to claim under the scheme. Testing of the portal commenced on 8 April 2020 and it is expected that this will be available by 20 April in time for monies to be received by 30 April. Once that has been developed, employers will be able to supply details of their furloughed workers to make a claim.
Claims can be made no more than once every three weeks (in line with the minimum furlough periods) and the employer should calculate the amount they wish to claim and keep records. Current guidance indicates that the following will be required:

  • employer’s ePAYE reference number
  • employer’s Self-assessment UTR (for sole traders or partnerships) or Corporation Tax UTR (for companies)
  • the number of employees being furloughed
  • the names, National Insurance Numbers and payroll/works numbers of all the furloughed employees 
  • the claim period (start and end date)
  • amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
  • employer’s bank account number and sort code
  • employer’s contact name
  • employer’s phone number

Claims can be backdated to 1 March 2020 and will be paid by BACs into a UK bank account. This back-dating must be in line with the date they last we able to work, and the correspondence to the staff to agree the terms.
HMRC is expecting a huge demand for the scheme and highlighted in a House of Commons Treasury Committee hearing on 8 April that the portal will be open 24/7 with an ability to handle 450,000 claims an hour. At the same evidence session, HMRC also highlighted that claims could be made up to 14 days in advance of running payroll – thus putting an employer in funds to make a payment to their employees. We anticipate further guidance on this in due course.

There are around 600 employers who are unable to file online (either for religious reasons or disability) who will be unable to claim for JRS online and who HMRC will support through their usual Assisted Digital channels.  

Claims will be audited retrospectively. Abuse of the scheme will be taken seriously by HMRC and HMRC will either withhold payments or seek to recover payments made outside the terms of the scheme at a later date.

As an agent, can CCL help my clients to claim?

On 8 April 2020, HMRC issued an announcement that businesses, and agents that are authorised to act on behalf of clients for PAYE matters, will be able to file claims on behalf of their clients. However, file only agents (who submit RTI returns only), including Payroll Bureaus, will not be able access the service for data protection reasons.
File only agents can help support their clients to make a claim by supplying information that they hold on employees to those clients. Businesses will need the following information on each of their furloughed employees in order to identify furloughed employees and calculate the claim amount:

  • National Insurance number
  • Salary, National Insurance and pension contribution information.

HMRC are anticipating that the demands for support by phone will exceed their capacity, and agents (including file only agents) are asked to help support businesses directly.

What must I pay to my employees?

Each month, you can pay your furloughed employees the lower of:

  • 80% of their regular wage
  • £2,500

You can choose to pay your employee their full wage, but you are not obliged to do so.
As the employee is not working, then the amount paid under the rules above can fall below the NLW or NMW if the payment was averaged over the hours that they would have worked. However, if the employee undertakes any training during their furloughed period then they are entitled to the NLW/NMW for the time spent training. The amount paid must therefore be enough to ensure than when looking at the hours they spend training the employee has received NLW/NMW. If this is not the case, the employer should increase the payment accordingly.

What will I receive?

Employers who furlough workers will be able to claim a grant of up to £2,500 per month for the regular wage plus the associated costs of Employer’s National Insurance contributions and the minimum employer contributions under automatic enrolment. HMRC will be issuing further guidance on this calculation.

If the employee is only furloughed for part of the pay period, the claim should be adjusted accordingly. Amounts can only be claimed under the scheme for periods when the employee is furloughed.

The first step is to calculate what pay is eligible for the scheme. This is the reference pay. Then the resulting employer’s NIC and minimum 3% employer pension contributions relating to the reference pay can be calculated. (The grant for employer pension contributions is only available if the employer will be paying this into the employee’s pension scheme as an employer contribution.)

For salaried employees who receive regular pay, the claim should be for 80% of the employee’s salary as at 28 February, subject to the cap.
Where the employee’s pay varies, and the employee has worked for you for over a year then, subject to the £2,500 cap, you can claim the higher of:

  • the same month’s earning from the previous year
  • average monthly earnings from the 2019-20 tax year

Any regular payments including past overtime, fees and compulsory commission payments can be included in the claim but discretionary payments such as bonuses, commissions and fees should not be included as part of the calculation of the employee’s reference salary.

This means that, for the payment to cover the whole of March 2020, you can either look back to see what you paid your employee in March 2019, or calculate the average of their pay for the 2019/20 tax year.  Once you have calculated the gross wage for your employee, you can calculate and then claim for Employers National Insurance and auto enrolment contributions in addition.

If your employee was only furloughed from 24 March, then for the March payroll, amounts can only be claimed for the pro-rated salary paid for 23 March to 31 March 2020. (This assumes that the employee remained furloughed until at least 14 April so that a minimum three-week period was met.)

Support is only available under the scheme for the NIC and minimum employer pension contributions required under auto enrolment on 80% of the reference salary (subject to the cap). If you top up your employee’s salary to 100%, or pay more than the minimum employer pension contributions under auto-enrolment, then you cannot claim any relief for those additional costs.   

Benefits in kind and salary sacrifice

The reference salary on which the scheme grant value is calculated should not include the value of non-cash benefits in kind, including those received under salary sacrifice

Apprenticeship Levy and Student Loans

Both the Apprenticeship Levy and Student Loans should continue to be paid as usual. Grants from the scheme do not cover these costs.

How will this be treated in employers’ business accounts?

The grant received should be treated as taxable income in the business accounts. However, as it is designed to offset the allowable expenses of keeping staff on the books (who would otherwise not have been paid and who have not done any work), the end result should be that there is no profit on which to pay tax.
For employers (such as those with domestic staff) who are not in business, it was confirmed on 9 April that the grant monies received under the scheme will not be taxable.

What happens when the scheme ends?

The scheme is temporary and is currently set to run for three months from 1 March, however it may yet be extended. When the scheme does eventually end, employers will need to decide whether to re-employ their furloughed workers, or consider termination at that point.

I have taken on an employee who has been furloughed? Is this allowed?

Furloughed employees are specifically allowed to take work with another employer during their furlough period as the Government do not wish to restrict the availability of labour during this period. What an employee must not do, is any work that makes money for the employer who has put them on furlough

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