Coronavirus Job Retention Scheme


Under the Coronavirus Job Retention Scheme (CJRS), all UK employers with a PAYE scheme will be able to access support to continue paying part of their employees’ salary for those that would otherwise have been made redundant during this crisis.

This applies to employees who have been asked to stop working, but who are being kept on the payroll, otherwise described as ‘furloughed workers’. The ‘furloughed workers’ will be on ‘furlough leave’. During this time, they will continue to be employed by the employer, but they will not be required to work for a temporary period of time.

This scheme has now been extended to March 2021. See our blog for the latest guidance.

How it works

In order to benefit from the CJRS, employers must pay employees at least, the lower of: 80% of their normal earnings or £2,500. HMRC will reimburse employers 80% of a furloughed worker’s pay up to a £2,500 monthly cap, PLUS the employer’s National Insurance and minimum auto-enrolment contributions.

The CJRS will cover the cost of wages for employees that have been furloughed since 1st March and can include workers who were in employment on 19 March.

It is likely that the CJRS will not interrupt an employees’ continuity of service. Likewise, annual leave will continue to accrue whilst staff remain employed.

All UK-wide employers with a PAYE scheme will be eligible: this includes the public sector, Local Authorities and Charities.

Updates from 29 May

From 1 July 2020 furloughed employees will be able to return to work part time, which is earlier than the 1 August date previously announced. Employees will continue to receive 80% of their salary for the scheme duration with the employer paying for their normal hours.

Click here for more information on the updates.

Updates from 15 April

On 15 April 2020 HMRC announced some important changes to the CJRS scheme:

  • Now can be used for any employer that had a PAYE scheme as at 19 March 2020.
  • It can be used for employees that were on payroll as at 19 March 2020, but only if an RTI submission including that employee had been made by that date. Previously this date was set as 28 February, however it will likely be unhelpful for most employers than run monthly payrolls. An employee that was taken on say 2 March, where there first RTI submission including them was say 30 March, will not benefit. This could however be an important change for employers that run weekly or irregular payroll runs.
  • As previously advised, the scheme can be used for employees that were made redundant after 28 February, provided they are re-hired. New stipulation that only applies to employees made redundant between 28 February 2020 and prior to 19 March 2020.
  • It can be used for employees on any type of Visa.

Further clarification and guidance on the CJRS was issued by the Government on 4 April.

How to calculate pay

For salaried employees with no variance in pay, it’s 80% of salary as at 19 March.

Employees with variable pay should be calculated as the higher of the below (subject to the cap of 80%/£2,500):

  • The same month’s earnings in the previous year
  • Average monthly earnings from the 2019/20 tax year

Additional pay and bonuses

  • In addition to basic pay, amounts the employer is obliged to pay are also included. This can include overtime, commissions and bonuses.
  • Amounts that are discretionary cannot be included. This will include discretionary bonuses and commissions.
  • Employers’ National Insurance and minimum Automatic Enrolment contributions will be reimbursed in addition to the £2,500 cap, but only on the gross salary being reimbursed under the scheme.
  • Employers that choose to ‘top-up’ employees pay will still be liable to Employer’s NI and AE contributions on that element.
  • Non-monetary benefits or amounts sacrificed under salary sacrifice schemes cannot be included. Anyone that participates in a salary sacrifice scheme will therefore be subject to the 80% on the lower sacrificed salary. In the circumstances employees can consider opting out of salary sacrifice arrangements.
  • In some cases 80% pay make take an employee below National Minimum Wage (‘NMW’). NMW doesn’t apply in these circumstances as the employee is not working. NMW will however need to be paid for time spent training.
  • Claims for employees returning from statutory leave (e.g. maternity leave) should be based on their contractual salary, not amounts received whilst on leave

The amounts declared on payroll must be the amount actually paid to the employee, not their usual salary. Therefore, if an employees pay is being reduced to 80%, that is the amount that should be declared.

Who can be furloughed

  • It has been confirmed that employees taken on after 19 March cannot be furloughed under the scheme
  • Employees receiving Statutory Sick Pay (SSP) cannot be furloughed. However, they can however be furloughed once SSP ends.
  • You can furlough an employee who is shielding in line with public health guidance if they are unable to work from home and you would otherwise make them redundant.
  • Employees that are unable to work due to caring responsibilities (e.g. looking after kids) can be furloughed. The general requirement that the employer does not have sufficient work for that employee must however still be met.
  • Salaried members of LLPs can be furloughed.
  • It has been confirmed company directors can be furloughed. We have further guidance here.
  • Employers can claim for employees that were transferred under the Transfer of Undertakings (Protection of Employment) regulations (TUPE) after 19 March 2020.
  • Public sector contractors within the scope of IR35 can be furloughed. Read more here.

Employees cannot undertake any work whilst furloughed, though they can study. If employees are required to study whilst furloughed, they must be paid at least National Minimum Wage for compulsory time spent studying, even if this is more than 80% of normal earnings.

Additional points

  • The minimum furlough period is 3 consecutive weeks. An employee can be furloughed multiple times, but each occasion must be for a minimum of 3 consecutive weeks.
  • The government have reiterated the need to communicate furlough in writing to employees. This evidence must be kept for a period of 5 years.
  • Employment rights are unaffected whilst furloughed.
  • Employees can take on another job whilst furloughed, subject to the terms of their existing employment contract.
  • Should the business decide, at a later point, that redundancies are still necessary, they should take legal advice at that stage on the associated risks.
  • Those knowingly found to be defrauding could face criminal convictions.

HMRC grant

  • The grant is pro-rated if the employee is only employed for part of the pay period. There is no indication that there is any pro-rata for part time employees, just those employed for part of the period.
  • The grant is taxable in the hands of the employer, but the wage costs remain tax deductible, so should be neutral.
  • The grant is a reimbursement by HMRC of salary costs paid to furloughed workers, so employers may face cash flow issues in paying these workers. A claim can be made to HMRC 14 days in advance of running the payroll with payments being made 4-6 days thereafter.

Do let us know if you need financial support for this as there are a number of options that may be open to you, including the Government’s Coronavirus Business Interruption Loan.

Employers will need to:

  1. Designate affected employees as ‘furloughed workers,’
  2. Notify those employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation. The government have reiterated the need to communicate furlough in writing to employees, which must be kept for a period of 5 years. Note if you have more than 20 employees whose contracts need to be changed a more formal consultation process will need to be done and we recommend legal advice at this point.
  3. Please note it is the employer’s choice to furlough and not the employee. If the employee requests to be furloughed, the employer can refuse to agree (e.g., if there is still work for them to do.)
  4. Employers then need to submit information to HMRC about those employees who have been designated as ‘furloughed’ and their earnings via a new online Portal which will be live by 20th April.
  5. HMRC will then reimburse 80% of wage costs for each ‘furloughed worker’ up to a cap of £2,500 per month, PLUS employer’s National Insurance and minimum Auto-Enrolment contributions.
  6. Furloughed employees could be paid 80% of their pay or higher if the employer chooses (bearing in mind the CJRS will reimburse a maximum of 80% to a maximum of £2500 per employee).

Key points for employers

  • Ensure that you document your thought processes and discussions when deciding which employees are to be designated at ‘furloughed’ – treat it as if it is a redundancy situation and think about how you would need to evidence your decision.
  • Consider if putting employees on furlough leave is absolutely necessary and reasonable to do in the circumstances. Again, make sure you record your reasons (in writing).
  • Ensure that you notify employees being designated as ‘furloughed’ in writing, giving your reasons, making clear any terms that will apply during this period, and offering reassurance that financial support via the CJRS will be available.
  • The CJRS is a reimbursement scheme so the employer will have to make the payments to employees first and then seek reimbursement from HMRC.
  • Be understanding that there may be groups of employees that feel hard done to (e.g. those who are genuinely sick with the Coronavirus, those having to self-isolate as a family member is sick, the over 70s and those in vulnerable groups who are only entitled to SSP or contractual sick pay [which may be less than 80% pay]) and they feel it is unfair that those ‘furloughed’ are getting much more.

The overall message, however, is that the Government will provide assistance to both employers and employees. They are urging businesses not to make permanent redundancies.

The public guidance now has numerous requests that employers and employees should not contact HMRC about the CJRS. HMRC are instead instructing employers to contact their agent.

This page was last updated on 1 June 2020.