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 laid off 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’. HMRC will reimburse 80% of their wages, up to £2,500 per month. This is to safeguard workers from being made redundant.

The CJRS will cover the cost of wages for employees that have been furloughed since 1st March and is initially open for 3 months but will be extended if necessary. It can include workers who were in employment on 28 February. Any employees that have already been made redundant from 1 March can therefore be reinstated to the payroll and instead be reclassified as furloughed workers.

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

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

How it works

If your business has been severely affected by the COVID-19 pandemic and you were about to make employees redundant, the CJRS offers the alternative of ‘furlough’.  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. 

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 the lower of 80% of pay or £2,500, PLUS Employer’s NI and minimum auto-enrolment contributions

To qualify the employee should not undertake ANY work for you whilst furloughed, including being required to answer calls, emails, etc.

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.

How to calculate pay

For salaried employees with no variance in pay, it’s 80% of salary as at 28 February.

Employees with variable 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.

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

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.

Who can be furloughed

  • It has been confirmed that employees taken on after 28 February 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 LLP’s can be furloughed.
  • After some initial uncertainty, it has been confirmed company directors can be furloughed. We have further guidance here.

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.

This page was updated 8 April 2020.