Desley Sherwin
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Coronavirus Job Retention Scheme - UPDATED

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*Updated guidance has been provided on 27 March 2020 – this note includes that guidance*

Who is eligible for the scheme?

Any UK organisation with employees can apply, including:

  • businesses
  • charities
  • recruitment agencies (agency workers paid through PAYE)
  • public authorities

These organisations must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.

Where the organisations being taken under the management of an administrator, the administrator will be able to access the Coronavirus Job Retention Scheme.

Comment: The Self-Employed Income Support Scheme was announced on 26 March 2020 – see our separate blog.

Public sector organisations

The Government expects that the scheme will not be used by many public sector organisations, as the majority of public sector employees are continuing to provide essential public services or contribute to the response to the coronavirus outbreak.

Where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not to furlough them. This also applies to non-public sector employers who receive public funding for staff costs.

Organisations who are receiving public funding specifically to provide services necessary to respond to COVID-19 are not expected to furlough staff.

In a small number of cases, for example where organisations are not primarily funded by the Government and whose staff cannot be redeployed to assist with the coronavirus response, the scheme may be appropriate for some staff.

What do businesses need to do to access the scheme?

Businesses need to designate affected employees as “furloughed”. Furloughed employees will remain on the payroll during this time.

To be eligible, furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:

  • full-time employees
  • part-time employees
  • employees on agency contracts (who are not working as a result of the furlough designation)
  • employees on flexible or zero-hour contracts

When on furlough, an employee must not undertake work for or on behalf of the organisation. This includes providing services or generating revenue (but see below regarding training).

While on furlough, the employee’s wage will be subject to usual income tax and other deductions.

If an employee is working, but on reduced hours or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their contractual salary (but see below, What if we have already put our staff on reduced hours?)

To be eligible for the scheme, employers should write to their employee confirming that they have been furloughed and keep a record of this communication.

Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.

Comment: we do not yet have guidance on what will happen to an individual who, on or before 28 February 2020, resigned their previous employment on notice and accepted an offer to start employment with a new employer on or after 29 February 2020. At the moment, it appears that they will not be eligible to be furloughed, even if there is a paper trail to suggest the hiring arrangements were completely genuine.

Claim process

Employers need to make a claim for wage costs through this scheme.

You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or  £2,500 per month.  The guidance has confirmed that the associated Employer National Insurance contributions and automatic enrolment employer pension contributions on that subsidised wage minimum can also be claimed and repaid.

Fees, commission and bonuses should not be included.

At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but this is entirely discretionary.

NB: HMRC will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions before the scheme becomes live.

Comment: Some employers have expressed concern to us that they simply cannot afford to pay the 80% furlough wages in the meantime. If so, we suggest you take up as much of the help offered as possible to keep you going until the scheme does start to pay out (Business Interruption Loan, etc). If you still can’t pay the 80% furlough wages, seek the agreement of your furloughed employees to defer payment so that they effectively accept payment and receive a payslip as usual, but immediately loan the money back to the employer on the strict condition that it will be repaid to the employee as soon as practicable after HMRC have repaid the furlough wages to the employer. Not all employees will be able to agree, and they should not suffer a detriment if they refuse.

How long will the scheme run for?

When the scheme is up and running, the payments will be backdated to 1 March 2020 (where appropriate) and will run for “at least three months”. The Chancellor has said the scheme may be extended if necessary.

What if we have already made employees redundant?

The scheme also covers employees who were made redundant after 28 February 2020, if they are rehired by their employer on the same terms and conditions as before their dismissal. To be eligible under the scheme, they must not undertake any work for the employer after their rehiring.

What if we have already put our staff on reduced hours?

The employee’s actual salary before tax as of 28 February 2020 will be used to calculate the 80% furlough wage. If staff have been put on reduced hours after that date, they should now be able to agree to be placed on furlough leave as though the reduction in hours had not taken place.

Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February 2020.

Can we put an employee who is on sick leave, on furlough leave?

Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.

Comment: Where an employee has been on sick leave for a non-Covid-29 reason and then claims to have recovered so that they are now eligible for furlough leave, we think that employers should reasonably satisfy themself that the employee genuinely is well and able to return to work. If in doubt, we believe that it would be reasonable for the employer to request that a GP or Occupational Health consultant should assess and report as to the employee’s fitness to return.

Employees who are ‘shielding’ in line with public health guidance (i.e. those who have been identified as most at risk of needing hospital treatment if they catch coronavirus and who are being asked to stay at home for at least 12 weeks) can be placed on furlough.

Can an employee request they are put on furlough leave?

Yes, but the employer does not have to agree.

Is it unfair to put some employees on furlough leave and keep other employees working?

Providing the employer has used non-discriminatory criteria to choose who is put on furloughed leave, it is possible to lawfully choose only to furlough part of the workforce.

What happens if we intend to put 20 or more employees on furlough leave?

Comment: There is no guidance currently, but we believe that as long as the employer has not acted in a discriminatory way and can be seen to have applied to the furlough selection process some form of ‘rough and ready’ selection criteria (which can be justified as being in accordance with business needs), the Employment Tribunal will hesitate to interfere with the process that has been undertaken.

Will employees continue to accrue holiday during furlough leave?

Yes, employees will retain all of their contractual rights (other than the rights during furlough leave to be provided with work and to receive more than 80% of their contractual salary) including the accrual of holiday entitlement. 

What can the employer claim back?

Full time and part time employees

For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February 2020 should be used to calculate the 80%.

Fees, commission and bonuses should not be included.

Employees whose pay varies

If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:

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

If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.

If the employee only started employment with you in February 2020, use a pro-rata for their earnings so far to claim.

Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.

Employer National Insurance and Pension Contributions

All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.

You can claim a grant from HMRC to cover wages for a furloughed employee, equal to the lower of 80% of an employee’s regular salary or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on paying those wages.

Are employers obliged to top up the remaining 20%?

You can choose to provide top-up salary in addition to the grant. Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme, nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).

National Living Wage/National Minimum Wage

Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working.  Therefore, furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW (but see, training below).

If your employee has more than one job

If your employee has more than one employer they can be furloughed for each job, as long as they meet the conditions for eligibility. Each job is separate, and the cap applies to each employer individually.

If your employee does volunteer work or training

A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of, your organisation.

If workers are required to complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

If your employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay

Individuals who are on or plan to take Maternity Leave must take at least two weeks off work (four weeks if they work in a factory or workshop) immediately following the birth of their baby. This is a health and safety requirement. In practice, most women start their Maternity Leave before they give birth.

If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.

Will contracts of employment need to be changed?

Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. We can provide you with a template letter on request.  

Making a claim

To claim, you will need:

  • your ePAYE reference number
  • the number of employees being furloughed
  • the claim period (start and end date)
  • amount claimed (per the minimum length of furloughing of three weeks)
  • your bank account number and sort code
  • your contact name
  • your phone number

You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim, so make sure you retain a necessary transactional paper trail.


Claims can be backdated until 1 March 2020 if applicable.

You can only submit one claim at least every three weeks, which is the minimum length an employee can be furloughed. This is a new indication that we were not previously aware of.

Comment: This suggests that you may be able to ‘rotate’ employees on and off furlough leave every three weeks.  What it does not tell us is what you should do in the following scenario:

Employee A is furloughed and employee B stays at work under his usual terms and conditions. After 20 days, Employee B (or a member of his family) starts to show signs of Covid-19 so is required to self-isolate for 14 days.

Can Employee A be brought off furlough leave part-way through his three week minimum furlough period? Yes, but it is likely that the employer will not be able to reclaim any of the 80% part-furlough wage paid for the 20 day period. It is not a minimum of three weeks.

After the 14 day self-isolation period, Employee B comes back to work and Employee A is re-furloughed. If the furlough period continues successfully for the three week period, can they swap again so that Employee B is then furloughed for three weeks, and Employee A comes back to work for three weeks? We think so, but then, after three weeks, can they swap again? We simply don’t know.

What to do after you’ve claimed

Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.

You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.

You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted.

When the Government ends the scheme

When the Government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).

Comment: We believe that redundancy consultation will be able to take place during furlough leave, if a genuine redundancy situation arises. Please seek legal advice before commencing any such process.

If sufficient numbers of staff are involved (20/100), it may be necessary to engage in a collective consultation process to procure agreement to changes to terms of employment, but we consider that in most situations, the Covid-19 effect on business operations is likely to provide a ‘special defence’. Seek legal advice if this affects your organisation.

Once the scheme has been closed by the Government, HMRC will continue to process remaining claims before terminating the scheme.

Income tax and Employee National Insurance

Wages of furloughed employees will be subject to Income Tax and National Insurance as usual.

Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.

Employers will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.

This guidance is believed to be correct as at 27 March 2020, but the situation remains fluid and guidance is subject to change.

For information on our employment services visit our employment law page.