Job Retention Scheme | Coronavirus

What is the Coronavirus Job Retention Scheme? 

All UK employers regardless of size will be able to access support to continue paying part of their employees’ salary for an employee that has been designated as a ‘furloughed worker. The grant applies to all UK based businesses. Eligible businesses include charities and not-for-profit organisations and will include single director companies, although the same rules will apply as to other businesses.  

*UPDATE 15 APRIL 2020*

The government has extended the start date for eligibility for furlough to 19 March from original 28 February meaning thousands more employees will able to receive support through the Coronavirus Job Retention Scheme (CJRS) as a result.

The government also confirmed that the scheme is expected to be fully operational next week with the online portal due to go live on or around the 20 April to allow businesses to start filing their returns before the crucial PAYE payroll runs.

Following a review of the delivery system and to ensure the scheme helps as many people as possible, new guidance published today has confirmed the eligibility date has been extended to 19 March 2020 – the day before the scheme was announced.

Employers can claim for furloughed employees that were employed and on their PAYE payroll on or before 19 March 2020. This means that the employee must have been notified to HMRC through an RTI submission notifying payment in respect of that employee on or before 19 March 2020.

The scheme will be in place for three months, and will be backdated to 1 March 2020, running for an initial three months, subject to review, through to 31 May. It is our view that it only applies to those staff who were employed/engaged at the time of the Chancellor’s announcement on 20 March 2020, were on the payroll at 19 March 2020, and who have not been dismissed since. 

Employers will put workers on temporary leave and then the HMRC will pay employers a grant worth 80% of an employee’s usual wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. HMRC are working urgently to set up a system for reimbursement as existing systems are not set up to facilitate payments to employers. 

HMRC has confirmed that ‘individuals will pay income tax and national insurance contributions (NICs) on any payments received through this scheme as they are replacement for income in line with normal practice for benefits or grants that replace income’. 

The maximum grant will be calculated per employee and is the lower of: 

  • 80% of ‘an employee’s regular wage’ and
  • £2,500 per month.

Plus the associated employers’ national insurance contributions (NIC) on this amount and the minimum automatic enrolment employer pension contributions on that wage.
Fees, commission and bonuses should not be included.

This gives a maximum cap of £2,500 +£245 (employers’ NIC) + £59 (auto- enrolled pension contribution) = £2,804 of total possible grant that can be applied for per employee per month. 

By way of an example, the cost to the company of a furloughed employee who continues to be paid £2,000 per month is as follows:  

X Ltd employs Mr A at an annual salary of £24,000, so £2,000 per month. Mr A has opted out of auto enrolment. 

Each month, Mr A currently receives net pay of £1,655 which is after deducting PAYE of £191 and employees NIC of £154. On this salary, the employer pays employers’ NIC of £177. 

The available grant for the employer is the lower of 

(a) 80% of £2,000, and  

(b) £2,500 

Plus employers’ NIC on this amount 

So X Ltd claims a grant of £1,600 plus £177 = £1,777. 

The net amount of cash required by X Ltd to furlough Mr A based on maintaining the existing salary is £2,000 + £177 – £1,777 = £400 per month. 

It is a matter for employment law whether the employer is actually required to pay this top up. Employees and employers can agree to a different arrangement during the furlough. 

We have produced other Job Retention Scheme calculation scenarios that you can find here.

The Process: 

  1. Where no work is available for one or more members of staff, and where there is no contractual right to lay staff off, our view is that employers should immediately consult (either individually or collectively following usual rules on consultation) with a view to affected staff agreeing to become “furloughed”. Where there is a contractual right to lay staff off, go to (3) below. 
  2.  If agreement is not reached, employers should take immediate legal advice. If agreement is reached, go to (3) below. 
  3. We believe the next applicable step will be that employers should write to each worker confirming that they are “furloughed”, following the Chancellor’s announcement of Friday 20 March 2020. 
  4. You can find our Furlough Template Letter here. We believe the letter should confirm that each member of staff will receive 80% of their salary up to £2,500 per month. Employers can top up salaries further if they choose to. The gross amount of pay per month should be set out. It should be made clear that the payment is being made under the Coronavirus Job Retention Scheme and is subject to change depending upon the rules of that Scheme, and upon the interpretation of rules under that Scheme as clarity emerges. 
  5. Employers should submit information to HMRC about the staff that have been furloughed and their earnings through the new online portal when it is available. 
  6. Employers should then start to pay staff in accordance with the arrangements. 

Am I Eligible? 

Any entity with a UK payroll can apply, including businesses, charities, recruitment agencies and public authorities. You must have enrolled for PAYE online – this can take up to 10 days.

All UK-wide employers with a PAYE scheme that was created and started on or before 19 March 2020 will be eligible including: 

  • Businesses, 
  • Charities, 
  • Recruitment Agencies (agency workers paid through PAYE), 
  • Public Authorities 

The employer must have a UK bank account. 

Employees You Can Claim For: 

Furloughed employees must have been on your PAYE payroll on 19 March 2020, and can be on any type of contract, including: 

  • full-time employees 
  • part-time employees 
  • employees on agency contracts (who aren’t working) 
  • employees on flexible or zero-hour contracts 
  • Foreign nationals are eligible to be furloughed.

The scheme also covers employees who were made redundant since 19 March 2020, if they are rehired by their employer. 

To be eligible for the subsidy, when on furlough, an employee cannot undertake work for or on behalf of the organisation. This includes providing services or generating revenue. 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 salary subject to the terms of the employment contract you agreed. 

Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way. 

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

You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.  


Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed.

However, you must pay your Apprentices at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) as appropriate for all the time they spend training. This means you must cover any shortfall between the amount you can claim for their wages through this scheme and their appropriate minimum wage.

Guidance is available for changes in apprenticeship learning arrangements because of COVID-19.

Public sector organisations

The government expects that the scheme will not be used by many public sector organisations, as most 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 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.


Individuals can furlough employees such as nannies provided they pay them through PAYE and they were on their payroll on, or before, 19 March 2020.


Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme. However, we would expect an administrator would only access the scheme if there is a reasonable likelihood of rehiring the workers. For instance, this could be as a result of an administration and pursuit of a sale of the business.

Eligible individuals who are not employees

As well as employees, the grant can be claimed for any of the following groups, if they are paid via PAYE:

  • office holders (including company directors)
  • salaried members of Limited Liability Partnerships (LLPs)
  • agency workers (including those employed by umbrella companies)
  • limb (b) workers

The guidance below sets out specific considerations for those individuals who are paid via PAYE, but who are not necessarily employees in employment law. Unless explicitly set out below, all other guidance is applicable to these cases, and should be followed.

Agency Workers

Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through this scheme, including where they are employed by umbrella companies.

Furlough should be agreed between the agency, as the deemed employer, and the worker, though it would be advised to discuss the need to furlough with any end clients involved. As with employees, agency workers should perform no work for, through or on behalf of the agency that has furloughed them while they are furloughed, including for the agency’s clients.

Where an agency supplies clients with workers who are employed by an umbrella company that operates the PAYE, it will be for the umbrella company and the worker to agree whether to furlough the worker or not.


1. What about staff who have already been dismissed prior to the Scheme becoming active 

If you made employees redundant, or they stopped working for you on or after 19 March 2020, you can re-employ them, put them on furlough and claim for their wages through the scheme.

2. Is the employer obligated to make up the 20% of wages lost by staff who are paid under the Scheme? 

You can choose to top up your employee’s salary, but you do not have to. Employees must not work or provide any services for the business while furloughed, even if they receive a top-up salary.

3. Are company directors entitled to 80% of their salary? 

As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

This also applies to salaried individuals who are directors of their own personal service company (PSC).

4. Can employers bring staff into the Scheme who are already on sick leave or receiving SSP/CSP due to self-isolation? 

If you’re employee is on sick leave or self-isolating, they’ll be able to get Statutory Sick Pay.

You cannot claim for employees while they’re getting Statutory Sick Pay, but they can be furloughed and claimed for once they are no longer receiving Statutory Sick Pay.

5. Can employees work for their employer at all while being ‘furloughed’?  

The government’s guidance to employees states that employees should not undertake any work for their employer while they are ‘furloughed’. The fact that the employer is unable to give its employees any work for the time they are ‘furloughed’ is what allows them to claim up to 80% of the employee’s wage for all employment costs (up to £2,500 a month).  

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. However, if workers are required to for example, 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. 

6. Can employees be moved in and out of furlough?

We have had many questions asking if workers can be moved in and out of being furloughed if work becomes available to an employer and then ceases again? The scheme is being designed to allow for flexibility so that furloughed staff can be brought back to work, for example, to replace those still working who later become sick. An employee must remain on furlough for a minimum period of three weeks, although a further period may immediately follow the previous furlough if agreed. This will ensure flexibility and permit furloughed employees being brought back to cover, for example, sickness of others. 

7. How do you calculate the 80% grant for zero hour or seasonal workers?

Confirmation has been received from HMRC that zero hours or seasonal workers can use the following for  calculation of the 80% grant payable under the Job Retention Scheme.  It will be the higher of:​

  • their earnings in the same pay period in the previous year; and
  • the average earnings in the whole previous 12mths (or fewer if they have worked less than 12mths). Half months can also be included in that calculation, pro-rated
  • employees must have been on the payroll on 19 March 2020,
  • employees can claim up to £2,500 from more than one employer if they had two or more jobs
8. Can employees staying at home to look after children be placed on Furlough?

Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed. For example, employees that need to look after children can be furloughed.

Employees eligible for statutory maternity pay or maternity allowance can claim up to 39 weeks of statutory pay or allowance as normal. The same principles apply for normal paternity, adoption or shared parental pay rights.

If the employer offers enhanced contractual rights these are included as wage costs that can be claimed through the scheme.

9. Can employees who have been furloughed then be made redundant?

Employees who have been furloughed can then be made redundant subsequently, even during the furlough period.  Min furlough period is 3 weeks.

10. What if an employee is working reduced hours?

If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme.

Furlough Letters

Don’t rush into implementing an employee furlough policy without talking to your lawyer or HR specialist first.  

If you decide that putting employees on furlough is the best option for you and your employees, then staff need to be notified of the change in their designation, from employees or workers to “furloughed workers”. In order to add clarity to a difficult and emerging situation, our view is that this should be in writing. Your furlough notice letter should contain the following: 

  • Address – This is a formal letter, a furlough notice should clearly state the date, employee’s name, and their address.  
  • Purpose – State the purpose of the letter. Get straight to the point. Include the employee’s position, department, reason for the furlough, and information about any changes to employee benefits. It is advisable to tell the employee that this action does not reflect dissatisfaction in job performance. 
  • Detail – Explain what a furlough is, determine the length of the furlough, and communicate employee benefits during this period to employees. 
  • Future communication – Offer a way for the employee to keep in touch. End the letter on a positive note. 

What you’ll need to make a claim

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. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.

To claim, you will need:

  • your employer PAYE reference number
  • the number of employees being furloughed
  • National Insurance Numbers for the employees you want to furlough
  • Names of the employees you want to furlough
  • Payroll/works number for the employees you want to furlough
  • your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
  • the claim period (start and end date)​
  • amount claimed (per the minimum length of furloughing of 3 consecutive 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.


You should make your claim using the amounts in your payroll – either shortly before or during running payroll. Claims can be backdated until the 1 March where employees have already been furloughed.

If appropriate, worker’s wages should be reduced to 80% of their salary within your payroll before they are paid. This adjustment will not be made by HMRC.

Minimum furlough periods

Any employees you place on furlough must be furloughed for a minimum period of 3 consecutive weeks. When they return to work, they must be taken off furlough. Employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.

After you’ve claimed

HMRC will check your claim, and if you’re eligible, pay it to you by BACS to a UK bank account.

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).

HMRC will process all claims made before the scheme ends.

When your employees are on furlough

You cannot ask your employee to do any work that:

  • makes money for your organisation
  • provides services for your organisation

They can take part in volunteer work or training.

Employee taxes

Your employees will still pay the taxes they normally pay out of their wages.

This includes pension contributions (both employer contributions and automatic contributions from the employee), unless the employee has opted out or stopped saving into their pension.

Employee rights

Employees still have the same rights at work, including:

  • Statutory Sick Pay
  • maternity and other parental rights
  • rights against unfair dismissal
  • redundancy payments

Grants cannot be used to substitute redundancy payments. HMRC will continue to monitor businesses after the scheme has closed.

Working for a different employer

If contractually allowed, your employees are permitted to work for another employer whilst you have placed them on furlough.

For any employer that takes on a new employee, the new employer should ensure they complete the starter checklist form correctly. If the employee is furloughed from another employment, they should complete Statement C.

Tax Treatment of the Coronavirus Job Retention Grant

Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.

Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.

Useful Links: 

Further Guidance Announced Saturday 4th April 2020 – Find out more

Claim For Wage Costs Through The Job Retention Scheme  

We hope that this note is helpful. The situation is changing by the day, and even the hour, and so as soon as there is any further information we will share that with you. In the meantime, if you have any questions or you encounter issues with getting employees to agree to being ‘furloughed’, please do not hesitate to seek assistance from one of the Raffingers team.  

If you have any questions, please email us on

Raffingers will be covering all of the Coronavirus updates as and when they come through from the government so sign up to our Coronavirus update mailing list by clicking here.