Coronavirus Job Retention Scheme

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Support for businesses through the Coronavirus Job Retention Scheme

Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.


All UK businesses are eligible.

How to access the scheme

You will need to:

  • designate affected employees as ‘furloughed workers,’ (whilst there are clear lay-off rules in the UK, the concept of “furlough” is a US term and as such is not specifically covered by UK Law) and notify your 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
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required but they have to create a new IT system to run the scheme which will take until April to complete) HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers. Note – It has been announced that directors and shareholders of owner managed companies can put themselves “on furlough” as at 27/03/20.

‘Furlough’ & the Job Retention Scheme

The Government has announced its plans for financial assistance to help employers retain employees for an extended period of time, although offering no work, and avoid layoffs. It is called the Job Retention Scheme.

Little information has been published as to how it will work and we are therefore dependant on further Government guidance.
The proposed scheme involves employers placing their employees in “furlough”. This term is not used in UK employment law but in essence it means putting employees on temporary leave of absence where they do not work but are retained on the payroll to be brought back to work when required.

Employers who use this scheme will be able to obtain a grant from the Government to cover 80% of ‘Furloughed employees’ wages, to a maximum of £2,500.00 per employee per month.

Whilst we await the Government’s announcement as to how the scheme will operate our consideration is that an employer will need to designate which employees will be “‘furloughed” and then submit that information to HM Revenue & Customs along with each employee’s earnings. Upon acceptance a grant to cover 80% of the gross wages will be issued. Although the online portal for this procedure is unclear at present we feel it will probably be paid in some way through the PAYE system.

The grant is a reimbursement to the employer therefore the employer should make the wage/salary payment to the “furloughed” employee as normal and then be reimbursed by HM Revenue & Customs.

The Chancellor, Rishi Sunak, has stated he hopes the first grants will be paid by the end of April 2020, and they will be backdated to 1st March 2020. The scheme is initially intended to run for 3 months but may be extended.

In theory any employee can be “furloughed”. They need to be on a registered PAYE Scheme in order for the employer to be able to claim the grant for their wages/salary.

An employee’s contract of employment is unlikely to mention the right of the use of ‘furlough’ within it as the word does not appear in UK employment law. It would be useful for the employee to mutually agree to this with the employer and more attractive for them to receive 80% of their wages for the period of “furlough” rather than be made redundant. It would be up to the employer to stand the cost of the additional 20% to make up the full wages should they wish to do so.

If an employer as already taken the step to utilise lay off they can get in touch with those employees and agree to change the current status from lay off to “furlough? They still wouldn’t be provided with any work but their pay arrangements would be changed from potentially nothing to 80% of their usual wage.

Before selecting employees for ‘furlough’ an employer may need to consider any future ramifications from discrimination claims.
In the absence of full guidance from the Government on how the Job Retention Scheme will work it may be prudent for an employer to wait before taking action to place employees on “furlough” for the time being.

Coronavirus Job Retention Scheme – Key Questions

Who can claim?

You must have

  • Any organisation that had a PAYE payroll on 28th February 2020
  • Enrolled for PAYE online – this can take up to 10 days
  • A UK bank account

Any entity with a UK payroll can apply, including businesses, charities, recruitment agencies and public authorities.

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.

Who can you claim for?

You can only claim for furloughed employees that were on your PAYE payroll on or before 28 February 2020.

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

Employees can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed.

To be eligible for the grant, when on furlough, an employee cannot undertake work for, or on behalf, of the organisation. This includes providing services or generating revenue. We understand that this will be interpreted very strictly by HMRC.

Employers are free to consider allocating any critical business tasks to staff that are not furloughed. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.

If you made employees redundant or they stopped working for you after 28 February

 If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages through the scheme.

If your employees are working reduced hours

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

If your employee is on unpaid leave

You can only claim for employees that started unpaid leave after 28 February 2020.

If your employee is self-isolating or on sick leave

 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.

Shielding Employees

You can claim for furloughed employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home and you would otherwise have to make them redundant.

Employees with caring responsibilities
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.

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

Employees can be furloughed in one job and receive a furloughed payment but continue working for another employer and receive their normal wages.

If your employee is on a fixed term contract
Employees on fixed term contracts can be furloughed. Their contracts can be renewed or extended during the furlough period without breaking the terms of the scheme. Where a fixed term employee’s contract ends because it is not extended or renewed you will no longer be able claim grant for them.

Company Directors
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).

Further guidance on members of LLP’s, agency workers etc. can be found here


If your employee is on maternity leave, adoption leave, paternity leave or shared parental leave

The normal rules for maternity and other forms of parental leave and pay apply.

You can claim through the scheme for enhanced (earnings related) contractual pay for employees who qualify for either:

  • maternity pay
  • adoption pay
  • paternity pay
  • shared parental pay
How do you furlough an employee?

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 grant employers must confirm in writing to their employee confirming that they have been furloughed. A record of this communication must be kept for five years.

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.

What if they have a job with another employer?

You can furlough them and they can still continue to work that other job, so long as the roles are separate.

Can you put people on and off furlough?

The minimum length of time an employee can be furloughed for is three weeks.

Does Holiday accrue through the period of furlough?

Holidays do accrue through furlough. If employees were on holiday while waiting to see what the guidance was and before furloughing them, then you should only claim furlough from the end of that holiday period.

Can Directors of a business furlough?

A director can do so provided they were paid via PAYE as at 28 Feb 2020. Company Directors can complete their statutory duties, even if furloughed. This is the only work allowed. 

Further details can be found in the section above here.

What can you claim and what do you pay furloughed employees?

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

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 (say to their usual salary) but is not obliged to under this scheme.

For full and part time salaried employees you should base this on their actual salary before tax, as of 28 February 2020.

Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they written to confirming their furloughed status.

Full or part time employees on a salary

Claim for the 80% of the employee’s salary, as of 28 February 2020, before tax.

Employees whose pay varies

If the employee has been employed for 12 months or more, you can claim the highest of either the:

  • same month’s earning from the previous year
  • average monthly earnings for the 2019-2020 tax year

If the employee has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work.

If the employee only started in February 2020, work out a pro-rata for their earnings so far, and claim for 80%.

Further details can be found here

What if an employee on furlough is then below National Living Wage/National Minimum Wage?

This is ok provided you are paying them in accordance with the scheme.

When can you claim?

The online service you’ll use to claim is not available yet. It is expected to be available by the end of April 2020.

What you’ll need to make 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 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.

Coronavirus Job Retention Scheme – What happens next?


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.

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.

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