Coronavirus job retention scheme


  1. Eligible businesses
  2. Eligible employees
  3. Meaning of ‘furloughed employee’
  4. Administration of the scheme
  5. Employment law and employment rights
  6. Calculating the grant
  7. Payroll requirements
  8. Making a claim to HMRC
  9. Flexibility
  10. Tax treatment for employees
  11. Tax treatment for employers

Introduction of the scheme

On 20 March 2020, the Government announced measures to protect employers and employees under the coronavirus job retention scheme (CJRS). The CJRS scheme is designed to support employers whose operations have been severely affected by coronavirus (COVID-19), to retain their employees and protect the UK economy.

Employers are currently able to obtain a grant from the Government to cover 80% of ‘furloughed’ employees’ wages, from 1 March 2020, to a maximum of £2,500 per employee per month, plus the associated employer national insurance contributions (NIC) and pension contributions (up to the level of the minimum automatic enrolment employer pension contribution) on that subsidised furlough pay. From 1 August 2020, the level of support will be gradually reduced with details announced on

The CJRS was given formal legal effect by a direction issued by HM Treasury on 15 April 2020, with a second, updated direction issued on 20 May 2020. HMRC updated its guidance multiple times, so it is important that employers who have furloughed staff review scheme updates and adjust their arrangements to ensure they meet current claim criteria. See the:

The HMRC guidance on eligible employees, which was originally included in the employers guidance, was moved to a new guide on 14 May 2020.

For an initial analysis of the direction, see the CIOT’s article: The ‘furlough’ coronavirus job retention scheme features and legal issues.

On 17 and 20 April, HMRC published the following additional guidance:

  • step-by-step guide for claiming under the CJRS
  • guidance (which was reissued in updated format on 12 June 2020) for employers on how to calculate 80% of wages (up to a maximum of £2,500 per month), with separate examples
  • HMRC online service to claim under the CJRS

References to the guidance mean the employers guidance unless otherwise indicated.

In addition, the House of Commons Library has published a detailed briefing paper, FAQs: Coronavirus Job Retention Scheme, which is regularly updated and addresses many questions brought up on the intricacies of the scheme.

Further, guidance for businesses on all the help available along with videos and webinars can be found here. There is a published list of businesses that must remain closed. This list has not been affected by announcements on 10 May 2020 on the Government’s recovery strategy. Further, the Government has released guidance for how businesses can work safely during the pandemic, with separate guidance for different types of workplaces. This may be useful in assessing whether it is appropriate to furlough staff.

See the Tax help for struggling businesses - employment guidance note for some of the areas a business may consider to help reduce or defer costs in relation to employment.

Timeline for scheme and amount of support

On 12 May 2020, the Chancellor announced that the scheme will continue until the end of October 2020. The timeline for the scheme has been announced alongside a factsheet and is as follows:

  • until 30 June: furlough: employees must be put on furlough and no work carried out for the employer at all. Support: 80% of salary up to £2,500 per month plus employer NIC and pension contributions
  • until 31 July: furlough: employers will be able to agree any working arrangements with previously furloughed employees. These arrangements must be agreed in writing. For hours worked, employers will pay employees in full as usual, bearing the full cost of employer NIC and pensions. Support: 80% of salary up to £2,500 per month plus employer NIC and pension contributions
  • for August 2020: furlough: flexibility of hours continues as above. Support: 80% of salary up to £2,500 per month. Employers will pay employer NIC and pension contributions
  • for September 2020: furlough: flexibility of hours continues as above. Support: Employers will pay employer NIC and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500 (plus any additional pay they have chosen to make over the 80% required)
  • for October 2020: furlough: flexibility of hours continues as above. Support: 60% of wages up to a cap of £1,875. Employers will pay employer NIC and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500 (plus any additional pay they have chosen to make over the 80% required)

The scheme ends on 31 October 2020.

The Government will make a one-off Job Retention Bonus payment of £1,000 to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021 provided they earn above £520 per month on average between the end of the scheme and the end of January 2021. Payments will be made from February 2021. Further detail will be announced by the end of July.

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Eligible businesses

Any entity with a UK payroll can apply, including businesses, charities, recruitment agencies (agency workers paid through PAYE) and public authorities.

Note that the 26 March version of the guidance stated that, in order to apply under the CJRS, the employer ‘must be a UK organisation with employees’. This requirement is not included in the updated versions.

Employers must have:

  • created and started a PAYE payroll scheme on or before 19 March 2020 (not 28 February 2020 as in previous versions of the guidance)
  • enrolled for PAYE online
  • a UK bank account

Employers who are individuals can furlough employees (such as nannies) provided that the employer pays them through PAYE, and that they sent HMRC an RTI submission notifying a payment in respect of the employee on or before 19 March 2020.

The scheme may not be available to some public sector organisations. Further information in this respect can be found in the guidance.

For guidance on payroll see the Real time information guidance note.

Eligible employees

Eligible employees for whom claims can be made will be identified by reference to the RTI submissions made for payments made to employees on or before 19 March 2020. A table illustrates various dates at which the employee was employed, the date the RTI submission was made and then stating whether the employee will be eligible. The HMRC guidance on eligible employees was moved to a new guide on 14 May 2020.

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Eligibility until 30 June 2020

Employees can be on any type of contract, and the scheme arrangements extend to:

  • full-time employees
  • part-time employees
  • agency workers and umbrella companies
  • employees on flexible hours or zero-hour contracts
  • apprentices

The guidance expressly states that foreign nationals are eligible to be furloughed. Grants under the scheme are not counted as ‘access to public funds’, and employers can furlough employees on all categories of visa.

Furloughed employees (see below for the meaning of ‘furloughed’) must not work for the employer during the period of furlough. Therefore, if any elements of employment duties are being performed, the employee will not qualify for the scheme. There is no de minimis, and therefore no work-related activities may be carried out.

The guidance provides that when an employee is on furlough, the employer cannot ask the employee to do any work that:

  • makes money for the employer’s organisation, or any organisation linked or associated with the employer’s organisation
  • provides services for the employer’s organisation, or any organisation linked or associated with the employer’s organisation

The references to linked or associated organisations are presumably to ensure that arrangements such as those where employers who operate through a group structure in which all employees are employed by a service company, which then provides the employees to the operating companies, are caught by the prohibition on work during furlough.

There is a very limited exception for directors, who can carry out particular duties to fulfill the statutory obligations they owe to their company, to the extent necessary (see below). There is a similar exception for the trustees of occupational pension schemes (see para 6.10 of the second treasury direction).

Employees working reduced hours or for reduced pay

The guidance states that if an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for the CJRS, though as announced on 12 May 2020, employees will be able to return to work part-time on the scheme with some salary being paid by the employer from 1 August 2020.

This does not mean that, up to 30 June 2020, an employer cannot put an employee who is currently working reduced hours or who is on reduced salary on furlough, if they then stop working altogether, but see below for the cut-off date for furloughing. Instead, this aspect of the guidance clarifies that an employer cannot have an employee working reduced hours or on reduced salary and on furlough at the same time and seek to ‘make up’ their pay to full pay under the CJRS.

Eligibility from 1 July 2020

From 1 July 2020, the scheme changed considerably. The guidance has been updated to reflect this, along with an announcement and a fact sheet. The scheme closed to new entrants from 30 June 2020, so anybody who had not been furloughed for a full three-week period prior to 30 June 2020 cannot be included in claims from 1 July 2020 onwards. Therefore, an employee must have been furloughed on 10 June at the latest, though this may differ if an employee is returning from statutory parental leave or is a military reservist returning from mobilisation.

Employees may work ‘for any amount of time and any shift pattern and a claim may be made for their normal hours not worked’. Although not made clear, it seems that these changes do not allow for employees to work only hours that are not their normal hours and a full furlough claim to be made in respect of their normal hours. See here for guidance on how to work out an employee’s usual hours and furloughed hours.

If an employer flexibly furloughs an employee, they must reach a new agreement with the employee, or reach a collective agreement with a trade union. A written copy of the agreement, which must be consistent with employment, equality and discrimination laws, must be kept for five years. Records must also be kept of the worked hours and furloughed hours.

From 1 July, flexible furlough agreements can last any amount of time and employees can enter into a flexible furlough agreement more than once. Where a previously furloughed employee starts a new furlough period before 1 July, this furlough period must be for a minimum of three consecutive weeks, regardless of whether that period ends before or after 1 July.

Volunteer work or training

The guidance for employers and making claims says that workers can do volunteer work or training while they are furloughed. However, they cannot provide a service to or generate revenue for their employer (or a linked or associated organisation). The updated guidance says that employers can help their furloughed workers find volunteering opportunities which can be with another employer or organisation.

However, if furloughed employees are required to take a training course, they must be paid at least the national living wage or national minimum wage for the time spent training, even if it is more than 80% of their wage that will be subsidised.

Union representatives and pensions trustees

During furloughed hours, employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers. However, they cannot provide a service to or generate revenue for their employer (or a linked or associated organisation). This also applies to employees who are pension scheme trustees or trustee directors of a corporate trustee who undertake trustee duties in relation to the pension scheme, but not to a professional, independent pension scheme trustee who has been furloughed by the independent trustee company.

Working for a different employer while furloughed

If contractually allowed, employees are permitted to work for another employer whilst their employer has placed them on furlough, or during the hours that they are on furlough under a flexible furlough agreement.

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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.

Employees made redundant or stopped working after 28 February

If an employee had been notified to HMRC as being on the payroll as of 28 February, but was then made redundant or stopped working for the employer before 19 March, they can be included in a CJRS claim if they have been re-employed by the same employer and furloughed. The re-employment date can be after 19 March if the person was identified as an employee of the employer in an RTI submission made by 28 February 2020.

If an employee has had multiple employers over the past year, has only worked for one of them at any one time and is being furloughed by their current employer, their former employer(s) should not re-employ them, put them on furlough and claim for their wages through the scheme.

The guidance clarifies that claims for employees who have been rehired following ceasing work after 28 February can only be made for the period from the date on which they are furloughed through the scheme (ie this cannot be backdated to cover the period when they were not employed by the employer).

Employees made redundant or stopped working after 19 March

If an employee had been notified to HMRC as being on the payroll as of 19 March, but was then made redundant or stopped working for the employer after 19 March, they can be re-employed and furloughed and included in a CJRS claim from the date of furlough.

Employees on unpaid leave

If an employee started unpaid leave after 28 February 2020, they can be furloughed. If, however, an employee went on unpaid leave on or before 28 February, they cannot be furloughed until the date on which it was agreed they would return from unpaid leave.

Employees self-isolating or on sick leave

The guidance states that:

  • employees on sick leave or self-isolating will be able to get statutory sick pay (SSP)
  • employers cannot claim for employees while they are getting SSP
  • employees can be furloughed and claimed for once they are no longer receiving SSP

Originally, the guidance did not address what happens to the entitlement of an employee who is on furlough leave under the scheme who then subsequently becomes sick. The guidance now clarifies that:

  • the CJRS is not intended for short-term absences from work due to sickness, and there is a three-week minimum furlough period
  • short-term illness or self-isolation should not be a consideration in deciding whether to furlough an employee
  • if, however, employers want to furlough employees for business reasons and they are currently off sick, employers are eligible to do so, as they are with other employees; in these cases, the employee:
    • should no longer receive sick pay
    • would be classified as a furloughed employee
  • employers are also entitled to furlough employees who are being shielded or off on long-term sick leave. It is up to employers to decide whether to furlough these employees. Employers can claim back from both the CJRS and the SSP rebate scheme for the same employee but not for the same period of time. When an employee is on furlough, an employer can only reclaim expenditure through the CJRS, and not the SSP rebate scheme. If a non-furloughed employee becomes ill, needs to self-isolate or be shielded, then the employer might qualify for the SSP rebate scheme, enabling the employer to claim up to two weeks of SSP per employee
  • furloughed employees retain their statutory rights, including their right to SSP. This means that furloughed employees who become ill must be paid at least SSP. It is up to employers to decide whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate
  • if a furloughed employee who becomes sick is moved onto SSP, the employer can no longer claim for the furloughed salary. Employers are required to pay SSP themselves, although they may qualify for a rebate for up to two weeks of SSP. If an employer keeps a sick furloughed employee on the furloughed rate, the employer remains eligible to claim for these costs through the CJRS

Note that the Treasury direction is arguably contradictory, reverting to the previous position in the guidance, suggesting that a sick employee cannot be furloughed under the CJRS until they have exhausted their entitlement to SSP. The second Treasury direction, at the end of paragraph 6.3, says in relation to timing:

‘provided that the time of the end of that period of incapacity for work is determined by an agreement between the employer and employee.’

This suggests that a sick employee may now agree with their employer to be furloughed and that their period of incapacity is ending, which resolves the issue with the previous direction.

Shielding employees

The guidance states that employees who are shielding in line with public health guidance (ie those defined on medical grounds as extremely vulnerable — see: government guidance) can be placed on furlough.

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The latest version of the guidance clarified that an employee who needs to stay at home with someone who is shielding can also be furloughed.

The latest version of the guidance no longer contains the caveat that appeared in the 4 April version of the guidance, that employer could claim for those who are themselves shielding, or who are at home with an individual who is shielding, only if:

  • the employee is unable to work from home, and
  • the employer would otherwise have to make them redundant

The rationale for the caveat applying in this instance was less than clear so its removal is a welcome development.

The guidance also clarifies that individuals with coronavirus-related caring responsibilities (for example childcare due to school closures) may also be furloughed. This is an important extension to the scheme, aimed at some of the practical difficulties many are facing.


Apprentices may be furloughed in the same way as other employees, and they can continue to train while furloughed. However, an employer must pay their apprentices at least the apprenticeship minimum wage, national living wage or national minimum wage as appropriate for all the time they spend training. This means an employer must cover any shortfall between the amount it can claim for the apprentice’s wages through the CJRS and their appropriate minimum wage.

Detailed guidance is available on how apprenticeships are affected by coronavirus, including their interaction with the CJRS.

Eligible employees who are not employees

The updated guidance included a new section to confirm that the following individuals are eligible for the CJRS as employees as the definition is not that used in employment law:

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

The Low Incomes Tax Reform Group published an article on 17 April on how the CJRS applies if an individual works through an agency, an umbrella company or their own limited company, inside and outside the public sector. See ‘Job Retention Scheme and temporary workers: the questions that you are asking’ for more information.


The guidance confirms that salaried directors are eligible for furlough, but makes it clear that directors owe statutory duties to their company; it would be for the company’s board to make a decision on whether on a particular director can be furloughed.

Furloughed directors can still fulfil their statutory obligations as long as they do no more than is reasonably judged to be necessary. However, they must not do work ‘of a kind that they would carry out in normal circumstances to generate commercial revenue or provide services to or on behalf of their company’. The guidance then states that the same treatment applies to salaried individuals who are directors of their own personal service companies. What that means in practice is still not clear. The Companies Act sets out standards for directors’ behaviour (such as acting in the best interest of the company) but the specific acts for which directors are responsible are things such as:

  • keeping accounting records
  • preparing annual accounts, and
  • maintaining statutory information

Therefore, work for clients would not be permitted and neither would looking for work or dealing with suppliers and the like.

The Treasury direction clarifies directors’ duties for the purposes of furlough:

Work undertaken by a director of a company to fulfil a duty or other obligation arising by or under an Act of Parliament relating to the filing of company accounts or provision of other information relating to the administration of the director’s company must be disregarded for the purposes of paragraph 6.1(a).’

Directors must be cautious not to undertake other duties that could be deemed ‘work’, invalidating a claim under the CJRS.

Directors who pay themselves once a year (typically one-person businesses where most revenue is taken as dividends) are, subject to certain conditions, eligible for furlough. The updated guidance contains the details of these conditions.

Agency workers

The CJRS is available for agency workers (including those employed by umbrella companies) as long as they are paid through PAYE. In agency cases, the advice is that the furlough must be agreed between the agency and the worker because the former is deemed to be the employer, not the end user. A furloughed worker cannot perform any work for, through or on behalf of the agency that has furloughed them, and that includes work for the agency’s clients. For umbrella company workers supplied by an agency, the umbrella company and the worker must agree the furlough arrangement.

Where agency workers are furloughed, the prohibition on working for the employer during furlough is clarified to prohibit work for the agency’s clients where this is through or on behalf of the agency.

See also the Agency workers guidance note.


The Government had previously confirmed that administrators will be able to access the CJRS. However, the guidance notes that it is expected that an administrator would only access the scheme if there is a reasonable likelihood of rehiring the workers, and they can only furlough and claim for employees who have been furloughed for a full three-week period prior to 30 June 2020 by their previous employer.

Fixed-term employees

Employees on fixed-term contracts can be furloughed and a CJRS claim made if:

  • their contract expired after 28 February 2020 and an RTI payment submission for the employee was notified to HMRC on or before 28 February 2020, or
  • their contract expired after 19 March 2020 and an RTI payment submission for the employee was notified to HMRC on or before 19 March 2020

Where fixed-term employees are furloughed, and their contract has not expired, it can be renewed or extended without breaking the terms of the scheme. The employee can be included in a CJRS claim if an RTI payment submission for them was notified to HMRC on or before 19 March 2020. Employees who started and ended the same contract between 28 February 2020 and 19 March 2020 will not qualify for the scheme.

Employees receiving maternity pay, adoption pay, paternity pay or shared parental pay

The guidance provides further details for individuals on maternity leave, contractual adoption pay, paternity pay or shared parental pay.

New legislation has been brought in to determine eligibility, and rates of pay, for certain statutory payments where employees have been furloughed. For statutory maternity pay (SMP), statutory paternity pay (SPP), statutory adoption pay (SAP), statutory shared parental pay (SSPP) and statutory parental bereavement pay (SPBP), pay for furloughed employees will be calculated as if the employee had not been put on furlough and was receiving full pay. This is introduced by statutory instrument (SI 2020/450) and applies from 25 April 2020. This means that any employees placed on furlough between 1 March 2020 and 24 April 2020 will have eligibility and calculations based on the actual payments received.

Employees returning from maternity, shared parental, adoption, paternity or parental bereavement leave after 10 June

An employer can furlough an employee returning from statutory parental leave after 10 June even if furloughing them for the first time, provided that:

  • the employer has previously submitted a claim for any other employee in relation to a furlough period of at least three consecutive weeks taking place any time between 1 March and 30 June 2020
  • the returning employee started maternity, shared parental, adoption, paternity or parental bereavement leave before 10 June and returned from that leave after 10 June
  • an RTI submission notifying payment in respect of that employee was made on or before 19 March 2020

As a result, the maximum number of employees an employer can claim for from 1 July 2020 is the maximum claimed for in any one claim before 30 June, plus any employees being furloughed for the first time after returning from parental leave.

Employee is a military reservist returning to work after 10 June

Similar rules to those returning from parental leave apply to an employee who is a military reservist returning to work after a period of mobilisation that ends after 10 June. See HMRC’s guidance.

Meaning of ‘furloughed employee’

‘Furlough’ is a term more frequently encountered in the USA. There, it is a temporary suspension of employment for a specified period of time, during which an employee does not receive wages. A furlough can occur as a planned period of time off work, eg an annual factory shutdown.

Dictionary definitions refer to ‘allowing or forcing someone to be temporarily absent from work’.

As per HMRC guidance, a furloughed employee is someone who is placed on temporary leave of absence for at least three consecutive weeks, but who has not been made redundant.

When employees return to work, they must be taken off furlough.

They can be furloughed multiple times, but each separate instance must be for a minimum of three consecutive weeks.

It is vitally important to appreciate that the employer cannot unilaterally place an employee on furlough unless that is permitted under the employment contract. Neither can the employer unilaterally reduce a person’s salary. Normal employment law considerations still apply, and employees will need to consent to being put on furlough.  It is crucial that employment law advice is obtained when considering implementing a furlough scheme.

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Decisions on furloughing can be taken on an individual-by-individual basis. There is no requirement to apply the same treatment to every employee for the purposes of the CJRS. But again, the employment law position should be taken into account.

Administration of the scheme

The scheme pays a grant to the employer (this is different from a loan). The grant is a reimbursement to the employer, therefore the employer will make the wage / salary payment to the furloughed worker and then be reimbursed by HMRC.

Employers will need to:

  • designate affected employees as ‘furloughed workers’
  • notify these employees (see below for commentary on the updated guidance on 17 April)
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC online service) which became live on 20 April 2020 (see below for further details)

Initially, the Government intended for the CJRS to run for at least three months from 1 March 2020, but it announced on 12 May that the CJRS will be extended until the end of October, continuing in its current form until the end of July 2020.

Agreeing to furlough employees

As per the updated guidance (on 17 April), employers must discuss the terms of furlough with their staff and make any changes to their employment contract by agreement. In some cases, employers may need to seek legal advice on the process, as the CJRS scheme does not infer an automatic right for an employer to furlough workers or reduce their pay without agreement. HMRC’s position is that employers must confirm in writing to their employees that they have been furloughed, saying: ‘if this is done in a way that is consistent with employment law, that consent is valid for the CJRS’. HMRC confirmed on 23 April that collective agreement reached between an employer and a trade union is also acceptable for these purposes. There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years. Employers must ensure that their communications with employees meet this test as a minimum.

The second Treasury direction amends the definition of a furloughed employee in regards to agreements to be put on furlough as follows, explicitly adding that agreement may be made by collective agreement:

‘6.7 An employee has been instructed by the employer to cease all work in  relation to their employment only if
(a) the employer and employee have agreed that the employee will cease all work in relation to their employment (such agreement may be made by means of a collective agreement between the employer and a trade union),
(b) the agreement (including a collective agreement)
(i) specifies the main terms and conditions upon which the employee will cease all work in relation to their employment,
(ii) is incorporated (expressly or impliedly) in the employee’s contract, and
(iii) is made in writing or confirmed in writing by the employer (such agreement or confirmation may be in an electronic form such as an email), and
(c) the agreement (including a collective agreement) or confirmation is retained by the employer until at least 30 June 2025.’

Major concerns had been expressed in relation to employers who, facing severe and urgent financial pressure as a result of the coronavirus outbreak, had placed employees on furlough without seeking their employees’ agreement or, in some cases, even requiring their employees to acknowledge the relevant communication.

We understand from a communication from HMRC that its position remains that all employers must agree furloughing with the employees that are affected. Once agreed, the employer must notify the employees in writing that they have agreed to be furloughed, but there is no need for the employee to respond confirming their agreement. The Treasury direction gives effect to this requirement, and HMRC has stated that the direction should be interpreted in accordance with the position set out in its published guidance. See question 18 in the briefing paper: FAQs: Coronavirus Job Retention Scheme for further discussion on this point.

For directors, the decision to furlough should be formally adopted as a decision of the company and noted in the company records, as well as being communicated in writing to the director.

Employment law and employment rights

The Government’s announcement made it clear in its guidance that nothing overrides the contractual and employment law position. Unless the contract has specific provisions that allow the employer not to pay employees if there is no work, employees remain entitled to receive what is specified in their employment contract. Very limited UK employment contracts will contain provisions governing how to furlough employees or even what this means. Additional work will be required to avoid discrimination in selecting furloughed employees and in agreeing the terms for the furlough.

Therefore, the matter of which employees an employer decides to furlough will be a matter for negotiation with staff and employment law. For further reading on this, see FAQs 26―32 of the FAQs: Coronavirus Job Retention Scheme.

Calculating the grant

Having determined whether somebody is an eligible employee under the CJRS, the next question is how much money is available from the Government. Again, it must be stressed that what is received is a grant to the employer, who retains responsibility for paying the employee.

The maximum grant will be calculated per employee, and, up to 31 July 2020, is:

  • the lower of 80% of an employee’s regular wage or £2,500 per month
  • plus the associated employers’ national insurance contributions (NIC) on this amount, and
  • pension contributions that are paid on the subsidised furlough pay, up to the level of the minimum automatic enrolment employer contribution; the maximum level of grant for employer pension contributions on subsidised furlough pay is set in line with the minimum automatic enrolment employer contribution of 3% on qualifying earnings. Grants for pension contributions can be claimed up to this cap, provided the employer will pay the whole amount claimed to a pension scheme for the employee as an employer contribution
  • but not any associated Apprenticeship Levy

The employer can choose to top-up the employee’s salary, but does not have to. Where employees are paid in excess of the maximum available grant, employers must consider whether they are willing to bear the cost of the excess or agree reduced pay with employees (whilst this must be considered from an employment law perspective, if an employee’s only other option is to be made redundant or take unpaid leave, it is likely they will agree to be placed on furlough leave at a reduced level of pay).

The employer cannot claim for (ie the scheme will not fund):

  • employer NIC and pension contributions on any top-up salary that the employer chooses to provide in addition to the grant
  • any pension contributions that the employer makes that are above the mandatory employer contribution

Claims should be started from the date that the employee finishes work and starts furlough (not when the decision is made, or when they are written to confirming their furloughed status). Grants must be prorated if an employee is only furloughed for part of a pay period.

See under the heading ‘Timeline for scheme and amount of support’ for details of how the grant is changing from August 2020.

The additional guidance published on 17 April clearly stated that the maximum wage amount an employer can claim in respect of a furloughed employee is £2,500 a month, or £576.92 a week, plus any employer NIC and pension contributions the employer can claim for.

If the length of time an employer is claiming for is not one week or one month, then the daily maximum wage amounts should be used to work out the maximum amount that can be claimed for each employee.

If an employee is furloughed over two calendar months or if an employer is claiming for multiple pay periods in one claim, the maximum amount must be calculated in accordance with the additional guidance (which contains useful examples on how to work out the maximum wage amount).

Note that claims can only be made once for a pay period and that amendments cannot be made, so the employer must make sure it has carefully included every employee for a particularly claim period for each claim which will require careful calculation where there are different pay periods for different employees.

HMRC online calculator

An online calculator has been made available by HMRC to assist employers in calculating how much they can claim. This can be accessed here.

HMRC’s calculator can currently be used to work out what an employer can claim for most employees who are paid either regular or variable amounts each pay period (for example, weekly or monthly). This is subject to certain exceptions, including where employees receive any top-up pay or have returned from statutory leave such as maternity leave in the last three months.

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In other situations, an employer will need to work out what they can claim manually using the calculation guidance or by seeking professional advice. It is the employer’s responsibility to check that the amount claimed is correct.

The step-by-step guide contains an example calculation for an employee on a fixed salary. For more information and further examples on more complex contracts or variable pay, employers are directed to the new guidance on working out 80% of your employees’ wages.

What to include when calculating wages

The amount an employer should use when calculating 80% of their employees’ wages is the regular payments they are obliged to make, including:

  • regular wages
  • non-discretionary payments for hours worked, including overtime. Further guidance (reissued in updated format on 12 June 2020) has been included on what these terms mean
  • non-discretionary fees
  • non-discretionary commission payments
  • piece rate payments

The following cannot be included:

  • payments made at the discretion of the employer or a client, where the employer or client was under no contractual obligation to pay, including tips (such as those distributed through troncs), discretionary bonuses and discretionary commission payments
  • non-cash payments
  • non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay

When variable payments are specified in a contract and those payments are always made, then those payments may become non-discretionary and should be included. Payments for overtime worked are non-discretionary when an employer is contractually obliged to pay the employee at a set and defined rate for the overtime worked.

Regarding salary sacrifice, the position appears to be that:

  • the ‘subsidised wage’ that the employer can claim for under the scheme has to be based on the employee’s post-sacrifice salary, ie not the notional ‘reference’ or ‘shadow’ salary that includes the sacrificed element
  • the employer and employee can agree to change salary sacrifice arrangements, but if they do not, both have to keep to the arrangements (eg with childcare vouchers, the employer has to keep providing them, and the employee gets them instead of the salary that has been sacrificed for them, even if they cannot make use of them in the current circumstances)
  • if employer and employee agree changes, eg to revert to the pre-sacrifice contractual arrangements, due to the fact that the coronavirus outbreak has been deemed a ‘life event’ this will not, so far as HMRC is concerned, cause HMRC to doubt the validity of the original sacrifice, ie whether it was a genuine sacrifice and not a temporary change

The additional guidance (reissued in updated format on 12 June 2020) contains information on specific areas such as the national minimum wage, holiday pay, sick pay, employees returning from family-related statutory leave and unpaid leave. Special rules apply if a claim is being made in respect of a limited liability partnership. See the FAQs: Coronavirus Job Retention Scheme, questions 33―38 for further reading on this.

Annual leave and holiday pay

HMRC provided updated guidance on annual leave and holiday pay on 12 June 2020. This confirms HMRC’s view that annual leave continues to accrue during furlough, including any contractual enhancement on top of the statutory entitlement. The employer and employee can agree to vary holiday entitlement as part of the furlough agreement; however, almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year, which they cannot go below. Holiday can be taken during furlough, and the employer should pay an employee’s usual holiday pay in accordance with Working Time Regulations. If an employee is flexibly furloughed, any hours taken as holiday during the claim period should then be counted as furloughed hours rather than working hours. Employees should not be placed on furlough for a period simply because they are on holiday for that period. Employers will be obliged to pay additional amounts over the grant, though will have the flexibility to restrict when leave can be taken if there is a business need. This applies for both the furlough period and the recovery period.

If an employee usually works bank holidays, the employer can then agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave, the employer would then either have to top-up their usual holiday pay, or give the employee a day of holiday in lieu.

HMRC notes that ‘during this unprecedented time, we are keeping the policy on holiday pay during furlough under review’. See Holiday entitlement and pay during coronavirus (COVID-19) and the FAQs: Coronavirus Job Retention Scheme, question 41 for further reading on this.

Work out 80% of an employee’s usual wage

The way an employer should work out 80% of an employee’s usual wage differs according to the way they are paid. The additional guidance (reissued in updated format on 12 June 2020) contains examples on working out the calculations covering a number of different scenarios, including fixed-rate full or part-time employees on a salary, employees whose pay varies and employees who have not been paid for a full pay period up to 19 March 2020.

HMRC tells employers to check what you can include as wages first and choose the calculation that best fits the way the employee is paid. For example, if the employee is paid a regular salary, use the calculation for fixed pay amounts. The guidance states that HMRC will not decline or seek repayment of any grant based solely on the particular choice of pay calculation, as long as a reasonable choice of approach is made. This is helpful and emphasises the need for good record-keeping.

Where a claim covers multiple pay periods, this calculation should be done for each and then these should be added together. Further guidance on claim periods is included here.

Fixed-rate full or part-time employees

As mentioned above, different calculations are required for salaried and variable hour workers in order to establish their ‘regular wage’.

For fixed-rate full or part-time employees, an employee’s ‘regular wage’ for the purposes of calculating the 80% is their ‘actual salary’ in the last pay period to end on or before 19 March 2020.

The previous guidance stated that the salary reference date for calculating the claim was 28 February 2020. The revised guidance stated that if, based on previous guidance, an employer has calculated their claim based on the employee’s salary as at 28 February 2020 (and this differs from their salary in their last pay period prior to 19 March 2020), the employer can choose to still use this calculation for their first claim.

Employees who receive variable pay

For employees employed continuously since 6 April 2019, an employee’s ‘regular wage’ is the higher of the amount earned in the same month in the previous year and the average monthly earnings for the 2019/20 tax year. This must then be divided by the number of calendar days in that pay period and multiplied by the number of furlough days in the relevant pay period.

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Where an employee has not been employed continuously since 6 April 2019, the starting point is their regular wage since they started work until the day before they are furloughed. This must then be divided by the number of calendar days in that period and multiplied by the number of furlough days in the relevant pay period.

Employer’s national insurance contributions

Up to 31 July 2020, an employer can claim for Class 1 employer NIC that they have paid on the grant that covers 80% of their employees’ usual monthly wage. The additional guidance explains how to work out what an employer can claim, together with examples.

Note that if employers pay more than the salary grant, there is a specified calculation methodology to apportion any NI paid, and no claim can be made where no employer NI is paid, for example: apprentices under 25.

In calculating the total employer NI contributions paid in any pay period, the employer should subtract any employment allowance used in that pay period:

  • if no NI is paid in a pay period due to the employment allowance (ie NI is offset in full), no NI grant should be claimed in that period
  • if the employment allowance is fully exhausted in a pay period, then the lower of the NI grant calculation and the employer NI paid in the pay period should be claimed

Employers may want to consider not claiming any employment allowance until furloughing ends because it is not clear how HMRC will deal with this. Note that from 6 April 2020, claims for the employment allowance need to be submitted every year and cannot be rolled over from one year to the next. See the Employment allowance guidance note.

Note that HMRC updated its examples on 30 April 2020.

Employer’s pension contributions

The guidance says that employers still need to pay pension contributions on behalf of their furloughed employees, and, up to 31 July 2020, can claim for these up to the level of the mandatory employer contribution, even if it is not an auto-enrolment pension.

Employers cannot claim for any pension contributions:

The additional guidance explains how to work out how much an employer can claim for employer’s pension contributions, including examples covering various scenarios.

In practice, many employers are likely to need to seek legal advice about pension contributions and arrangements.

See also the Pension contributions and pension advice guidance note.

Recovery of costs by HMRC

Draft legislation to be included in Finance Act 2020 has been published. This will give HMRC the power to raise income tax assessments to recover amounts from the recipient of a CJRS payment to which they are not entitled, or where a CJRS payment has not been used to pay furloughed employee costs. This may occur, for example, where the employment allowance is also claimed and therefore the employer has not in fact incurred employer NIC that are included in the claim. Further details can be found on the Taxation of coronavirus (COVID-19) support payments page.

Payroll requirements

Employers must report the amount of grant they receive and pay to an employee through RTI on an FPS, in the same way they would report their normal pay. Guidance is available on RTI and the CJRS here.

Employers should make RTI submissions on or before the date they pay their employee. See the RTI ― reporting ‘on or before’ time of payment guidance note.

HMRC expanded its RTI guidance on 23 April and moved it to a separate link.

Where employers pay furloughed employees at more than 80% of their normal wage, or at an amount above £2,500 per month, then tax and NIC must be deducted in full on the whole payment. The CJRS grant will only cover part of that payment.

Where an employer is authorised to make deductions from pay, this may continue during furlough as long as those deductions are not ‘charges, fees or other costs in connection with your employment’.

Timing of payments and claims

Guidance has been updated to address situations where employers have made payments at different times to the usual pattern.

Where payments have been made to employees early (along with the RTI submission), the next time they are paid should be on their normal contractual pay date.

Where employers have continued to pay employees during a period of furlough, in advance of receiving any payments under the scheme, they do not need to make any further RTI submissions when they receive the grant that reimburses those payments made in advance.

If employees have not been paid while the employer waits for the CJRS grant to come through, payments must be subject to tax and NIC on the date that payments are made to the employees. Those payments should not be backdated to the normal pay date. An FPS must only include wages actually paid to employees. An EYU should be submitted to correct the position where payments were reported in March but not paid until April.

Making a claim to HMRC

The CJRS claims portal became live on 20 April 2020. Employers can now submit a claim.

Before employers make a claim, they need to ensure that they:

  • have read all the available guidance on GOV.UK before they apply
  • gather all the information and the precise calculations they need before they start their application
  • can find out more in the calculation guidance where they can access a claim calculator, this will allow them to check their claim for most employees who are paid the same amount each pay period
  • can access HMRC’s simple step-by-step guide for additional help

By making a claim the employer agrees that the grant received can only be used to pay employee’s salary and the employer NICs and pension contributions which the employer must pay in relation to that salary, even if the company is in administration. Employers cannot enter into any transaction with the employee which reduces the salary below this amount. This includes any administration charge, fees or other costs in connection with the employment.

Information needed to make a claim

In order to claim the grant, employers will need (as listed in the guidance):

  • to be registered for PAYE online
  • their employer PAYE reference number
  • the number of employees being furloughed
  • national insurance numbers for employees being furloughed
  • payroll / employee number for the employees being furloughed (optional)
  • employer’s name or employer self assessment unique taxpayer reference or corporation tax unique taxpayer reference or company registration number
  • the claim period (start and end date)
  • full amount being claimed for, including, up to 31 July 2020, employer National Insurance contributions and employer minimum pension contributions
  • their bank account number and sort code (but only if a BACS payment can be accepted)
  • the billing address on their bank account
  • their contact name
  • their phone number

Where an employee has a National Insurance number, but the employer does not know it, HMRC states that the employer should make all reasonable efforts to establish it, including by making use of the RTI NINO Verification Request submission if appropriate.

If the employer has fewer than 100 furloughed staff, they will be asked to enter details of each employee they are claiming for directly into the system, this will include their name, National Insurance number, claim period and claim amount, and payroll / employee number (optional). If one (or more) of the employees does not have a National Insurance number, the employer should contact the COVID-19 Helpline on 0800 024 1222 so that the claim can be processed over the phone.

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If the employer has 100 or more furloughed staff, they will be asked to upload a file with the information rather than input it directly into the system. HMRC will accept the following file types: .xls .xlsx .csv .ods, and has provided a file upload template to complete for claim periods starting on or after 1 July. The file should include the following information for each furloughed employee: name, National Insurance number, claim period and claim amount, payroll / employee number (optional). If an employee does not have a National Insurance number, the employer must instead provide a payroll or employee reference number for the employee in the file. Employers are advised to only provide the requested information, otherwise they risk delaying the payment or having to provide the details again. In addition, the file must contain only one line per employee per period, data must not be split by contract type, and the calculations must not be broken up into multiple periods within the claim.

The employer should retain all records and calculations in respect of the claims for six years (see the guidance).

Businesses, and agents that are authorised to act on behalf of clients for PAYE matters, will be able to claim. However, file only agents, including payroll bureaus, will not be able access the service due to data protection reasons.

If an agent makes a claim on the employer’s behalf, the employer will need to tell them which bank account they would like the grant to be paid into.

How to claim

Employers will need their Government Gateway user ID and the password they received when they registered for PAYE online.

The link for making the claim is in HMRC’s guidance, first published on 20 April. To receive payment by 30‌‌ April, employers will need to complete an application by 22‌‌ April. All claims in respect of the period to 30 June must be made by 31 July. Claims in respect of the period from 1 July can now be made.

If the employer does not finish a claim in one session, they can save a draft. The claim must be completed within seven days of starting.

As per guidance on how to claim up to 30 June 2020:

  • an employer can only claim for periods when an employee was on furlough
  • an employer cannot make more than one claim during a claim period
  • an employer can decide the length of the claim period
  • claim periods should follow one after another, with no gaps in between, where employees have been continuously furloughed
  • for any claim made, the claim end date must be no more than 14 days in the future from the date the claim is made. Any claim period must contain all the furloughed days that the claim amount relates to
  • an employer can make their claim in anticipation of an imminent payroll run, at the point they run their payroll or after they have run their payroll
  • an employer must claim for all employees in each period at one time
  • claims can be backdated until 1 March if applicable
  • claims cannot start any earlier than the date the employee was first furloughed
  • a claim should be made for each PAYE scheme operated by an employer
  • HMRC will retain the right to retrospectively audit all aspects of a claim

Claim periods starting on or after 1 July must start and end within the same calendar month and must last at least seven days, unless you are claiming for the first few days or the last few days in a month. For full details of claims from 1 July with examples, see the guidance issued on 12 June 2020.

As mentioned above, the employer can choose to top-up the employee’s salary, but does not have to.

Update from HMRC on 22 April 2020:

HMRC has noticed that some employers have had difficulty accessing the system because they do not have an active PAYE enrolment. In order to make a claim directly, employers need to:

  • have a Government Gateway (GG) ID and password. If an employer does not already have a GG account, they can apply here, or by going to GOV‌.UK and searching for HMRC services: sign in or register
  • be enrolled for PAYE online. If  an employer is not registered yet they can do so now, or by going to GOV‌.UK and searching for PAYE Online for employers

Once a claim has been made

Once HMRC has received an employer’s claim and it is eligible for the grant, HMRC will pay it via BACS payment to a UK bank account within six working days.

Employers must:

  • keep a copy of all records for six years, including the amount claimed and claim period for each employee, the claim reference number for their records and their calculations
  • tell their employees that they have made a claim and that they do not need to take any more action
  • pay employees their wages (if they have not already done so)

The employer must pay the employee all the grant it receives for their gross pay; no fees can be charged from the money that is granted. Furloughed staff must receive no less than 80% of their reference pay (up to the monthly cap of £2500).

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

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


As added in its guidance on 17 April, HMRC will check claims made through the scheme, and payments may be withheld or need to be repaid in full to HMRC if the claim is based on dishonest or inaccurate information or found to be fraudulent. The guidance stresses that dishonest or deliberately fraudulent claims ‘put our essential public services and the protection of livelihoods at risk during these challenging times’. It also notes that an online portal has been created for employees and the public to report suspected fraud. Similar additions have been made to the employee guidance, which states that the scheme is part of a collective effort to protect people’s jobs and urges employees to report abuses (such as the employer not paying monies claimed under the scheme to the employee, asking employees to work whilst on furlough, or making a backdated claim to include periods when an employee was working).

Claim errors

Any amount overclaimed must be paid back to HMRC, and this can be done via an adjustment in the next claim. There is a process for repayment where the employer will not be making another claim. If an amount has been underclaimed, the employer should contact HMRC to amend the claim. See here for further details.


The employer may want, for example, to introduce a rota or shift system, by which two teams (doing similar jobs) work alternate periods, and are placed on furlough in their non-working periods.

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According to the employer guidance, an employee must be furloughed for a minimum of three weeks. The employer guidance also states that the employer can only submit one claim at least every three weeks. The March 2020 version was silent as to whether an employer can implement such a rota or shift system. However, the March 2020 version of the employee guidance stated:

‘Your employer can place you on furlough more than once, and one period can follow straight after an existing furlough period, while the scheme is open.’

The employer guidance confirms that a ‘roll-on’ and ‘roll-off’ system of furlough is possible. It states that any employees an employer places on furlough must be furloughed for a minimum period of three consecutive weeks. When these employees 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 three consecutive weeks.

The rota system in the example above would therefore be possible.

As per the updated guidance on 30 April, each period of furlough can be extended by any amount of time whilst the employee is on furlough. However, the scheme end date is the last day the employer can claim for through this scheme.

Note, however, that flexible furloughing can apply from 1 July 2020. See above for more details.

Tax treatment for employees

Wages of furloughed employees will be subject to income tax and NIC as usual. Employees will also pay automatic enrolment contributions, unless they have chosen to opt out or to cease saving into a workplace pension scheme. See the Automatic enrolment ― overview guidance note.

Tax treatment for employers

Payments received by a business under the scheme must 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. See the Allowable deductions for employee-related expenses guidance note.

Individuals with employees that are not employed as part of a business (such as nannies or other domestic staff) are not taxable on grants received under the scheme. Domestic staff are subject to income tax and national insurance contributions on their wages as normal.