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  • Overview

    On the 26 March 2020 the Government announced the details of its unprecedented Coronavirus Job Retention Scheme (the scheme/CJRS) in response to the disruption caused by COVID-19. Further information in the form of guidance was published by HMRC on 4 April in order to clarify how the scheme will operate. This has been updated numerous times and with an update to the Check if you can claim for your employees’ ages through Coronavirus Job Retention Scheme guidance issued on 14 May. As promised the Chancellor announced changes to the CJRS on 29 May introducing flexible furlough.

    On 15 April 2020, the Chancellor of the Exchequer issued a direction to HMRC containing authority and instructions for making the payments under CJRS and this was updated on 22 May and 29 June to ensure that the direction was consistent with the guidance on how the scheme works.  The direction legally underpins the guidance.

    In his summer statement on 8 July, the Chancellor has introduced further measures aimed at keeping jobs. One of them is to give to employers a £1,000 grant for every employee brought back from furlough to work after 31 October 2020, provided they remain in employment until 31 January 2021.


    The on-line portal for employers to start making claims for reimbursement for furlough payments made to PAYE employees and workers opened on 20 April.

    Here is the link to claim:

    You will need to have a Government Gateway User ID.

    To use the scheme the following steps must be taken:

    1. Check if you can claim
    2. Calculate 80% of your employees wages –
    3. Claim for your employees’ wages on line –
    4. Report a payment in PAYE Real Time Information –

    Employers with less than 100 employees will need to enter details of each employee (name, NI number, claims amount and claim amount). Employers more than 100 staff can upload a spreadsheet, containing the above information. 

    From when and how long?

    Originally intended by the Government to end 3 months from 1 March to 31 May, in the light of the need to maintain social distancing, the scheme has been extended to 31 October 2020, when it will finally close.  Leaving the employer a choice to bring furloughed staff back to work or potentially make them redundant, if the requirements of the business to employ them in the job that they were doing before furlough, no longer exist. If they are brought back to work, there is a Government incentive for employers to keep them on their books and working until 31 January 2021, in the form of a one of payment of £1,000 towards the wage costs of each individual (formerly furloughed staff member).       

    The current level of support available via the scheme will remain the same until 30 July 2020 inclusive. Employers can use the scheme anytime. Although the Government has said that no new claims for employees, under the scheme, for the grant can be made after 10 June 2020. So employers who wished to take advantage of the scheme for the first time had to do so by 10 June. Because the existing scheme as we know it for new employer claimants ended on 30 June. Employers will have until 31 July to make any claims in respect of the period to 30 June.

    Flexibility, flexible furlough and impact on cap of £2,500 or £576.92 per week

    From August, to October 2020, the scheme will become more flexible, allowing some employees to return to part-time work. This means that wage caps are proportionate to the hours an employee is furloughed. For example, an employee who hits the £2,500 per month (£576.92 per week) cap, because 80% of their wage or salary per month is higher than £2,500 per month, is entitled to 60% of the £2,500 cap if they are placed on furlough for 60% of their usual hours.

    How does the cap adjustment apply to flexible furlough? This table shows how the cap of £2,500 is adjusted once part-time furlough is introduced.

    Actual Working days each week of every month

    Actual Furlough Days  each week of every month

    Percentage of working  week each month on Furlough not working

    Furlough monthly furlough payments Cap under the CJRS (as adjusted)





















    To calculate the amount you should claim for an employee who is flexibly furloughed, visit:

    Sliding contributions from employers

    The Chancellor has announced that for 80% of wage costs claimed for under the scheme, in June and July, employers will not have to contribute to the scheme unless they choose to top up the 80% or £2,500 cap up to 100% of salary.

    As for the period from August to end of October the contributions will be as follows:


    Government contribution

    Employer contribution

    Employee benefit



    employer national insurance contributions and pension contributions (5% of gross wage costs for average claim) (ERNIC&PC)

    80% of pay up to cap of £2,500 per month


    70% (up to a maximum of £2,187.50)

    ERNIC&PC (as above) and 10% contribution (£312.50 per month if cap applies) towards employee wage costs including above. For average claims this represents 14% of gross wage costs for average claim. Could be more, depending on what the employer agreed with the employee

    As above


    60% (up to a maximum of £1,875)

    ERNIC&PC (as above) and 20% contribution (£625 per month if cap applies) towards employee wage costs including above. For average claims this represents 23% of gross wage costs for average claim. Could be more, depending on what the employer agreed with the employee

    As above

    This means that whilst the benefit to employees remains the same (80% of pay or £2,500, whichever the lower), the employer will have to pay (on a sliding upwards) a contribution for the first time from 1 August. Meaning that the Government will only be contributing just 60% from October, not 80%.

    The earlier guidance called Claim for wages through the Coronavirus Job Retention Scheme says that when the Government ends the scheme, employers must make a decision, depending on their circumstances, as to whether employees can return to their duties. If not it may be necessary to consider termination of employment (redundancy). However, as we highlight below, employers can bring employees back from furlough on a part-time basis.

    How much?

    Under the scheme Employers will be able to claim 80% of furloughed employees’ usual monthly wage costs, up to a limit of £2,500 per month, per employee. From the day that the employee finishes work and starts furlough, not when the decision is made or when they are written to confirm their furlough status; assuming that they have first given their agreement. Employers can, if they wish, top up the grant they receive from HMRC up to 100% of employees’ pay and pension contributions. This level of support from HMRC will remain available until July 2020.

    From 31 July to 31 October 2020 there will be no reduction in the 80% salary that furloughed employees receive, unless they enter the flexible furlough scheme and part time furlough and work each week, but as from 1 September employers will be required to pay a 10% contribution to these salaries and from October the contribution will be 20%. 

    For employees who are on fixed salaries, their payroll data used for real time information (RTI) submission by 19 March will have been used as the basis for the grant. For employees whose pay varies from week to week or month to month, according to the hours or shifts they work, the calculation will be based on the higher of the pay paid in the same period in the previous year or average monthly earnings from the 2019-20 tax year. An employee’s working pattern does not have to match their pay period (for example, an employee could be contracted to fixed 40 hours a week, but be paid a variable monthly amount because of shift allowances). HMRC will not decline or seek repayment of any grant based solely on the particular choice between fixed or variable approach to calculating usual hours, as long as a reasonable choice is made by the employer.

    Reimbursement can include: wages, non-discretionary past overtime, fees, bonuses and commission payments. Compulsory commission payments will cover commission and bonuses that employees are contractually entitled to. The Government has also clarified what will not be reimbursed under the scheme, which includes payments such as discretionary bonuses, tips, discretionary commission and non-monetary benefits (such as a company car).

    Employers can also reclaim employers National Insurance Contributions and pension payments at the (minimum auto-enrolment employer contribution) 3% rate of the furlough salary, not normal salary. Until 1 August, when employers will have to bear these costs. Employees will be taxed on the furlough payments and receive the payment net of employee NICs’ as well.

    Employers must ensure that they include the details of all of the employees they want to claim for in each payroll period.  They cannot later go back and amend or make another claim for the same period.

    Salary sacrifice schemes

    Employers cannot include salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay. The entirety of the grant received to cover the employees subsidised furlough pay must be paid to them. No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme. Where the employer provides benefits to furloughed employees, including through a salary sacrifice scheme, these benefits should be in addition to the wages that must be paid under CJRS. Normally, an employee cannot switch out of a salary sacrifice scheme unless there is a life event. Covid-19 is regarded as a life event by HMRC that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.    

    Who can be furloughed?

    The scheme does not have to be limited to those who would otherwise be made redundant or laid off. It applies to anyone furloughed by reason of the circumstances as a result of COVID-19.

    Employees – fixed-term and permanent, apprentices, agency workers (including those employed by umbrella companies), personal service workers and salaried members of an LLP – are all eligible under the scheme.  The latest guidance refers to separate guidance:

    For fixed-term workers their contracts can be renewed or extended before their expiry during the furlough period so long as an RTI payment was notified to HMRC prior to 20 March 2020.

    Workers on fixed term contracts which expired after 28 February or 19 March can also be re-employed and then put on furlough if either:

    • 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.

    But workers whose contacts started and ended between 28 February 2020 and 19 March 2020 will not be eligible.

    Cut off dates

    Provided an employee was on the PAYE payroll on 19 March 2020 the scheme can be used to cover their wages until the end of the scheme on 31 October, although the employers’ contribution will be 20%. Also no new claims can be made after 10 June 2020, for the first time, for those employers who have not been put their staff on furlough thus far. So, for those employers contemplating putting their people on furlough for the first time, they had to have put them on furlough by 10 June, in order for them to remain on furlough for at least 3 weeks until the scheme closed to new entrants on 30 June 2020. From this point, employers have only been able to furlough employees that they have furloughed for a full three consecutive week period prior to 30 June 2020. Employers will have until 31 July to make any claims in respect of the period to 30 June 2020.

    Exception for those returning from maternity, parental, adoption, paternity or bereavement leave

    For those people who are returning from statutory parental leave including maternity, parental, paternity, adoption and bereavement leave, after 10 June 2020, they can be furloughed.

    Minimum periods and rolling furlough

    Until 30 June, an employee could be furloughed multiple times, so long as each furlough period is at least three consecutive weeks. However, from 1 July, there is no longer a requirement for furloughed employees to remain on furlough for a minimum of three weeks, in accordance with the flexible furlough scheme from 1 July, provided they have been furloughed for at least 3 weeks expiring on 30 June. Each period of furlough can be extended by any amount of time whilst an employee is on furlough.

    Employees you can claim for

    Essentially if your employee was employed on 19 March and was on your payroll on or before 19 March 2020, which means that an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March then you can claim for them.

    If you had employees who were employed on 28 February, but not 19 March, then the following table has been provided by the guidance:

    Was the employee employed as of this date?

    Date RTI submission notifying PAYE payment made to HMRC

    CJRS eligible


    28 February 2020

    On or before 28 February 2020


    28 February 2020

    On or before 19 March 2020


    28 February 2020

    On or after 19 March 2020


    19 March 2020

    On or before 19 March 2020


    19 March 2020

    On or after 19 March 2020


    On or after 19 March 2020

    On or after 19 March 2020


    So, it can be used for employees who have been made redundant or who resigned on or after 28 February 2020 provided they are re-employed, before or even after 19 March 2020 and have been placed on furlough for at least three consecutive weeks between their return date and 30 June. However employers should be mindful of cash flow issues this could create if the scheme payments do not come through until June, (as estimated). There is also a small risk that HMRC may later determine that reinstating employees who had resigned in order to take advantage of the scheme is fraudulent and refuse to reimburse wages paid under these circumstances.

    If you’ve made your employees redundant

    You can continue to claim for a furloughed employee who is serving a statutory notice period and not working or partly working under the flexi-furlough scheme (see below). However grants cannot be used to substitute redundancy payments.

    Working during furlough

    Up until 30 June 2020, in order to be eligible for this scheme, employees must not have undertaken any work whatsoever for their employer in terms of delivering services or generating revenue for their business or a linked organisation to the business. But employee and union representatives could carry out duties and activities for individual or collective employee representation purposes, provided they did not deliver services or generate revenue for their employer. 

    They could undertake voluntary work for another organisation or engage in training programs. The only exception to this rule banning work is in the case of company directors or office holders, who are still permitted to carry out their statutory duties, such as passing board resolutions, approving accounts or submitting annual returns.

    HMRC have set up a hot-line for employees to report abuses of the scheme, such as where they are required to work for their employers whilst on furlough. However, those employees who have other jobs or wish to secure other employment having been permitted to do so by their furloughing employer stand to gain from the system, to the tune of their new pay from other employment and their furlough payments up to £2,500 per month (capped) or 80% of their pay, whichever the lower.

    NEW from 1 July - part-time furlough and flexible furlough

    The Chancellor announced on 29 May that from 1 July, employers can allow existing furloughed employees to work part time, with maximum flexibility, for any amount of time (provided the claim period is a minimum of seven calendar days) and any work pattern and still claim the CJRS grant. They can decide on the new flexible arrangement, so that for example full time employees can work 2 days per week and be furloughed 3 days per week.  This meets the demands to scrap the all or nothing system of furlough. Although if employers have not furloughed staff thus far, and wanted to do so with a view to taking advantage of the flexi furlough scheme from 1 July, they had until Wednesday 10 June to furlough them for the first time, keep them on furlough for three consecutive weeks minimum until 30 June 2020 and then bring them back part-time.  Otherwise, employees who have been previously furloughed since 1 March 2020 and have come back to work, can be re-furloughed for a new period of three consecutive weeks before 1 July, even if the three consecutive week period ends after 1 July.  So, for example a previously furloughed employee can start a new furlough period on, say 22 June, which will have to continue for three consecutive weeks ending on or after 12 July.  

    Self-isolating or shielding

    If an employee is self-isolating in accordance with Government guidance because they:

    1. are showing symptoms; or
    2. live with someone who has symptoms of COVID-19; or
    3. have been informed through new the test and trace system that they have been exposed to someone with the virus

    and so need to self-isolate, then the individual should receive Statutory Sick Pay (‘SSP’) from day one as opposed to day four under new amendments to the statutory sick pay regulations. Although an employer can seek to bring them off sick leave and offer to furlough them instead to take advantage of the grant.

    People who are extremely vulnerable such as those with heart conditions, respiratory problems or organ transplant beneficiaries and must therefore shield at home and under amendments to the Statutory Sick Pay Regulations 1982 (as amended): are entitled to SSP, as they are deemed to be incapable of work, even though they may be capable of working from home. Whilst the SSP regulations say they are entitled to SSP, the guidance says that they can be furloughed too.

    Employer eligibility

    The scheme is open to all UK employers that had an active PAYE payroll scheme on 19 March 2020 and have a UK bank account. This includes businesses, charities, recruitment agencies and public authorities (other than those who continue to receive public funding for staff costs).

    Public sector employers

    Whilst open to public sector organisations, not many have used the scheme, except where part of their funding is privately funded, by e.g. retail sales or services. This is due to most public sector employees providing essential public services during the pandemic. The Government has confirmed that any public sector organisations who receive public funding to pay wages are expected to continue paying their staff in the usual way so long as their funding continues. However, it is recognised that a small number of organisations not entirely funded by the government will not be able to redeploy staff to assist with the pandemic response and may therefore furlough staff if appropriate.

    Agreement to be furloughed

    Furlough must have been agreed between employer and employee.  This arrangement is an agreed variation of their contract of employment.

    Employers wishing to benefit from the scheme must have confirmed in writing to the employee that they have been furloughed and keep a record of the written communication for at least 5 years.  The latest guidance states that a collective agreement reached between an employer and a trade union is acceptable as notification of furlough. The same applies to flexible furlough arrangements. If an employee has been on furlough and you wish to bring them back to work part-time, when they have been a full-time employee before being furloughed, you will need to reach a new written agreement with them.  They can enter into a flexible furlough agreement more than once.

    There has been a widespread view amongst employment lawyers including us that employee’s consent needs to be in writing prior to furlough starting and when it is varied for flexi-furlough. 

    When deciding which workers to offer furlough leave to, laws around contracts of employment, equality and discrimination will apply as they ordinarily do.

    If more than 20 staff could face redundancy if they do not agree to go on furlough, the employer will have to consult with elected employee representatives or a union where one is recognised.   

    Tax treatment of the CJR Grant and record keeping

    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 and Corporation Tax purposes.  

    Records of claims made must be kept for 6 years.

    Annual leave

    Whilst the employer guidance on CJRS does not at all deal with the issue of holiday leave and pay, the guidance for employees does.  It says that employees who are furloughed can continue to accrue holiday leave as per their contracts of employment. All employees are entitled to 5.6 weeks (28 days including public holidays) leave under the Working Time Regulations (WTR), although for part-time employees this is pro-rated. Because the WTR prescribe that leave must be paid at normal pay rates.

    This means that during furlough periods lasting at least 3 weeks, employees who take holiday must receive their normal pay for holiday days, not furlough pay. This includes those who have taken Good Friday, Easter Monday, VE day (8 May) and Spring Bank Holiday (25 May) as leave, if they normally take those as leave days. 

    The WTR allow employees who are unable to take their leave for any reasons relating to COVID--19 to roll over that entitlement for up to two years, if it was not reasonably practicable for them to take leave.

     The CJRS guidance says that employers can restrict when holiday can be taken and the WTR say that employers can designate periods of leave by giving employees twice the amount of holiday days to be taken as prior notice.  

    The Government has produced Holiday Entitlements guidance on 13 May 2020. It deals with some of the topics that the CJRS employee guidance covers (above) but in addition:

    1. Confirms that furloughed employees can take holiday without bringing the furlough period to an end;
    2. Suggests that employers can require employees to take holiday while on furlough, but notes that “the employer should consider whether any restrictions the worker is under, such as the need to socially distance or self isolate, would prevent the employee from resting, relaxing and enjoying leisure time, which is fundamental purpose of holiday.” The holiday guidance does not give a clear indication on whether holiday taken during furlough meets the definition of annual leave set out in EU case law. The European Court of Justice has always followed the mantra that such leave must enable the worker to rest and to enjoy a period of relaxation and leisure.
    3. On holiday pay, it states that in addition to normal pay being paid to the holidaying furloughed employee (not at the furloughed rate), employers can claim back up to 80% or £2,500 if lower from HMRC under the CJRS.
    4. Indicates that, when considering whether it was not reasonably practicable for a worker to take leave, for the purposes of whether a worker can carry forward or roll over unused holiday for up to 2 years, an employer should consider factors such:
      1. as whether the business has faced a significant increase in demand due to coronavirus that would reasonably require the worker to continue to be at work and cannot be met through alternative practical measures;
      2. the extent to which the business’s workforce is disrupted by the coronavirus and the practical options available to the business to provide temporary cover of essential activities;
      3. the health of the worker and how soon he or she needs to take a period of rest and relaxation;
      4. the length of time remaining in the worker’s leave year, to enable the worker to take holiday at a later date within the leave year;
      5. the extent to which the worker taking leave would impact on wider society’s response to, and recovery from, the coronavirus situation; and
      6. the ability of the remainder of the available workforce to provide cover for the worker going on leave.

    It notes that employers should do everything reasonably practicable to ensure that the worker is able to take as much of his or her leave as possible in the year to which it relates and that, where leave is carried forward, it is best practice to give workers the opportunity to take holiday at the earliest practicable opportunity.

    1. As for furloughed workers, the holiday guidance notes that they will be unlikely to need to carry forward statutory annual leave as they will be able to take it during the furlough period, so long as the employer pays the correct rate of holiday pay. However, if, due to the impact of coronavirus on operations, the employer is unable to fund the difference between furlough pay and holiday pay, this would be likely to make it not reasonably practicable for the worker to take the leave, enabling the worker to carry it forward under the Regulations. Whilst many furloughed staff will argue that they have not been able to enjoy the full benefits of holiday during lock down, over the past 6 weeks, it has still been possible for them to exercise out doors and engage in other leisure activities, albeit in a restricted way. As lock down is eased when more freedoms to get out and about are added, so the argument that furloughed workers cannot take holiday during all or some of the potential 8 months maximum on furlough until 31 October will hold less water.          

    Miscellaneous issues

    The guidance does deal with national living/minimum wage obligations by making it clear that whilst those on the NMW/NLW can receive less than the prescribed hourly rates during furlough, if they engage in training then this is treated as working time and must be paid at the NLW/NMW relevant rates.

    For staff that have been TUPE transferred to a new employer after 19 March 2020, their new employer can claim under the scheme and furlough those staff.

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