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Emma O'Connor


This is article is no longer the latest information - for more up to date guides please visit our COVID-19 Hub and read the latest JRS Update here


On Friday 20 March the Government unveiled its response to the impact of coronavirus (Covid-19) on UK businesses by announcing a Coronavirus Job Retention Scheme. What does this scheme mean for your business and what steps will you need to comply with?

Coronavirus Job Retention (JRS) - Guidance for employers (Government Guide issued 29 March 2020)

Key points

  • The JRS will run for at least three months, starting from 1st March.
  • It is expected to be up and running by end of April.
  • Employers can use a portal to claim for 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on their qualifying wage.
  • While on Furlough the employee’s wage will be subject to usual income tax and other deductions.
  • Further guidance on calculating Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions will be issued before the scheme goes live.
  • Employers must pay their employee a minimum of the lower of 80% of their usual monthly wage or £2,500 per month. They may choose to top up an employee’s salary but this is not obligatory.
  • The minimum length of time an employee can be furloughed is 3 weeks. They cannot undertake any work for their employer during this time.
  • Employers must write to their employees to confirm they have been furloughed and must keep a record of the communication.

Which employers claim?

Any UK employer including charities and not for profit organisations with employees can apply, provided they had created and started a PAYE payroll scheme on 28 February 2020 and have a UK bank account. Employment Agencies who employ employees through PAYE can also claim.

Where an employer is under the management of an administrator, the administrator can access the scheme. 
Non-public sector employers who receive public funding for staff costs are expected to continue using that money to pay staff, and not Furlough them.

Which Employees can be claimed for?

To be eligible, employees (full/part time)must have been on your PAYE payroll on 28 February 2020 including those employees on flexible or zero hour contracts. Employees employed by an Employment Agency are also covered provided they are not working. Those hired after 28 February 2020 cannot be furloughed – this is significant for employers.

Employees made redundant since 28 February 2020 can be rehired by their employer and placed on the scheme. Redundant employees have to have been employed as at 28 February 2020 and made redundant thereafter. Employees placed on unpaid leave before 28 February 2020 cannot be furloughed. Employees made redundant before 28 February 2020 cannot be included in the JRS.

To be furloughed there cannot be any work for the employee to do – they would otherwise have been laid off or made redundant.  Employees who have been placed on reduced hours/days are not furloughed as there is work to be done. When on furlough an employee cannot undertake any work for or on behalf of their employer, this includes generating revenue or providing any services. Therefore an employee working on reduced hours or pay will not be eligible for this scheme.

Employees can partake in training and volunteer work as long as this does not provide services to or generate revenue for their employer. If workers are required to complete online training whilst they are on furlough leave, then they must be paid at least the NLW/NMW for the time spent training. If this is more than the 80% of their wage that will be subsidised, the employer must top up the balance.

Equality and discrimination laws will apply in the usual way when deciding who to place of Furlough leave.

Employees with more than one job can be put on Furlough by each employer. The cap applies to each employer individually.

Income tax and Employee National Insurance

The 80%/capped wages of Furloughed employees will paid through payroll in the usual way and be subject to usual Income Tax and National Insurance.

Where an employee has not chosen to opt-out or to cease saving into their workplace pension scheme they will continue to pay automatic enrolment contributions on qualifying earnings whilst Employers will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings, although these will be repaid under the grant scheme.

Sick leave, self-isolation and shielding employees

Employees on Sick Leave or who are self-isolating should continue to claim Statutory Sick Pay, but they can be furloughed on their ‘return’. Employees who are shielding as per public health guidance for 12 weeks can be furloughed.

What if an employee is on maternity (or other family) leaving?

Employees will remain on (or continue to take) statutory leave in the usual way and be able to claim statutory maternity etc. pay if they qualify under usual statutory rules.  If the employer offers enhanced (earnings related) contractual pay to women on Maternity Leave, this can be included as wage costs and can be claimed through the JRS. The same principles apply where the employee qualifies for contractual adoption, paternity or shared parental pay. If when the employee is due to return to work, if there is no work to do, they can be furloughed under the JRS (if the scheme is still running).

What rights do employees have whilst on the JRS?

Employees have the same rights as they did before they were furloughed – this includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.

Employees should also be reminded of their other contractual and policy obligations to their employer whilst on furlough leave.

What about holiday?

Holiday would appear to accrue during a period of furlough; however, employers may want to put limits on holiday being taken. It is also unclear if employees do take holiday during a period of furlough are they entitled to full pay or pay calculated under the JRS? Employers may in fact want employees to take holiday during furlough either to avoid a huge accrued holiday bill if the employee were to be made redundant at the end of JRS or to avoid holiday being taken at a time when they want employees to work.

The Working Time (Coronavirus) (Amendment) Regulations 2020 SI 2020/365 have been made and brought into force with immediate effect. They relax the restriction on carrying over untaken annual leave into the next leave year where leave has not been taken because of the COVID-19 pandemic. The untaken leave can be carried over into the next two leave years. The new rule applies to the four weeks of basic EU annual leave but not the additional 1.6 weeks of annual leave or any additional employer holiday leave.

What about the National Living/Minimum Wage?

During a period of furlough/JRS the employee’s wage (8% or capped) may fall below that of the NMW/NLW.  However, when the employee is working, volunteering or undertaking training, the NMW/NLW applies and the employer may have to top up their wage so that it complies with this.

Calculating what to claim

Fix salary/monthly pay – For full time and part time employees take their actual monthly salary before tax as at 28 February 2020 – this is the salary snap shot date, used to calculate the 80%/cap. Fees, commission and bonuses should not be included in this calculation.

For variably paid employees - If an employees pay varies and they have been employed (or engaged by an employment employer) for a full twelve months prior to the claim, a claim can be made for the higher of either:

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

For ‘varied pay’ employees who have been employed for less than a year, an average of their monthly earnings since they started work should be used to claim.

If an employer chooses to top-up a salary, Employer National Insurance Contributions and automatic enrolment contribution on the top-up will not be funded through the JRS. Neither will voluntary automatic enrolment contributions that are higher than the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).

How employers can Claim under the JRS

To claim, employers will need:

  • ePAYE reference number
  • number of employees being furloughed
  • the claim period (start and end date)
  • amount claimed (per the minimum length of furloughing of 3 weeks)
  • bank account number and sort code
  • contact name
  • phone number
  • the amount being claimed

HMRC will retain the right to retrospectively audit all aspects of a claim.

One claim can be submitted every three weeks, claims can be backdated to 1 March.

The employee must be paid the entire grant the employer receives for their gross pay, no fees can be charged from the money that is granted to the employee.

Tax Treatment of the Grant

Payments received by an employer under the scheme must be included as income in the employer’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.

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

What happens once the JRS ends?

When the government ends the scheme, a decision must be made, depending on the circumstances, as to whether employees can return to their role. If not, redundancy may need to be considered.

Additional information can be found:

Other employer initiatives announced:

The Budget on 11 March 2020 announced a number of measures to help employer deal with the likely impact of the coronavirus. The steps included:

  • Employer Interruption loan Scheme which allowed employer to apply for a loan of up to £5 million. The Government were to cover 80% of any losses with no fees. The first 6 months are interest free;
  • Employers with less than 250 employees were to have the first 14 days of SSP refunded by the Government; 
  • A employer rate holiday was introduced for retail, leisure and hospitality employers in England for the tax year 2020/21; 
  • Retail, Leisure and hospitality employers which operate from premises with a rateable value between of between £15,000 and £51,000 are able to apply for a grant; Those employers eligible for small employer rate relief will receive a £10,000 cash grant and will be contacted by their local authority; A new lending facility from the Bank of England to help support the liquidity of larger employers experiencing a disruption to their cash flow.

Further measures included:

  • VAT payments deferred to the end of June 2020
  • Interest free cash grants to small employers; 
  • Self-assessment income tax payments for July 2020 deferred for 6 months; 
  • Increase in standard Universal credit of £20 a week with the same increase for that receiving working tax credit.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.


Get in touch

If you have any questions relating to this article or have any employment issues you would like to discuss, please contact the Employment team on [email protected]

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