Coronavirus Job Retention Scheme

PLEASE NOTE the Coronavirus Job Retention Scheme has been updated – for the latest information please refer to our Extension to the Coronavirus Job Retention Scheme page by clicking here.

We now have further guidance from HMRC on the CJRS (see guidance), which is welcome news but it is worth highlighting that the guidance doesn’t cover every possible scenario and we expect there to be further guidance announced in the coming weeks.

From 1 July, employers will be able to bring employees back to work according to the needs of the business. Provided the employee agrees and their contract allows, they can be brought back to work partially and remain furloughed for the remainder of their normal working time.

There will be no minimum length of time the employees are required to be furloughed and employers can have the employees work any amount of time or any shift pattern they require.

Access to the furlough grant will only be available for those employees who have been furloughed for a minimum continuous period of three weeks between 1 March 2020 and 30 June 2020. This means the last day a new employee could have been furloughed was 10 June. The other prerequisite requirements of the original scheme i.e. included on a real time information submission to HMRC during 2019/20 and no later than 19 March 2020, will also have needed to be met.

The only exception to the 30 June cut off will be where an employee returns from a period of statutory parental leave, meaning it would not have been possible to furlough them prior to 30 June.

Taylor Associates, along with other professional bodies, have asked the Treasury and HMRC to extend this exception to include those employees who are newly required to shield themselves – for instance, as a result of a recent medical diagnosis – however, no relaxation on this has yet been provided.

To be able to flexibly furlough employees, employers need to have agreed this with their employees in writing and will need to:

  1. Make sure that the agreement is consistent with employment, equality and discrimination laws.
  2. Keep a written record of the agreement for five years.
  3. Keep records of how many hours the employees have worked and the number of hours they are furloughed (i.e. not working).

As outlined above, if the commencement of the period of furlough after the 10th June is the first time the employee has been furloughed, subject to the parental leave exemption, no relief can be claimed under the current or revised scheme.

If the employee previously completed a three week consecutive period of furlough prior to 10th June, then relief would be available. However, as the recommencement of the furlough starts prior to the 1st July, the employee must remain on full-time furlough for the minimum three week period to have a qualifying claim – irrespective of this period going beyond the 1st July.

From 1st July, employers’ claims will be limited to the maximum number of employees previously included on a claim prior to 30th June.

To illustrate the point, assume an employer made who has made two claims under the scheme up to 30 June of:

  1. 10 employees claimed for on 1st May and
  2. 8 employees claimed on 27th June

The maximum number of employees able to be included in a claim by this employer from 1 July would be 10 employees. This is regardless of whether the employees claimed for in each claim were different employees and the total employees furloughed over the 1 March to 30 June period was higher than 10 employees (potentially up to 18 employees). The employer will be capped on their claim and can only receive a grant for up to 10 employees in a given period from 1 July.

If an employer furloughs an employee who is returning from statutory parental leave after 30 June, they can be added to the maximum number of employees a claim can be made in respect of. Building on the previous example, if the employer furloughed two employees who returned to the business from statutory parental leave in August, the claim for August and subsequent months could be for a maximum of 12 employees.

Until 31st July, the amount of the grant available will continue to be 80% of applicable wages, capped at £2,500, along with support with pension and employer national insurance costs.

From 1st August, the grant will cover 80% of applicable wages, capped at £2,500, but there will be no relief for employer national insurance or pension contributions (capped at 3% of qualifying earnings levels).

From 1st September, the scheme will require employers to contribute towards the employees’ furlough pay. Employees will continue to be required to receive 80% of their applicable pay, but 10% will need to be covered by the employer and 70% will continue to be covered by the grant.

For the final month of the scheme in October, the employer contribution will rise to 20%.

As a consequence of these changes, the maximum grant available for each employee will be:

  • July: £2,500 plus employer national insurance and pension contributions
  • August: £2,500
  • September: £2,187.50
  • October: £1,875

Given the varying levels of support which will be available in the period between July and October, claims will only be able to be made within the same calendar month. In addition, a claim period must cover a minimum period of 7 days, unless the claim is being split because of a month coming to an end, or beginning.

To put this in to context, it would be possible for an employer to have a claim period running from 1st – 7th July and a second from 8th – 31st July. However, it would not be possible to have a claim period running from the 29th July – 4th August, with the employer instead needing to split the claim between 29th – 31st July and then 1st – 4th August.

The guidance asks employers to match their claim period to their payroll reference period. However, as employers can still only make one claim for a given period, employers with multiple payrolls will struggle to achieve this. For instance, those who run both a fortnightly payroll and a monthly payroll, will find it hard to match their claim period to their payroll reference periods – particularly as claims must be restricted to calendar months.

The earliest an employer can make a claim is up to 14 days before your claim period end date.

In practice, employers may struggle to make claims this early without the need to amend the subsequently. Where employees have been flexibly furloughed, the employer may not be certain of the value of the claim until the end of the claim period, when they know the hours worked and hours of furlough of the employee.

Where an employee is under a flexible furlough arrangement, the basis of the claim will change from looking at days of furlough and will instead look at the number of hours of furlough. As a consequence of this shift, the way in which the claim is calculated is completely different from what we have seen in the scheme to date.

The revised calculation also introduces the concept of ‘usual hours’ which will need to be identified and separately calculated to be able to then calculate the furlough pay grant.

To arrive at the number of furlough hours that can be claimed for, employers will need to deduct the actual hours worked in the period from the calculated usual hours. The balance of this calculation is then the number of furlough hours the employer can claim for.

For employees who are fully furloughed, the guidance confirms that this step in the calculation can be ignored and the claim will continue to be calculated using the maximum amount method currently used.

As with the current scheme, there are different methods to determine usual hours depending on the type of work undertaken by the employee. The guidance sets out how usual hours are to be calculated, but it should be noted that this will be an unenviable and likely time consuming task for employers.

The guidance defines the different types of work and each type of work has its own calculation of usual hours. The work types are distinguished as:

  • Employees with fixed hours
  • Employees with varying hours
  • Piece or task rate workers

Employees with fixed hours

The usual hours for an employee with fixed hours is calculated with reference to the number of hours the employee was contracted for (not actually worked) at the end of the last pay period on or before 19 March 2020. The number of hours are then divided by the ‘repeating shift pattern’ and then multiplied by the number of days in the claim period, before then rounded up to the next whole number.

The idea of the repeating shift pattern is to address situations when an employee may not work a typical Monday to Friday, and instead work a ‘nine day fortnight’ or ‘three on/three off’. For clarity, the repeating shift pattern for these three scenarios would be seven days, fourteen days and six days respectively.

Employees with varying hours

For employees with varying hours, the usual hour’s calculation is even more complex, with the calculation being the higher of:

  • The average hours worked in the 2019/20 tax year, up to the day prior to the employee being placed on furlough, if furloughed during the 2019/20 tax year, and
  • The corresponding hours in the calendar period in the 2019/20 tax year.

As a consequence employers with employees on varying hours will, as a starting point, need to know both the hours worked of each employee for the entirety of the 2019/20 tax year and specific hours for the equivalent period in the 2019/20 tax year, to the period of claim.

Employees undertaking piece rate or task based work

If possible, the guidance asks employers to follow the same calculation as those with varying hours. If this is not possible – and for those employee’s paid on a ‘per widget’ basis, employers are unlikely to need or have kept records of the number of hours worked, the guidance asks employers to estimate the hours based on the number of ‘pieces’ they produced and compare this to the ‘average rate of work per hour’ used for national minimum wage purposes.

While at first glance this appears to mirror the existing scheme, the concept of minimum furlough pay is a key move away from the current scheme. Up until 1st July, employers can decide what to pay their employees while on furlough, but must cap any claim to the amount actually paid to the employee.

From 1st July, employers need to ensure they have actually paid minimum furlough pay to have a valid claim. Given the added complexity involved in calculating minimum furlough pay, along with the figures that feed into the calculation (such as usual hours), this requirement puts extra pressure on employers to ensure there are no errors in their calculations for risk of having to repay the grant to HMRC.

The minimum furlough pay is calculated by taking the lesser of:

  • 80% of their usual wage
  • The maximum wage amount (£2,500 for July, reducing to £1,875 by October)

The amount is then multiplied by the employee’s furloughed hours for the period, before being divided by their usual hours. The result is the minimum amount you must pay your employee for the hours they spend on furlough in the claim period.

As outlined above, a grant claim towards a furloughed employee’s employer national insurance and pension contribution will only be possible for the month of July. In addition, the pension contribution grant will continue to be capped at the minimum contribution required under auto-enrolment, using the ‘qualifying earnings’ method of calculating the contribution.

Where the employee has been flexibly furloughed, the claim will be further limited to apportion the amount between the furlough hours and working hours.

No, should the employer not be in a position to bring the employee back to work, they will be able to continue furloughing them on a full-time basis.

If employees are on full-time furlough, the other conditions of the 1st July will be applicable. In practice this will mean there will be differences from claims under the current scheme, such as:

  • The grant available however will be limited to the new maximum outlined in the guidance
  • Claims will need to limited to calendar month basis
  • There will no requirement for the employee to be fully furloughed for a 3 week period as of 1st July
  • There will be a cap on overall number of claimants includes those on full furlough
  • Employees will need to be paid the minimum furlough amounts to qualify. Until 30th June, claims have been capped at the lower of 80% of normal pay and amount actually paid to the employee.
  • Employers must have created and started a PAYE payroll scheme on or before 28 February and have a UK bank account to be able to access the grant
  • An employee must be furloughed for the employer to receive the grant
  • An employee who is furloughed, must be furloughed for a period of at least three weeks and for a maximum of three months (although the guidance suggests this may be extended) to qualify for the grant
  • There is no need to furlough all employees and employees can be furloughed on a case by case basis, depending on the employer’s needs
  • An employer can re-furlough an employee after they have returned to work from a previous period of furloughing

Furloughing an employee means they must not undertake any duties of their employment. It is worth noting that as CJRS will be considered on an employment by employment basis someone having a second job or taking on a new job while furloughed does not impact the CJRS grant the employer receives for the employee.

Similarly an employee can take part in volunteer work or training, which does not provide services to or generate revenue for the employer who has furloughed them. It’s worth noting however that if the employee is undertaking training, this may be considered working time for minimum wage purposes, and employers will need to ensure that minimum wage is paid if the training is working time.

The guidance also expands on who can make a claim for the grant and confirms that where a company is in administration, the administrator will be able to access the scheme.

The grant will only be available for employees included on payroll on 28 February, so will therefore not cover new hirers taken on after this date.

The grant is available for both full time and part time employees, as well as directors and casual workers, as previously announced by the Chancellor.

However, the concern for directors is that directors will often take a low or no salary from the business. Instead they will often utilise dividends to top up their income, as and when they have the profits to do so. As dividends are not subject to PAYE, the dividend amounts are unlikely to form part of the CJRS calculation for the director. Directors in this position are likely to find that should they qualify for a CJRS grant, the amount paid would likely be 80% of a low salary.

A further concern is that a director must be non-active to be furloughed, but given they will continue to need to manage the business in some way, they are unlikely to be completely in-active and therefore may fail the CJRS requirements.

Employees entitled to statutory pay, such as statutory sick pay and maternity pay, will continue to receive these payments and will not be able to be furloughed while in receipt of the statutory payments.

The guidance does however confirm that employees who fall within the vulnerable category and are required to undertake shielding are able to be furloughed and access the scheme.

The scheme is open to public sector employees, but the Government view is that the majority of public sector workers are essential workers and unlikely to be furloughed. Even where the public sector role is non-essential, the suggestion is that it would be possible to re-deploy them to an essential role, rather than furlough the worker.

The grant will be based on regular earnings excluding any fees, commissions or bonuses. The grant will provide reimbursement for 80% of the earnings figure, subject to a total gross payment to the employee of a maximum of £2,500 per month.

The total maximum grant available to the employer will be higher than the £2,500, as it will also cover the employer national insurance and minimum auto-enrolled pension contributions due.

Based on our initial calculations, we believe the cost of making a gross payment to a furloughed employee during the 2020/21 will be as follows:

Gross Payment


Employer NI


Employer Pension


Total grant available


Employees will remain liable to PAYE, employee national insurance and any other usual payroll deductions (such as student loan repayments) on the furloughed payment made to them by their employer.  The employer may choose to pay more than the amount of the grant paid to them by the Government.

The latest guidance details how those with irregular earnings CJRS grant entitlement will be calculated.

The calculation of the grant entitlement is split within three categories;

  • Employees with more than twelve months service
  • Employees with less than twelve months service
  • Employees who joined in February 2020

For the employees who have more than twelve months service, the grant is calculated as the higher of:

  • The same month’s earning from the previous year
  • Average monthly earnings for the year

For employees with less than twelve months service, the grant is calculated as an average of their monthly earnings since the start of their employment.

For employees who joined during February 2020, the grant can be based on a pro-rata of their earnings.

Employer can only make one claim every three weeks at most, which presumably will mean the claim is made on a PAYE scheme basis, rather than on an individual basis as each employee is furloughed.

Employers will make the claim in line with the actual payroll amounts, and will do so at the point at which the payroll is run or in advance of an imminent payroll.

To make a claim, employers will need the following information:

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

The payment will be made via BACS to the employer, which explains the requirement to have a UK bank account.

It should be noted that HMRC have indicated that they may retrospectively audit the validity of claims being made. With this in mind, should you need assistance in making the claim, Taylor Associates would be happy to support you with this, to ensure the amount claimed is correct.

The grant received should be included in calculating the taxable profits of the business for income tax and corporation tax purposes.

The furloughed payments actually made to the employee and associated employer costs will also be deductible in arriving at the taxable profits of the business.

The key questions we still need guidance from government on are:

  1. How long will employers have to wait to receive payment from CJRS? The initial guidance suggests the scheme will be paying out by the end of April at the latest, but there is no further guidance on whether particular businesses or sectors will be prioritised.
  2. Can an employer delay making payment to employees until they receive funding from the CJRS? It would appear from the initial guidance that employers will have to make the payment initially, and are then reimbursed by the CJRS. However, there is no guidance on whether it will be possible to delay payment of wages becoming due this month until April, when the scheme should be up and running. The guidance does point to the ability to use the business disruption loan suggesting this can be used to bridge the cash flow until the employer is reimbursed by CJRS.
  3. Will the employer have to fund the cost of the apprenticeship levy on payments made under grant? While the grant covers the cost of employer national insurance and minimum pension contributions, it doesn’t appear to provide relief for the apprenticeship levy payments.
  4. Will holiday entitlement continue to accrue during the period in which the employee is furloughed? This is an employment law issue and the guidance makes clear that there will be a variety of legal issues that will need to be addressed with employees to ensure a claim can be made. Presumably, holiday pay accruing will be one such area to be addressed.
  5. The guidance explains that the grant will be calculated on earnings excluding bonuses and commissions, and goes on to provide details on how to calculate the earnings of employees with variable pay. It does not however state what earnings the grant will be based on. For instance, it’s not clear if the guidance will allow employer to make new pay rises, or honour existing rises already agreed, for the purposes of calculating the grant available.
  6. How will the CJRS apply to personal service companies? Particularly in instances where they have subjected the income of the company to a deemed employment income tax charge, with PAYE paid on the amount?
  7. For employees who are part time, will there be any pro-rata of the £2,500 cap, to recognise in that they are not in full time employment?
  8. How will benefits in kind, particularly those which are payrolled benefits and included within gross pay on payslips and RTI reports, interact with the scheme? Will these be included within the definition of earnings?
  9. In respect of the re-furloughing of workers, while a minimum period of furloughing is within the guidance, there does not appear to be a minimum period of working time that an employee must do before they are able to be furloughed again. Will there be a minimum period of working time required between periods of furlough for the CJRS to be available?
  10. A clearer definition of what constitutes regular earnings will be needed to be able to make a claim. However, the guidance does say further information will be provided to clarify how to calculate the claim that can be made.

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