Coronavirus Job Retention Scheme

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.

  • 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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