Coronavirus Job Retention Scheme

On Friday 20 March 2020, the Chancellor, Rishi Sunak, announced the introduction of the “Coronavirus Job Retention Scheme” (the Scheme). The guidance in relation to the Scheme has changed several times since it was first released. The Treasury has now issued a Direction to HMRC which, we hope, provides definitive guidance on how the Scheme will work.

Coronavirus Job Retention Scheme

On Friday 20 March 2020, the Chancellor, Rishi Sunak, announced the introduction of the “Coronavirus Job Retention Scheme” (the Scheme). The guidance in relation to the Scheme has changed several times since it was first released and the Treasury has issued two Directions to HMRC, the most recent of which provides current guidance on how the Scheme operates.


The idea of the Scheme is to enable employers, whose businesses have been affected by Coronavirus, to keep staff who are paid through PAYE on the payroll rather than having to make redundancies or take other measures. They will be able to do this by “furloughing” staff, which means that they will not be working but kept on the payroll.

The Scheme covers the cost of wages backdated to 01 March 2020 and is open on the terms set out below in this publication until 30 June 2020.

From 01 July 2020 the Scheme will be varied to allow employees to return to work on a part time basis and, from 01 August 2020, the government’s contribution towards wages for furloughed employees will be reduced. The details of these changes are due to be published by the end of May 2020. It is currently planned that the Scheme will come to an end on 31 October 2020 (although the Scheme could be extended further).

Here is an outline of the proposed tapering down of the Scheme over the coming months – further information on this is due to be published in mid-May.

  June July August September October

Government contribution



80% of pay up to £2,500 plus employer NICs and pension contributions 80% of pay up to £2,500 plus employer NICs and pension contributions 80% of pay up to £2,500 70% of pay up to £2,187.50 60% of pay up to £1,875

Employer contribution



None required None required employer NICs and pension contributions 10% of pay up to £312.50 plus employer NICs and pension contributions 20% of pay up to £625 plus employer NICs and pension contributions

Can employee work?


No Employers can (subject to agreement with the employee) bring an employee back to work for any amount of time and any shift pattern, while still being able to claim CJRS grant for their normal hours not worked.
Further restrictions Only as set out below The employee must have previously been furloughed for a minimum of 3 consecutive weeks by 30 June 2020.

It is important to note that the Scheme will be closed to new entrants from 30 June 2020. Therefore, from the 30 June 2020 an employer will only be able to furlough employees that they have furloughed for the full three-week period before this date.

In practical terms, this means that an employer will need to have furloughed any employee for the first time by 10 June 2020 in order for them to utilise the Scheme in respect of that employee.

Further, from 1 July 2020 the number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim under the current Scheme.

Details of the current form of the Scheme

The Scheme will remain in place, as set out below until 30 June 2020.

  1. Who to Furlough

All PAYE employees, other than those off sick (unless they are “shielding” because they fall within a vulnerable group), who have been on the employer’s payroll since before 19 March 2020 (provided the employer had submitted real time information payroll data by that date) can, subject to consent, be furloughed. This can include some workers as well as employees. The Government guidance confirms that the following types of workers can be furloughed:

  • Apprentices
  • Office holders (including company directors)
  • Salaried members of limited liability partnerships
  • Agency workers

Specific considerations need to be taken into account for the types outlined above and employers should take legal advice if they are unsure whether a type of worker can be furloughed and/or how to furlough them.

It is vital that employees do not undertake any work for the employer whilst furloughed. However:

  • They are permitted to undertake training (subject to being paid NMW); and
  • a director who is furloughed can undertake work to fulfil a duty or other obligation arising from an Act of Parliament relating to the filing of company’s accounts or provision of other information relating to the administration of the director’s company.  This is a very narrow interpretation of directors’ duties.

Ultimately, it is up to the employer to decide who should be furloughed. It is important to be mindful of any discriminatory reasons in the decision making process.

It is important to note that an employer can only claim for furloughed employees that were employed on 19 March 2020 and who were on their PAYE payroll on or before 19 March 2020. This means a Real Time Information (RTI) submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020.

  1. How to furlough

The first thing to note is that there is no automatic right to furlough staff, written agreement to being furloughed is required from each individual employee.

The Treasury’s Direction specifically requires that the employee agrees to cease all work for the employer.

The risk of not obtaining agreement is twofold:

  1. If HMRC deem the agreement to be inadequate then the employer may be unable to reclaim under the scheme;
  2. If the employee disputes that they have consented to being furloughed then they could argue that the % of their pay that they are not receiving during the furlough period is technically a deduction from wages. This could lead to a claim by the individual for the balance of their full salary for the entire period of the furlough.

Agreement to furloughing should be obtained following consultation with the affected staff. However, there is no specified time period set out in the guidance and in the circumstances  the period for this can be modified  and it is likely to be acceptable for this to be done via email correspondence.

If more than 20 employees are affected, employers should consider their obligation to collectively consult. Employers may also consider whether to submit form HR1 to the Secretary of State in the event that they will be making redundancies for those who do not consent to furloughing.

It is important to be aware of the 45 day consultation period required where an employer proposes to make more than 100 redundancies. This is something that should be considered at least 45 days before the Scheme comes to an end to allow sufficient time for any consultations to take place.

If the employee does not agree to being furloughed then the employer may want to consider alternatives such as:

  1. Unpaid leave;
  2. Forcing employees to take holiday;
  3. Reduction in hours and pay (this requires consent);
  4. Dismissing staff with under 2 years’ service;
  5. Making redundancies.

Once an employee is furloughed they must be furloughed for a minimum period of 3 consecutive weeks. They can then be taken off furlough leave and can be placed back on at a later date. Employers should go through the same process of obtaining consent each time they need to furlough an employee.

It is important to note that a furloughed employee should not undertake any income generating work for the employer. However the Government guidance on the Scheme has made it clear that a furloughed employee is allowed to get another job or volunteer whilst furloughed, subject to the employment contract in relation to the furloughed job allowing this.

  1. Paying furloughed workers

You should keep your furloughed employees on the payroll and pay them the lower of 80% of their pay or £2,500 per month, plus the associated employer NICs and minimum auto-enrolment pension contributions on that pay.  This should be paid directly to them via payroll.

Employers can claim for any regular payments that they are obliged to pay including wages, past overtime, fees and compulsory commission payments.

However, the amount of salary for the employee must disregard anything which is not “regular salary or wages”.  That includes disregarding any performance related bonus or discretionary payments (including tips), any conditional payments (eg where a threshhold must be met) and any non-financial benefits provided to employees i.e. taxable Benefits in Kind and salary sacrifice schemes.

For employees whose pay varies, the 80% should be computed by reference to a previous pay period. You will be able to claim the higher of:

  1. the same month’s earning from the previous year (e.g. earnings from March 2019); or
  2. average monthly earnings in the 2019-20 tax year or, if the employee has been employed for less than a year, the average of their monthly earnings since they started work.

Apprenticeship Levy and Student Loans should continue to be paid as usual. Grants from the Job Retention Scheme do not cover these.

HMRC’s portal, via which claims from the Scheme can be made, went live on 20 April 2020:


Employers can now apply to HMRC for a grant for 80% of the total of the reference period wage plus employers NIC and the legal minimum pension contributions.

Annual leave

The Treasury’s Direction and the employer’s guidance on the Scheme are silent on how to deal with annual leave. However, the employee’s guidance states that employees can take annual leave whilst on furlough, with the employer having to ‘top up’ to 100% of normal pay. This also applies in respect of Bank Holidays. Alternatively, an employer could allow a furloughed employee to take a day in lieu of a Bank Holiday once they are no longer furloughed.

We recommend that you seek legal advice if you receive a holiday request from a furloughed employee, particularly where their pay varies.

If an employer wishes to require an employee to take holiday whilst furloughed they must give them at least twice the amount of time in notice as they are requiring them to take as holiday. An employer should also consider whether there are any circumstances which would prevent the employee from using the time for rest and relaxation (e.g. if they are shielding).

Where actions have already been taken.

Some employers may have already taken steps to lay off or dismiss some staff.  If this has happened, employers can invite the dismissed or laid off employees back into the workplace and then seek their agreement to be furloughed.

The Scheme will be backdated to 01 March 2020.

It is important to note that the Scheme must be exercised in accordance with existing employment law. We therefore strongly recommend that you take legal advice before taking any actions under the Scheme.

If you require specific advice regarding annual leave or indeed any matters surrounding Covid-19 then please get in touch with the Employment Team.


Kitsons Solicitors - Rosie Evans

Need advice on an issue relating to coronavirus/covid-19?
Please contact me directly with this form

    We use your name, email address, company name and telephone number for the sole purpose of providing you with information regarding this specific enquiry. Your information is transferred and stored securely at all times. We never share your information with any third parties. For more details, please read our privacy policy.


    About the author

    Kitsons Solicitors - Rosie Evans

    Rosie EvansAssociate

    Rosie is an Associate in our Employment team

    More about Rosie