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Coronavirus Job Retention Scheme – Clarification from Government


Yesterday (26 March) the Government published further guidance on the Coronavirus Job Retention Scheme (CJRS), answering some (but not all) of the queries that employers may have about the CJRS.  In this briefing we set out the key points regarding the CJRS.


Under the CJRS, the Government will reimburse 80% of employees’ wage costs up to £2,500 per month if the employer has designated them as ‘furloughed’.  This applies to all UK businesses in an attempt to avoid extensive redundancies following the slump in economic output that the virus will cause.

The systems have not yet been set up, but the Government will pay funds directly to employers via a new HMRC portal.  Employers will continue to pay furloughed staff direct.

The exact commencement date of the CJRS is not yet known, although the Government has stated that it should be operational by the end of April. The CJRS will be backdated to 1 March and will initially last for a period of 3 months.

What steps should employers take?

Employers need to designate employees as ‘furloughed’ and inform them in writing that they are furloughed.  It is important that employers keep copies of this confirmation as evidence of furloughing when the CJRS is set up.

If contracts of employment do not include lay-off provisions, then changing the status of employees to being furloughed and/or reducing their pay may require their consent.

If headcount needs to be reduced but certain tasks continue, it may be necessary to furlough certain employees whilst retaining others, and this is permitted under the CJRS.  Employers may decide to invite employees to voluntarily choose to be furloughed.  When choosing who should be furloughed, discrimination laws will still apply so employers should be careful how they choose who should be furloughed.

Which employers are eligible?

Eligibility is based on having an HMRC PAYE payroll reference number at 28 February 2020.  All businesses who are UK employers with a UK bank account are eligible.  This includes charities and recruitment agencies. The CJS may also cover employees in domestic workplaces if they are paid through a HMRC registered payroll.

Which employees are eligible?

Employees must have been employed on 28 February 2020 to be eligible. Those hired after this date will not be eligible.

Employees are eligible irrespective of whether they are full-time, part-time or employed under a zero hours or temporary contract, although it is not entirely clear whether “workers” – as opposed to employees – are covered by the CJRS (such as workers on a zero hours contract).

Where employers have already made staff redundant or placed them on unpaid leave since 28 February, those employees’ status can be altered to ‘furloughed’ in order to benefit from the CJRS. Employees who were made redundant will need to be reinstated to the payroll and issues will arise about the repayment of redundancy pay, notice pay and other amounts paid on dismissal.

Employees who are on maternity or other statutory family leave may be furloughed.

How does it operate?

No work can be carried out by employees for their employer whilst they are furloughed.  Employees that have more than one employer can continue working for one even if furloughed by the other, or can be furloughed by both.   The 80% payment can be made by each employer.

Employees may volunteer whilst they are furloughed, as long as they are not making money for or providing services to their employer.

Employees must be placed on furlough for a minimum of three weeks and can remain furloughed for the duration of the CJRS, which will initially run until the end of May. However, employees may also move on and off furlough as long as each period of furlough lasts for at least three weeks.

As a furloughed employee is not working, they do not have to receive the national minimum wage (unless they are undertaking training whilst furloughed).

If employees are currently on sick leave, they can be furloughed after the sick leave has ended.

Other employment rights, including the right to statutory sick pay, maternity and other parental rights, unfair dismissal and rights in respect of redundancy are unaffected by the CJRS.  Therefore, employers must ensure that proper processes are followed if making employees who are furloughed redundant when the CJRS ends.

Wage Costs

The calculation of 80% of the employees’ wage costs is carried out as follows:

  • For full- and part- time staff: 80% of their gross monthly salary
  • For staff with varied hours, the higher of:
    • the amount in the same month in 2019; or
    • their average monthly earnings from last year.

Where employees have been employed for less than a year, employers should calculate the figure using the average of their monthly earnings since they commenced employment.

Bonuses, commissions and fees are not included in wage costs.

Once the CJRS is up and running, employers will need to input the wage details for furloughed employees into the HMRC portal.  Following this, they will receive a grant from HMRC covering the following in respect of each furloughed worker:

  • 80% of the wage costs up to the cap of £2,500 per month
  • Employer’s national insurance contributions
  • Minimum auto-enrolment pension contributions

Employees must pay income tax, employee’s national insurance contributions and auto-enrolment pension contributions on the sums that they receive under the CJRS.

Employers can choose to top up the additional 20% of the wages of furloughed employees although there is no obligation to do so.  Employers will be responsible for employer’s national insurance contributions and pension contributions on any ‘top-up’.

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