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Coronavirus (COVID-19): Government publishes details on the Job Retention Scheme

27 March 2020
Following the announcement by the Chancellor on the headlines of the Job Retention Scheme, the government has now issued much anticipated further guidance.

 The scheme has been introduced as a temporary measure to assist employers and employees during the coronavirus outbreak.  It is open to all UK employers for a period of three months, but may be extended.  The scheme is backdated to 1 March 2020 and is expected to be up and running by the end of April.

Key points to note from the guidance:

Who can claim?

Any UK organisation with employees can apply to the scheme, including: businesses, charities, recruitment agencies (agency workers paid through PAYE) and public authorities.  A key requirement is that the employer must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.  It is not expected that public sector employers who are receiving public funding for staff costs will need to use the scheme. 

Employees must have been on the PAYE payroll on 28 February 2020 and can be on any type of contract, including agency contracts and zero-hours contracts.  Employees hired after this date cannot be furloughed under the scheme. The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.  

To be eligible the employee must not undertake any work for or on behalf of the organisation.  If you need your employees to undertake certain tasks, short-time working may need to be considered as an alternative but you would not then be able to access the scheme in respect of the period in which work was carried out.  The scheme does however allow for the employee to undertake training and to carry out volunteer work, provided the services do not generate revenue for their employer. 

Subject to any contractual sick pay applicable, employees on sick leave or self-isolating should receive Statutory Sick Pay, but can be furloughed after this period.  Employees who are shielding in line with public health guidance can be placed on furlough.  

What can be claimed?

Employers can use a portal to claim for 80% of furloughed employees' usual monthly wage costs, up to £2,500 per month.  Fees, commissions and bonuses are not included.

In an unexpected but welcome move, the guidance has clarified that employers can also claim associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions in addition to the monthly wage costs.  

An employer can choose to top up an employee's salary up to 100% but this is not a requirement of the scheme.  If an employer does choose to top up the salary, Employer National Insurance Contributions and automatic enrolment contributions on the additional amount will not be funded through the scheme.  

Full and part time salaried employees - the employee's actual salary before tax, as of 28 February 2020 should be used to calculate the 80% (excluding fees, commission and bonuses as set out above). 

Employees whose pay varies – If the employee has been employed for twelve months prior to the claim, employers can claim the higher of: 

the same month's earnings from the previous year and 
the average monthly earnings from the 2019-20 tax year.  

If the employee has been employed for less than a year, employers can claim the average of their monthly earnings since they started work.  

How will the employee be taxed?

Payments to the employee should be made via the PAYE system and will be subject to deductions for income tax and employee's NICs. As mentioned above, in addition to the grant, the employer can also claim the associated employer's NICs and the minimum auto enrolment pension contribution. Further guidance from HMRC is expected on how to make these calculations when the portal goes live. 

The grant income received must be included as income in the business’s calculation of its taxable profits but employment costs can be deducted as normal when calculating the businesses' taxable profits.

What about the National Living Wage/National Minimum Wage?

The guidance is clear that furloughed workers who are not working must be paid 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.  However employers must make sure that if an employee is required to undertake training during the period of furlough, that they are paid at least the NLW/NMW.  

Can employees go in and out of furlough?

The guidance states that employees must take furlough leave for at least three weeks.  There is nothing to prevent employers rotating furlough leave amongst the workforce, providing the blocks of three weeks leave requirement is adhered to.  Employers can only submit one claim every three weeks.  Claims can be backdated to 1 March 2020. 


The guidance provides useful clarification on how the scheme will operate.  Inevitably, there will be more questions raised and updated guidance issued.  For example, the guidance is silent on the mechanics of holiday pay during any period of furlough.  

Employers must note that normal employment law applies when seeking to furlough employees.  Unless there is a pre-existing right to vary the working hours, employers will need to follow a process to vary the contracts.  Collective consultation may need to be engaged if sufficient numbers of staff are involved and the changes cannot be made by agreement.  

Employers now have the unenviable task of deciding which employees to furlough.  Where necessary, a matrix should be created, using fair, consistent and non-discriminatory criteria for choosing which employees will be furloughed.  

Communication is key.  If you would like us to assist you with a question and answer document for your employees on how furlough works in practice please get in touch.  If you would like any other assistance with the issues raised in the update please do not hesitate to contact us.  

For further information on the government assistance for the self-employed please click here >

Pensions and JRS

To understand the importance of JRS for employers still striving to meet their pensions obligations during these difficult times, along with the issues The Pensions Regulator has considered with regard to COVID-19 view our pensions article >

Further Reading