Coronavirus (COVID-19) & Furloughed Employees

Coronavirus Job Retention Scheme (CJRS) Extension:

                       At a glance guide to current and upcoming changes


The CJRS or furlough scheme is to be extended until 30 September 2021. This means that furloughed employees will continue to receive 80% of their salary for hours not worked, up to £2,500 a month, but employers will be asked for a contribution of 10% from July 21 and 20% in August and September 21 towards the hours their staff do not work.

Employees will receive 80% of their current salary for hours not worked, up to a maximum of £2,500 per month. This cap is proportional to the hours not worked. Employers will not be required to contribute or top-up for the hours not worked from now until the end of June 2021.

The government will meet the pay of the employee up to this cap but the employer remains responsible for meeting the pension and national insurance contributions costs. The employer will, of course, pay the employee for the hours actually worked in the normal way.

This means that the extended CJRS scheme is more generous than it was in October and therefore it will mirror the terms of the CJRS for August.

To be eligible under this Extension, employees must be on an employer’s PAYE payroll by 23:59 30th October 2020. This means a Real Time Information (RTI) submission notifying payment for that employee to HMRC must have been made on or before 30th October 2020.

The employee does not need to have been furloughed previously.  This is a significant change to the rules.

The grant must be paid to the employee in full.

The reference to pay and the ‘usual hours’ will differ depending on whether the employee has been furloughed previously under the original CJRS or not.  Please refer to the section below marked ‘Reference Pay and Usual hours’ for more detail.

CJRS extension claims must be submitted by 11.59pm 14 calendar days after the month you are claiming for or the next working day where the 14th day falls on a weekend.

Claims for February must be made by 15 March 2021.

HMRC have announced plans to publish details of the companies and LLPs that have actually made claims for the month of December onwards. How to ask HMRC not to publish your claim details. Click here.  Employees will be able to access their Personal Tax Account on to check which furlough claims have been made on their behalf.

The Job Retention Bonus will not be paid this month as originally planned and may not be paid at all.

The Job Support Scheme (JSS) has now been postponed, presumably until the CJRS extension scheme ends.

The legal framework for the scheme is laid down in Treasury Directions. We are currently at the 6th Treasury Direction and we expect another this week. Click here 

At a glance:

We have updated this guidance to reflect the changing nature of the scheme. This means that we have removed information that related solely to the first version of the scheme and information that relates solely to previous months.

We look at the above and more in further detail below.

‘Reference Pay’ and ‘Usual hours’ – Much depends on whether the employee has fixed or variable pay


If the employee has fixed pay and the following applies then we use the last pay period ending on or before 19 March 2020 as the reference pay period:


An RTI submission was made on or before 19 March 2020 showing payment to that employee.


A valid CJRS claim has been made in respect of that employee on or before 31 October 2020.

For all other employees, the reference period is the last pay period ending on or before 30 October 2020; this will only apply for periods starting after 1 November 2020



If on the other hand an employee’s pay varies and they were on the payroll on 19 March 2020 then the ‘reference pay’ is 80% of the higher of:

the wages earned in the corresponding calendar period in the tax year 2019 to 2020


the average wages payable in the tax year 2019 to 2020.

Calendar Lookback method

Claiming for February 2021? Lookback to February 2020

Claiming for March 2021? Lookback to March 2019 (yes 2019)

Claiming for April 2021? Lookback to April 2019 (yes 2019 again)

As we look forward, for someone who is to be furloughed in April 2021 having previously received a payment of earnings which were reported on the FPS on or before 19 March 2020 we would lookback at April 2019 rather than April 2020.

The advice above also applies where a valid CJRS claim was made on or before 31 October 2020.



For all other employees the reference pay is based on 80% of the average wages payable between 6 April 2020 (or later if the employee started after that date) and the day that they were furloughed on or after 1 November 2020.

The dates are inclusive. This includes any hours that the employee received holiday pay for.

See examples 2.9 and 3.3 in HMRCs guidance which was last updated 4 February 2021.

Employees whose first pay period ends after 30 October 2020.

Remember; for periods from 1 November onwards you can only claim for employees who were employed on 30 October 2020 as long as the employer has also made an RTI submission showing a payment for that employee between 20 March 2020 and 30 October 2020.

It is possible to furlough an employee whose 1st pay period ends AFTER 30 October.  This  will apply to employees that have been hired in September or October 2020.

The employer will need to ensure that HMRC have received details of the employee’s pay via RTI on or before 30 October.

The ‘usual hours’ will be the hours that they were contracted for at the end of the latest pay period on or before 30 October 2020.

For example, an employee starts work on 12 October 2020 and is to be paid £2,340 per month. If an RTI submission is made by 30 October then it is possible for that employee to be furloughed from 1 November 2020.  The reference pay to be used in the claim will be £1,620 (rather than £2,340) as this was what will be reported in October to account for the fact that the employee started work on the 12th.

Remember that the daily maximum wage amount for November is capped at £83.34 per day and this will drop to £80.65 in December to ensure that the £2,500 cap is observed.

Company Directors and annually paid employees

It is possible to make a claim for an annually paid employee including a director but we will need to check to ensure that the employee has been paid via RTI between 20 March 2020 and 30 October 2020. Here is a link to the government’s guidance on directors.

Re-hiring an employee

If the employee was employed and on the payroll on 23 September 2020 and they were subsequently made redundant or stopped working for their employer can be re-employed and claimed for.  An RTI submission must have been made to notify payment to that employee between 20 March 2020 and 30 October 2020.

This applies to fixed term contract employees too, provided that they were on the payroll at 23 September and the contract expired after 23 September.

How long can an employee be furloughed? – This applies to the CJRS and CJRS extension

There is no minimum period that an employer can furlough an employee and a separate agreement can be made when re-furloughing an employee on subsequent occasions.

Claims must start and end within the same calendar month and must last at least 7 days unless the employer is claiming for the first few days or the last few days in a month.

An employer can only claim for a period of fewer than 7 days if the period they are claiming for includes either the first or last day of the calendar month, and they have already claimed for the period ending immediately before it. The 3rd Treasury Direction dated 26 June calls such a period an ‘Orphan Period.’

This will have an impact for the employer too. See ‘How often can a claim be made?’

Can an employee work for an employer whilst they are furloughed?

Yes  An employer can bring furloughed workers back to work part time whilst still claiming the CJRS grant for their normal hours not worked.

Where training is undertaken at the request of the employer the employee will be entitled to be paid at least the NMW for this training. In most cases, the 80% (70% from September) furlough payment will ensure that the NMW has been observed and so an additional payment will not be required.

How to make a claim

Click here to be taken to the site which also sets out what the employer will need to provide.

A claim under the old or original CJRS cannot be made after 30 November 2020 and employers will not be able to add to that claim after that date.

How often can a claim be made?

The claim period is not linked to the employee’s pay period. This simply affects the frequency by which an employer can submit a claim and has nothing to do with pay period intervals.

However, only 1 claim can be made per claim period.

This means that an employer should include all details for all of the employees that were furloughed during that claim period in one claim even if some of those employees are fully furloughed and some are flexibly furloughed.

Claimed too much? –  This applies to the original CJRS

If an employer has overclaimed in the past then they have 2 choices.

  • Correct the matter in the next claim
  • Pay HMRC back (if there are to be no further claims by that employer)

If an employer has overclaimed a CJRS grant and has not repaid it they should notify HMRC by the latter of the following dates:

  • 90 days after receipt of the grant90 days after the day circumstances changed so that you were no longer entitled to keep the CJRS grant or
  • 20 October 2020

A claimant can overclaim because they were not entitled to it or if they have not paid it out in the form of wages.

Penalties for not repaying an overpaid grant
If a taxpayer was not entitled to the grant and has not repaid it by the latter of the above dates then HMRC can charge a failure to notify’ penalty.  This penalty very much depends on the taxpayer’s behaviour. Please refer to HMRCs factsheet CC/FS11.

HMRC will charge late payment interest and they raise the possibility of publishing details of deliberate defaulters as per their factsheet CC/FS13.

What if the company becomes insolvent having claimed too much?
in this scenario, HMRC can hold the company officers as personally liable.

Access to Public Funds
Grants under the scheme are not counted as ‘access to public funds’

Specific provisions for Partnerships which have overclaimed CJRS
In factsheet CC/FS48 HMRC state that if the grant is paid over to the partnership rather than being kept by the individual partner then HMRC may assess any of the partners to collect the amount of the tax due as Income Tax. The partners will be jointly and severally liable for the tax.

An employer who has made an error which has resulted in an underclaim should contact HMRC to amend their claim and this will result in HMRC conducting additional checks.

It is possible to save and return to a claim within 7 days of starting the claim.

What if HMRC make an error?
If HMRC have made a mistake or there has been an unreasonable delay on HMRCs part then it is possible to complain. Contact HMRC:

Maximum monthly, weekly or daily wage claim per employee.

This is £2,500 or £576.92 (weekly).


For month ends where the employer is not claiming for a whole week or a whole month then they should use the following daily maximums.

The daily maximum for:
January 2021 is £80.65
February 2021 is £89.29
March 2021 is £80.65
April 2021 is £83.34

Who can make the claim?

In addition to the employer, it is possible for an employer to authorise an agent to file a claim on their behalf. An employer can do that by accessing your HMRC online services and selecting ‘Manage Account’.

How many employees can a claim be made for?

There is no maximum number of employees you can claim for from 1 November 2020.

Can an employer claim for an employee who is serving notice?

HMRC state ‘Your employer can continue to claim for you while you are serving a statutory notice period or contractual notice period, however grants cannot be used to substitute redundancy payments.’


An employer cannot claim for any days from 1 December 2020 during which a furloughed employee was serving a contractual or statutory notice period.  This includes employees who are serving notice of resignation or retirement.

Statutory Redundancy Pay

Employees with more than 2 years’ continuous service who are made redundant are usually entitled to a statutory redundancy payment.

legislation came into force on Friday 31 July  to ensure that employees who are furloughed receive statutory redundancy pay based on their normal wages, rather than a reduced furlough rate (currently 80%).


If you make an employee redundant, you should base statutory redundancy and statutory notice pay on their normal wage rather than the reduced furlough wage.

Notified State Aid
The CJRS is not notified State Aid.

Job Retention Scheme Calculator

A claim can be made before, during or after a payroll is processed.  A claim can be made up to 14 days before the claim period end date.


There are a number of scenarios when the calculator cannot be used and the most recent addition to this is where the employee started a notice period or went back off a notice period in the same claim period on or after 1 December 2020.

Click here: When the calculator cannot be used

Record Keeping

An employer must keep all details of a claim including the claim reference number for 6 years.


HMRC understand that there will be occasion when there is a business succession and they advise ‘Where on 19th March 2020 an employee was employed in a qualifying (RTI registered) PAYE scheme by someone who is not the current employer and after 19th March 2020 the employee is transferred to a new employer and the transfer meets one of the three conditions in paragraph 10, the new employer can make a CJRS claim even though they register an RTI PAYE scheme after 19th March. The new employer is treated as having made the 2019/20 earnings payments made by the former employer on or before 19th March 2020.’

For claim periods from 1 November 2020, a new employer is able to claim if the TUPE or PAYE business succession rules apply to the change of ownership. The employees should have been employed by their prior employer on or before 30 October 2020, have a valid RTI submission showing payment to them to by their old or new employer between 20 March 2020 and 30 October 2020  and the employee must have transferred to their new employer on or AFTER 1 September 2020

Payroll Consolidation

Where a group of companies have multiple PAYE schemes and these are consolidated into a new PAYE scheme after 19 March 2020 then the new scheme will be eligible to furlough those employees.

Employment Allowance (EA)

The allowance increased to £4,000 from 6 April 2020. HMRCs guidance informs us that it is possible to delay claiming the employment allowance whilst claiming for NICs under the original CJRS scheme. This does not apply to the CJRS extension as employers are responsible for paying NIC in full without rebate under the CJRS extension.

Up to 31 July 2020 Employers who received a grant for employer NICs costs should have deducted the amount of grant they have received from the amount of Employment Allowance they have left before they use it, if not doing so would result in receiving relief for the same cost twice.

The extension of the scheme to 30 April 2021 becomes problematic.

Now we must take in account the fact that an employer can use the Employment Allowance to pay less employer NICs until the allowance runs out or we reach 5 April 2021.

If you still have any NIC liability for the year after taking into account NICs claimed under the CJRS, you can use your Employment Allowance to reduce that liability by offsetting the EA against future payments made to HMRC under your PAYE scheme for the year.

Research and Development

If furlough payments are met by the government through the CJRS then that expenditure will be treated as having been subsidised and will therefore not qualify under the SME scheme.  In such cases those employers generally claiming under the SME scheme will have to make a separate claim under the large company scheme.

The only area where this advice might change is with regards to annual leave or where sick leave is taken during furlough.  These two costs can be considered as qualifying R&D expenditure. HMRC allows claimants to apply the same apportionment between qualifying and non-qualifying activities to holidays and sickness as they do to working time.

Employers will need to remember that when an employee is on furlough they should not be engaged in R&D and therefore none of the corresponding staffing costs can qualify for R&D.  With flexible furlough an apportioned claim will need to be made.

Coronavirus Business Interruption Loan.

If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.

Please read our separate summary article for further information.

Reference Pay under the original CJRS

We use the Gross salary in their last pay period prior to 19 March 2020 (this was previously stated as the gross salary at 28 February 2020) is the relevant figure to use for full and part time employees.

Please refer to our section above on ‘Reference Pay and Usual hours’ as this does not apply in respect of those employees that have not been on furlough previously.

Non-monetary benefits and Salary Sacrifice

When arriving at the gross salary the employer should not include non-monetary benefits in kind like a company car and salary sacrifice schemes.

Are Overtime, Bonuses and Commissions included in this Gross figure?

The Gross salary does not include Fees, discretionary bonuses and commission. Previously, HMRC told us that this can include past overtime and something that they referred to as ‘compulsory commission’.  HMRC have since updated their guidance to focus on whether the payment is discretionary or not.

HMRC have added ‘only include payments which you have a contractual obligation to pay and to which your employee had an enforceable right.  HMRC also further clarify to add that if other variable payments are ‘always’ made then those may also be added to the calculation.

Overtime payments can be included in the calculation where the employer is contractually obliged to pay the employee at a set rate for overtime hours.

To be read in conjunction with the next section:

(The 2nd) Treasury Direction made on 22 May

On Wednesday 22 May a 2nd Treasury Direction was issued and this provides some further information.

HMRC do, however, advise that ‘Where the employer provides benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme’

HMRC agrees that COVID-19 counts as a life event/’lifestyle’ that could warrant changes to Salary Sacrifice arrangements.  It possible for the employer and employee to update the relevant employment contract to switch out of a Salary Sacrifice, however, at present the guidance does not allow for employers to recalculate the reference salary in order to reflect these increases in the amount of furlough pay the employers can claim under the scheme.  HMRC have updated their Salary sacrifice guide for employers on 9 April. Click here.

Employees whose pay varies – This applies to the original CJRS

For those employers that have employees on varying wages the eligibility criteria continue to refer to monthly earnings and the following would apply.

HMRC have updated their guidance on 27 April 2020 to distinguish between an employee already employed at 6 April 2019 and one who started after 6 April 2019.

Employees whose pay varies and were already employed at 6 April 2019 –  This applies to the original CJRS

Up until the end of August, claim for the higher of either (subject to the £2,500 cap):

  • 80% of the same month’s wages from the previous year
  • 80% of the average of your monthly earnings for the 2019/2020 tax year

To calculate 80% of the same month’s wages from the previous year:

Start with the amount they earned in the same period last year. Divide by the total number of days in this pay period -(including non-working days so for March 2020 this would be 31). Multiply by the number of furlough days in this pay period. Multiply by 80%. See HMRCs example here

For Employees whose pay varies and started work after 6 April 2019 – This applies to the original CJRS

The employer should determine the cumulative ‘earnings’ for 2019/2020 up to the day before furlough. Divide this by the number of days employed in 2019/20 (including non-working days) up to the day before furlough. Then multiply this result by the number of days furloughed in this pay period and then finally multiply by 80%

For example, in the case of an employee who started on 1 May 2019 and was placed on furlough on 23 March 2020 we would see 327 days in the tax year until they were furloughed and 9 days in the furlough period. For a salary of £15,000 the claim would be for £330.28 using the methodology set out above and HMRCs figures.

Note: HMRC use the word ‘earned’ rather than ‘paid’.

(The 3rd) Treasury Direction made on Friday 26 June Click Here

HMRC have made a 3rd Treasury Direction on Friday 26 June, using the powers conferred by Sections 71 and 76 of the Coronavirus Act 2020 to set out the legal framework for making claims under CJRS.  The direction brings together the information that been released in previous guidance and news alerts.

Family related statutory leave

If a fixed pay employee is furloughed on return from say, maternity leave or paternity leave then the reference salary is their gross salary rather than the pay that they received whilst on family related statutory leave.

The following applies to the original CJRS scheme

The calculation of the Average Weekly Earnings or AWE is different for those who family related statutory pay begins on or after 25 April 2020.  This applies where an employer has used CJRS to pay the employee during any part of the relevant 56 days or 8 weeks and this leave began from 25 April 2020.

From 25 April 2020 anyone who is entitled to Statutory Maternity, Shared Parental, Paternity Pay, Statutory Adoption Pay and Statutory Shared Parental Pay and Parental Bereavement leave will have the amounts calculated based on their full pay and not the 80% furlough rate.

Those employees that returned to work after 10 June and were on any of the following: Statutory Maternity, Shared Parental, Paternity Pay, Statutory Adoption Pay, Statutory Shared Parental Pay or Parental Bereavement leave can still be furloughed between July and October onwards.

Provided that an RTI payment submission was made on or before 19 March, the leave began before 10 June and the employer has previously submitted a claim for any other employee.

This will only apply where they work for an employer who has previously furloughed other employees.

If an employee has received any of the statutory payments highlighted in this section (statutory maternity etc) then the employer must subtract the amount which is paid to the employee for the claim period from the amount the employer claims under CJRS.


For periods from 1 November 2020, if an employee returns from maternity, shared parental, adoption, paternity or parental bereavement leave then the normal scheme rules apply in terms of how to work out the Average Weekly Earnings (AWE).

If an employee is getting Maternity Allowance while they’re on maternity leave, they should not get furlough pay at the same time.

National Minimum Wage

Individuals that are working are entitled to NMW for the hours that they are working or treated as working under minimum wage rules.

Furloughed workers are not working and therefore, it is possible that the 80% figure might result in a figure that is below NMW for the hours that they were furloughed even if they are working part time hours too.

HMRC state ‘This means that furloughed workers who are not working can be paid the lower of 80% of their salary or £2,500 even if, based on their usual working hours, this would be below their appropriate minimum wage.’

Apprentices can be furloughed in the same way that any other employee can be furloughed, however, they are entitled to at least Apprenticeship Minimum Wage/National Living Wage/National Minimum Wage (NMW) as appropriate for the time that they are training, even if this is more than 80% of their normal wages.

‘Whistle-blower’ service

HMRC have set up a ‘whistle-blower’ service for workers to use to report employers.


It is acceptable for an employer to furlough an employee for business reasons while that employee is already on sick leave or isolating.

An employee who becomes ill during a period of furlough is entitled to SSP as a minimum, however, an employer may decide to keep paying the furlough rate.

If a fixed pay employee is furloughed on return from sickness then the reference salary is their gross salary rather than the pay that they received whilst off sick.

What if the employee is on SSP already?

HMRC state that employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.

Employees who are shielding in line with public health guidance can be placed on furlough, however, HMRC do state ‘It is up to employers to decide whether to furlough these employees.’

Holiday Pay

Here is a link to HMRCs guidance HOLIDAY PAY

Workers who have been placed on furlough continue to accrue statutory holiday entitlements, and any additional holiday provided for under their employment contract

Employees will continue to accrue leave whilst on furlough and they can also take holiday whilst on furlough. In respect of holiday pay, HMRC say ‘Employers will be obliged to pay the additional amounts over the grant.’

If an employee is flexibly furloughed (this applies to any new furlough period from 1 July to October) then any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours.

Working Time Regulations (WTR) require holiday pay to be paid at your normal rate of pay or, where your rate of pay varies, calculated on the basis of the average pay you received in the previous 52 working weeks.

If an employee takes holiday while on furlough then the employer should pay the employee their usual holiday pay in accordance with the WTR.

Dedicated Schools Grant (‘DSG’) & Early Years Funding

This section will be relevant to early years providers that are employers.  Where providers are in receipt of government funding such as the DSG the expectation is that those funds will be used in order to keep the business open.

For example: If a provider’s average monthly income is 35% from DSG and 65% from other income, the provider could claim CJRS for up to 65% of their staffing costs.

The government’s guidance: Click here


NHS England has stated that it will fully remunerate dentists for the NHS work that they would have otherwise undertaken since the pandemic began, subject to some conditions.

Dentists who are employees will be eligible for CJRS in respect of Non-NHS work.

NHS England will be asking of evidence of the portion of NHS/private income used in any applications for additional support.

The British Dental Association (BDA) suggest that if, for example, staff are furloughed and private income amounts to 33% then the employee should be furloughed for 33% of the time and paid in full under the NHS scheme for the remainder.  If an employee was furloughed for 3 months then the split might be 1 month as furloughed and 2 months as NHS.

There is further guidance on how this impacts self-employed dentists in our SEISS article.

Does this apply to Personal Service Companies?

The guidance states that this applies to salaried individuals who are directors of their own Personal Service Company (PSC) including Off-Payroll workers supplying services via their PSC.

The 3rd Treasury Direction of 26 June confirms that work will not include any obligation of duty to file company accounts or to make a CJRS claim or paying wages and salaries.  The direction does not set out examples of what would be considered ‘work.’

Presumably, it remains possible that ‘work’ would include checking the post and replying to customer emails.

This became less contentious from July when all furloughed employees were permitted to undertake part time work and the employer would then only claim for the ‘usual hours’ not worked.

However, HMRC have previously stated that they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

Does this apply to a contractor within the scope of IR35 off-paying working rules?

Yes, it can do.  In this scenario, if a public sector body such as the NHS wanted to furlough a contractor then they would need to discuss this with the PSC and the fee payer.  Usually, the fee payer is an agency that pays the contractors PSC.  The agency would then make the claim for reimbursement under the job retention scheme and the PSC would then report the payment it pays to the contractor as deemed employment income via PAYE on the RTI return.

Where a contractor is continuing to receive payments from a public sector client (including through the CJRS or other any other scheme), income from this client should be excluded from any calculation of the reference pay for the purposes of the CJRS if the contractor also decides to furlough themselves as an employee or director of their own company.

Where the Public Sector Off-Payroll rules of s61R ITEPA 2003 apply, the earnings of the company are treated as earnings of the worker concerned.

Military Reservists -This applies to the original CJRS scheme

A military reservist can be furloughed when they return to work even if they have returned to work after a period of mobilisation after 10 June even if they are being furloughed for the first time.

This is possible where the employer has furloughed at least one other employee for 3 weeks by 10 June and the 19th March requirements relating to RTI have been met and the employee was away on mobilisation before 10 June and returned after 10 June.

Must an employer supplement employees’ salaries over the 80%?

No.  Employers can if they wish to or if there is an employment contract in place which requires this.

How does the grant impact on a business’s tax position?

The Grant will be treated as normal business income and taxable accordingly.

Individuals with employees that are not employed as part of a business (such as nannies or other domestic staff) are not taxable on grants received under the scheme. Domestic staff are subject to Income Tax and NICs on their wages as normal.

We will update this document as and when further governmental guidance is issued. To date, this has been on a daily basis.




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Tax Advice Consultant
0844 892 2470

Pras has over 15 years’ experience in practice having worked for PwC and then Grant Thornton UK LLP immediately prior to joining the team. He is able to advise on a wide range of taxation matters and in particular issues relating to corporation tax and the challenges that owner-managed businesses face.

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