Coronavirus (COVID-19) & Furloughed Employees

Coronavirus Job Retention Scheme (CJRS):

At a glance guide to current and upcoming changes
From this month, September, the government will pay a reduced 70% of wages up to a cap of £2,187.50. Employers will be required to pay NICs and pension contributions and contribute a minimum 10% of wages (up to £312.50) to arrive at the 80% total and the overall cap of £2,500

From October the government will pay 60% of wages up to a reduced total contribution from the govt of £1,875. Employers will pay ER NICs and pension contributions and 20% of wages (up to £625) to arrive at the 80% total and the overall cap of £2,500.


Where are we now?

We have updated this guidance to reflect the changing nature of the scheme. This means that we have deleted information that related solely to the first version of the scheme.

HMRC updated their guidance on 18 August with full examples.

These examples highlight the fact that an employee can only be furloughed now if they were previously furloughed for 3 weeks prior to 30 June 2020 (see sections on military reservists and those returning from parental leave)

Overpaid claims must be paid back to HMRC.

A £1,000 job retention bonus will be paid in February 2021 to those that meet qualifying conditions.

There is no minimum furlough period.

CJRS claims must pay all of the CJRS grant to the employee in full.

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

Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation. Collective agreement reached with a Trade Union is accepted as agreement. Our HR support line can help (0844 892 2807).

When will the scheme end?

The quick answer is: 31 October 2020.

Job Retention Bonus
The government announced an intention to introduce a one-off payment to UK employers for every furloughed employee who remains continuously employed through to 31 January 2021.

It has been announced that qualifying employees would need to earn above the Lower Earnings Limit of £520/month on average between 1 November and 31 January 2021.The payments will be made in February 2021.

The new flexible furlough scheme from July to October

From July

It will only be possible to furlough an employee if that employee has previously been furloughed for 3 consecutive weeks taking place any time between 1 March and 30 June (unless they fall into particular categories).

It is possible to furlough an employee for any amount of time. There is no minimum 3 week furlough period per employee from July to October.  The period that an employer can claim for is a minimum of 7 calendar days apart from ‘orphan periods.’

Furloughed employees are allowed to return to work on a part time basis to work any shift pattern and for any amount of time that has been mutually agreed between the employer and the employee.

From August

The 80% and £2,500 remain in place.  Again wage caps are proportional to the hours that the employee is furloughed.

Employers will now meet 100% of the expense relating to employers NICs and pension contributions for furloughed employees, with no reimbursement from the government.

Employers will have to pay employees for the hours that they have worked without reimbursement from the government.

From September

The government will only pay 70% of a furloughed employees wages up to a maximum contribution from the government of £2,187.50 for an employee who is furloughed throughout September without working any hours at all for their employer.

Employers will now solely meet the expense relating to employers NICs and pension contributions, for furloughed employees, with no reimbursement from the government. Employers will also have to top up the employees wages by contributing at least 10% so that the employee still receives 80% of their wages up to a cap of £2,500.

For a furloughed employee (who does not even work part time) the employer will have to contribute £312.50 to top up the £2,187.50 governmental contribution to arrive at the £2,500.

Employers will have to pay employees for the hours that they have worked without reimbursement from the government.

From October

The government will only pay 60% of a furloughed employees wages up to a maximum contribution from the government of £1,875 for an employee who is furloughed throughout October without working any hours at all for their employer.

Employers will now solely meet the expense relating to employers NICs and pension contributions, for furloughed employees, with no reimbursement from the government. Employers will also have to top up the employees wages by contributing at least 20% so that the employee still receives 80% of their wages up to a cap of £2,500.

For a furloughed employee (who does not even work part time) the employer will have to contribute £625 to top up the governments maximum contribution of £1,875 to arrive at the £2,500.

Employers will have to pay employees for the hours that they have worked without reimbursement from the government.

Here is HMRCs tabular guidance:

July August Sept October
Government contribution: employer NICs and pension contributions Yes No No No
Government contribution: wages 80% up to £2,500 80% up to £2,500

70% up

to £2,187.50

60% up to £1,875
Employer contribution: employer NICs and pension contributions No Yes Yes Yes
Employer contribution: wages 10% up to £312.50 20% up to £625
Employee receives 80% up to £2,500 per month 80% up to £2,500 permonth

80% up





80% up to £2,500 per month

How long can an employee be furloughed?

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.

Step by Step Guide – issued 1 September 2020


HMRC have issued an updated step by step guide for employers to reflect the changes from 1 September. click here to access it.

If you have more than 100 furloughed staff then HMRC advise that you upload your file as an .xls, .xlsx, .csv or .ods and for claims on or after 1 July 2020 they advise that you use their template found here.

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?

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 grant• 90 days after the day circumstances changed so that you were no longer entitled to keep the CJRS grantor• 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.

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:

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?

A claim cannot exceed the maximum number of employees claimed for in any period before.  So if an employer has previously made 3 claims and they were for 20, 30 and 50 employees then from July to October they would only have been able to claim for a maximum of 50 employees (plus anyone returning from ‘Family related statutory leave’ and military reservists)

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.’

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%).

Notified State Aid
The CJRS is not notified State Aid.

Job Retention Scheme Calculator Click here

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.

The calculator cannot be used where employees have returned from family-related statutory leave (maternity leave, paternity leave, shared parental leave, adoption leave, parental bereavement leave).  The calculator cannot be used where there is an annual pay period.

Maximum monthly, weekly or daily wage claim per employee.

This is £2,500 or £576.92 (weekly).

The daily figures per day for September and October are £83.34 and £80.65 and this will be the maximum amount the employer will have to pay the employee but the amount that the employer can claim from the government will be lower.

The aim being that the employer will multiply the appropriate rate by the number of days that the employee has been furloughed in the particular pay period in order to work out the maximum amount they can claim.

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.’

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 this scheme.

Employers who delay their Employment Allowance claim and have unused Employment Allowance available at the end of the tax year can use this to reduce other tax costs. Employers who have received a grant for employer NICs costs through the scheme should deduct 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.

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.

Gross or Net?

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.

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

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

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

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 70% (80% in August)

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 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.

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 70% (was 80% in August) 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 70% 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

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

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.

Link to HMRC webinars




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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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