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How to access the Job Retention Scheme

This article summarises the Furlough Scheme, which applies up to 30 September 2021.

What is the Coronavirus Job Retention Scheme?

The Coronavirus Job Retention Scheme (CJRS) is a temporary scheme put in place by the Government to support those workers who would otherwise have been laid-off as a result of the crisis. Such workers have been designated as ‘furloughed’.

It originally opened from 1 March 2020 and has been extended a number of times. The latest, and probably final, extension was announced on 3 March 2021. The scheme has now been extended to 30 September 2021.

The original scheme, up to 31 October 2020, required employees to be on the payroll by 19 March 2020. From November 2020, new employers and employees were able to use the scheme, even if they had not previously done so. The key date was that employees had to be on the payroll by 30 October 2020. From May 2021, further new claims can be made for employees who were employed on 2 March 2021.

What organisations are eligible?

All employers who have a UK payroll and a UK bank account can use the scheme. Claims must be submitted by the 14th day of the month following the claim, so claims for March 2021 must be submitted by 14 April; claims for April 2021 must be submitted by 14 May and so on.

There is a limited opportunity to correct errors made in a claim. Any overclaim should be disclosed to HMRC as soon as possible, within 90 days of the original claim.

Who qualifies as a furloughed employee?

Where employees were on the payroll at 19 March 2020 and had been included on a PAYE submission before that date, they could be included in CJRS claims up to October 2020.

From 1 November 2020 to 30 April 2021, claims can be made for any employee who was on the payroll, and for whom a PAYE submission had been made, by 30 October 2020.

From 1 May 2021, claims can be made for an employee who was on the payroll on 2 March 2021, provided a PAYE submission including that employee had been made between 20 March 2020 and 2 March 2021.

The Government advises that employers should discuss with their staff when deciding to offer furlough and make changes to the employment contract by agreement. They also advise that it may be necessary to engage collective consultation practices to secure agreement to changes to terms of employment. We would recommend that legal advice is sought on this process.

To be eligible for the subsidy, employers should write to their employee confirming that they have been furloughed and the employer should keep a copy of the letter for five years. For directors, the decision to furlough should be formally adopted as a decision of the company and noted in the company records, as well as being communicated in writing to the director.

Where an employee moves to part-time working while continuing on furlough, employers must agree with their employee any new flexible furloughing arrangement and confirm that agreement in writing. Employers will also need to keep records of how many hours their employees work and the number of hours they are furloughed (ie not working).

Employers do not need to place all of their employees on furlough and can continue to fully furlough employees if required (although a contribution to costs will be required, which will increase from 1 July 2021). Employees cannot undertake any work during time that they are recorded as being on furlough.

Employees on sick leave or self-isolating are subject to Statutory Sick Pay (SSP) provisions. They can be furloughed while they are off sick, provided this is for business reasons and not simply because they are suffering from short-term illness. Employees who are self-isolating in line with public health guidance can be placed on furlough, if they are unable to work from home and the employer would otherwise have had to make them redundant. Employees who are unable to work because they have caring responsibilities, such as childcare, can be furloughed.

If a furloughed employee falls ill, or is furloughed while they are on sick leave, they must receive at least the amount they would be entitled to under SSP. However, the employer can continue to pay them their furloughed pay if this is more. If the employee is moved onto SSP, employers can no longer claim for the furloughed salary, but if employers keep the sick employee on the furloughed rate, they can continue to claim those costs through the Job Retention Scheme.

If an employee has more than one employer, they can be furloughed for each job. Being furloughed by one employer will not prevent an employee from continuing to work for another employer. An employee who has been furloughed can take on a new job with another employer, if their original employment contract permits it. Furloughed employees can also take part in volunteer work.

There are specific rules for employees on maternity and paternity pay.

There is no minimum furlough period for periods starting on or after 1 July 2020.

You can find further details on eligibility here.

What are the financial implications?

HMRC will reimburse 80% of furloughed workers’ wage costs, up to a cap of £2,500 a month. However, the employer will be required to pay the associated Employer National Insurance Contributions (NIC) and minimum automatic enrolment (AE) employer contributions on the 80% wage.

From 1 July 2021, employers will be asked to pay an additional contribution towards furloughed pay, so that in total employees will continue to receive at least 80% of their salary, up to the £2,500 cap. The level of the employer contribution will be:

  • Periods up to June 2021 – employer pays NIC and AE
  • July 2021 – employer pays NIC, AE and 10% of pay
  • August and September 2021 – employer pays NIC, AE and 20% of pay

The attached table summarises the level of contribution that will be required.

May June July August September
Government contribution: wages for hours not worked 80% up to £2,500 80% up to £2,500 70% up to £2,187.50 60% up to £1,875 60% up to £1,875
Employer contribution: employer National Insurance contributions and pension contributions Yes Yes Yes Yes Yes
Employer contribution wages for hours not worked No No 10% up to £312.50 20% up to £625 20% up to £625
For hours not worked employee receives 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month


Employers can continue to choose to top up employees’ wages above the 80% total and the £2500 cap, but will have to fund this in full.

Fees, commission and bonuses can be included, provided they are contractual and not discretionary. This is a change from the original guidance which only permitted basic pay and any regular compulsory payments to be included.

Additional employer pension contributions above the minimum mandatory employer contribution are excluded.

Taxable benefits in kind, and benefits provided through salary sacrifice schemes, are not deducted in arriving at the reference salary. However, HMRC agrees that changes to salary sacrifice schemes may be warranted, if the relevant employment contract is updated.

An employer can choose to top-up the salary of the furloughed employee if they wish but is under no obligation to do so. However, employers must bear the cost of NICs and AE. From 1 July 2021, when an employer contribution of 10% is required, the employer must top-up pay to at least 80% of normal wages, up to the cap of £2,500 a month.

However, where an employee takes holiday during a furlough period, they will be entitled to their full salary for any days taken. This means that employers will need to top-up the furlough amount for holidays and Bank Holidays. Employers may prefer to ask employees to take time off in lieu when the employee returns to work, but this should be discussed and agreed with the employee. Holiday entitlement will continue to accrue while an employee is on furlough.

For full-time and part-time staff, the relevant basis to determine the 80% wage will be their “reference salary”. This will vary depending on when the employee was first eligible for furlough.

For employees who were eligible for furlough prior to 31 October 2020, the reference salary will be the basic pay of the furloughed employee as in their last pay period prior to 19 March 2020. For employees furloughed for the first time on or after 1 November 2020, the reference salary will be the salary for the last pay period ending prior to 30 October 2020, and for employees furloughed for the first time on or after 1 May 2021, the reference salary will be the salary for the last pay period ending prior to 2 March 2021.

The grant itself is a taxable receipt of business income for the employer for Corporation Tax or Income Tax. It has been confirmed that the grant will not be taxable for a non-business employer of domestic employees. It has also been confirmed that CJRS grants will not be classed as State Aid.

The online system for paying grants has been working well, and in general HMRC are meeting their target of paying grants within six working days of the application. Claims can be made up to 14 days before the payroll date.

It appears that the funding of the wages by HMRC will not be offset by any outstanding tax liabilities. This is good news, as otherwise it could negate the effectiveness of the Scheme for distressed businesses, who were deferring relief under Time to Pay.

How do you determine variable pay?

The calculation of Variable pay will require employers to have access to detailed payroll records for the last year. If you use a payroll agency, you will need to ensure you get the relevant information from them.

If the employee has been employed for at least a year before the claim, you can claim either for:

  • The same month’s earnings from the previous year.
    • Average monthly earnings from 2019/2020 tax year.

If the employee has been employed for less than a year, then average earnings is based on the worked period.

For employees who were furloughed for the first time on or after 1 November 2020, average hours will be calculated based on the number of hours worked from 6 April 2020 and up to the employee’s first day spent on furlough.

Details of how to calculate claims for periods starting on or after 1 May 2021 will be published in a further update to the scheme in due course.

Part-time working

Employees are permitted to work part-time while they are on furlough. The employer will pay the employee their full wages for the hours worked and the furlough grant will initially pay 80% of the remaining proportion of the wages.

The Flexible Furlough Scheme is available for any amount of time and any shift pattern.

For example, for an employee earning £24,000 per annum, or £2,000 per month, who works two days per week from 1 April 2021, the employer will pay £800 per month (40% x £2,000) and the grant which can be claimed will be approximately £960 (60% x £2,000 x 80%). The employer will be responsible for paying NIC and AE on the £960. In July, the grant will reduce to £840 (60% x £2,000 x 70%) and from August it will be £720 (60% x £2,000 x 60%), assuming that working hours remain the same. The employer can pay a further top-up to wages, but this is not mandatory.

Employers can claim the grant for the hours their employees are not working calculated by reference to their usual hours worked in a claim period. Employers will need to report hours worked and the usual hours an employee would be expected to work in a claim period. This is likely to involve complex calculations for employees who are on variable hours contracts. For salaried employees, the ‘usual hours’ calculation will not be as simple as the examples above, as it is necessary to calculate hours on a calendar basis, even if the employee simply works standard hours from Monday to Friday. This can result in small differences, typically of up to 5% of the claim, in many cases.

For each claim period the employer will need:

  • the number of usual hours the employee would work in the claim period
  • the number of hours the employee has or will work in the claim period
  • the employer will also need to keep a record of the number of furloughed hours the employee has been furloughed in the claim period

For employees on variable hours contracts, the “usual hours” will be calculated based on the average hours worked during 2019/20, or in the same calendar month from the previous year if this figure is higher. This calculation is updated to average hours from 6 April 2020 up to the first day of furlough for employees who were furloughed for the first time on or after 1 November 2020. Similar calculations will also be needed for any employees who are entitled to overtime or bonus payments.

How to claim

Claims will be made via an online portal, which is now live and can be accessed here.

To make a claim you will need the following details:

  • ePaye reference number
  • number of employees being furloughed
  • National Insurance Numbers for the employees you want to furlough
  • Names of the employees you want to furlough
  • Payroll/works number for the employees you want to furlough
  • your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
  • the claim period (start and end date)
  • amount claimed
  • bank account number and sort code
  • your address to which bank statements are sent
  • your contact name and phone number

Employee details will have to be entered individually if you are claiming for less than 100 employees. For 100 employees or more, a spreadsheet file can be uploaded.

The employer will compute the amount being claimed and HMRC can audit the claim subsequently.

Claim periods must start and end within the same calendar month and must last at least 7 days unless the claim relates to the first few days or the last few days in a month. A claim can only be made for a period of fewer than 7 days if the period includes either the first or last day of the calendar month, and a claim has already been made for the period ending immediately before it.

Claims should be matched to payroll processing dates, if possible. However, all furloughed employees must be included in each claim, so if employees are paid on different times, employers will have to choose which date to use for their claim. Where pay periods cross a month end, two claims will have to be made, one for each calendar month.

Claims for employees who are flexibly furloughed should not be made until the exact number of hours worked has been calculated. This may mean that it will be difficult to make the claim in time to receive the money from HMRC before the payroll date.

HMRC have issued additional detailed guidance relating to the calculations, including some worked examples, which you can find here.

There is also an online calculator, although this may not deal with some complex situations.

Payment will be direct to the business bank account and is expected to be made within six working days. Note that, as stated earlier, this must be a UK bank account. The employer must also be registered for PAYE online.

Practical considerations

The scheme has now been updated on multiple occasions, and the calculations have become increasingly complicated. In particular, where new employees have joined in recent months, different “reference salaries” may have to be used for different employees.

The requirement to calculate usual earnings, and to make claims by reference to calendar months, adds further costs and complexity to the scheme. The deadline to submit claims by 14 days after the end of the calendar month means that calculations need to be done as soon as details of hours worked are available.

Updates to guidance

We will update our guidance as soon as more details are published. If you would like to discuss any of the above or have other queries about how you can make the right decisions for the future of your business and your income, please contact your usual Blick Rothenberg contact or one of the Partners to the right.

You can also visit our Coronavirus – Practical Guidance for businesses today Hub for our latest insights and sign up here to receive important Practical Guidance updates delivered directly to your inbox.

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