Tax: Job Retention Scheme

  • Written By: John Manis
  • Published: Wed, 25 Mar 2020 11:00 GMT

The Government has released additional guidance on the ‘Coronavirus Job Retention Scheme’.

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Many employers will already be familiar with the basic operation of the scheme. Employers can claim back 80% of the salary of employees who are temporarily ‘furloughed’. Broadly, this means that the employer will ask affected employees to cease their duties for a temporary period, as there is no work, but retain them as employees. The amount that can be claimed per employee is 80% of their salary, capped at £2,500 per month, plus employer’s NICs and minimum auto-enrolment employer pension contributions on that sum.

Which employers can participate?

The scheme will be available to all employers who had a PAYE payroll scheme in operation on 28th February and have a UK bank account. The Government’s guidance does not include any other qualifying conditions for the employer, although it states that the scheme is “designed to support employers whose operations have been severely affected by coronavirus”. It appears that cash-rich businesses which have not been ‘severely’ affected can technically qualify, although it may not be the Government’s intention for such businesses to claim under the scheme.

The Government expects that not many public sector organisations will use the scheme, as the majority of public sector employees will either continue to provide services or contribute to the coronavirus response.

Which employees can be furloughed?

Furloughed employees must have been on the employer’s PAYE payroll on 28 February 2020. They must be furloughed for a minimum of three weeks to qualify under the scheme.

Employees who continue to work on reduced hours or for reduced pay are not covered. The scheme only applies where employees entirely cease providing services to, or generating revenue for, the employer. Employees can take part in volunteer work or training. Where an employee is required to complete online training courses while they are furloughed, they must be paid at least the national living wage/ national minimum wage for doing so.

The scheme covers part-time employees, employees on flexible/ zero-hour contracts and agency workers. It also covers employees who were made redundant after 28 February 2020 but are then rehired. Only workers who are paid through PAYE can qualify; other workers may need to rely on the separate scheme for the self-employed.

Employees who are ‘shielding’ from COVID-19 in line with public health guidance can be placed on furlough. Employees currently on sick pay/ self-isolating with a possible coronavirus infection should only be placed on furlough after their period of self-isolation ends.

What can be claimed under the scheme?

The amount that can be claimed per employee is:

  • the lower of 80% of the their regular salary and £2,500 per month; and
  • employer’s NICs and minimum auto-enrolment employer pension contributions on that sum.

Furloughed employees must continue to make employee auto-enrolment pension contributions, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.

Refunds will be backdated to 1 March 2020 and the scheme is expected to run for at least three months.

What is the process for furloughing employees?

Employers will first need to decide who to furlough. The decision will need to be taken in accordance with employment law. There may be an obligation on the employer to consult with employees where more than 20 employees are affected.

Employers will also need to decide what to pay furloughed employees. Some employers may only be willing or able to pay the amount that the Government will refund. Reducing an employee’s salary however may require their consent, unless their employment contract allows otherwise. Employers who are very badly affected by the coronavirus may need to offer employees a choice between being furloughed on reduced pay, and redundancy. The Government’s guidance states that “employers should discuss with their staff and make any changes to the employment contract by agreement.”

If employees continue to receive full pay, it may be possible to furlough them without their consent.

Employers should write to affected employees confirming that they have been furloughed and keep a record of this communication.

It is expected that the scheme will be operational by the end of April. Until then, employers will need to continue to pay the salaries of affected employees.

What is the process for claiming from HMRC?

Claims will be made through an online portal, which is in the process of being set up. The following information will need to be submitted:

  • PAYE reference number;
  • the number (but not the names) of employees being furloughed;
  • the claim period (start and end dates);
  • the amount claimed;
  • the employer’s bank account number and sort code; and
  • contact details for the employer.

Claims should be made when the employer runs its payroll, or in advance of an imminent payroll. Valid claims will be paid via BACS payment to a UK bank account

The Government’s guidance can be found here. Although the guidance published by the Government is helpful, some questions remain. There will be more certainty about the exact operation of the scheme when draft legislation is published.


By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of publication.

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