Coronavirus Job Retention Scheme - explained.

Article | Matthew Eady | 27th March 2020

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The Coronavirus Job Retention Scheme was launched on Friday 20 March as part of a wider range of measures to help all UK employers. Further guidance was released on 26 March 2020.

The Job Retention Scheme represents an unprecedented step in helping employers retain their workforce during the COVID-19 crisis with the intention being that the economy will be quicker to recover if there are not widespread redundancies. Noting that although 2020 is a leap year, the key date for eligibility under the Job Retention Scheme is Friday 28 February 2020.

For the Job Retention Scheme to be available:

  • An employer must have created and started a PAYE payroll on or before 28 February 2020 and have a UK bank account;
  • The relevant employee must have been on the the employer’s PAYE payroll on 28 February 2020 (this will include full-time and part-time contracts, employees on agency contracts and those on flexible or zero-hour contracts);
  • Any employees who were made redundant after 28 February 2020 can be rehired by the employer and put onto furloughed status;
  • The employer and employee must both agree to the furloughed status designation; and
  • Whilst employees are furloughed the employee will continue to be paid via their employer’s payroll but cannot undertake any work for the employer although they may work for other employers or undertake voluntary work.

The Job Retention Scheme is being introduced for an initial three-month period from 1 March to 31 May 2020 with a minimum claim per furloughed employee of 3 weeks. A furloughed employee has the same employment rights as they did previously. An employer does not have to place all employees on furlough. Employers should note that the non-discrimination laws continue to apply.

Where employees are designated as “furloughed employees’, an employer can pay such employees 80% of their “wage” (see below), up to a cap of £2,500, and may claim this amount plus associated employers’ National Insurance Contributions (NICs) and the minimum mandatory auto-enrolment employer pension contributions figure back from the Government. Employers can top-up salaries if they choose to but are under no obligation.


  • The “wage” will be paid by the employer to the furloughed employee via the normal payroll and this amount will remain subject to income tax, NICs (both employees’ and employers’) and auto-enrolment pension contributions; and
  • The amounts claimed under the Job Retention Scheme by the employer will be included as income in the employer’s calculation of taxable profits for Income Tax and Corporation Tax purposes while the wage paid plus the associated costs (see above) can be claimed as deductions.

At this present time, Government guidance indicates that for a full or part-time furloughed employee the calculation of the wage for the Job Retention Scheme will be the furloughed employee’s actual salary before tax as of 28 February 2020, excluding fees, commission and bonuses. To accommodate different contract types, for those furloughed employees where pay varies during the year, the calculation of the wage will be the higher of:

  • The wage paid by the employer in February 2019; or
  • The average monthly earnings for the 2019/20 tax year (ending on 28 February 2020)

Where an employer recruited a new employee in February 2020, the wage calculation can be pro-rated. Specific rules will apply to those employees on maternity leave, contractual adoption pay, paternity pay or shared parental leave.

Where employees or directors take a combination of salary and dividends, for instance from their own company, and can satisfy the conditions to be placed on furlough, the calculation of wage will only apply to the salary part of their remuneration.

The Job Retention Scheme arrangements are expected to go live by the end of April 2020 and will require claims to be made via an HMRC portal (which is still under development) using the following details:

  • The employer’s ePAYE reference number;
  • The number of employees being furloughed;
  • The claim period (start and end date);
  • Amount claimed (per the minimum furlough length of 3 weeks);
  • The employer’s bank account number and sort code; and
  • The employer’s contact name and telephone number.

The reference to the employer’s UK bank account in the guidance notes suggests that the Job Retention Scheme claims will be paid directly to the employer rather than the employer’s payroll agent. It will therefore be important to start collating of all of the above information in readiness for the portal being opened.

Given that the Job Retention Scheme portal is not expected to be opened until the end of April 2020, employers should consider that they will have a negative cash-flow as the April wages will still be payable to a furloughed employee well before the Job Retention Scheme claim is received. If you need help with this please contact or your usual PEM contact

About the author

Matthew Eady

Matthew is a Partner in our Employment Tax team. He joined PEM in 2006 and achieved Partnership in 2017. He Read more …

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