Coronavirus Job Retention Scheme - explained.

Article | Matthew Eady | 1st June 2020

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Updated – 1 June 2020
The Coronavirus Job Retention Scheme (JRS) was launched on Friday 20 March as part of a wider range of measures to help all UK employers and represented 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. To date, the JRS has supported 8.4 million jobs with claims being made by over 1 million businesses.

The Chancellor confirmed on 29 May 2020 that JRS cannot continue indefinitely and will end on 31 October 2020 but with the following amendments designed to both increase flexibility and share the cost burden under JRS with employers:

a) JRS closes to new entrants on 30 June 2020. No claim under JRS will therefore be permitted for any employee that was first furloughed after 10 June 2020 and all claims for the period ending 30 June 2020 must be made by 31 July 2020;

b) From 1 July 2020, employers may make use of “flexible furloughing” under which they will be permitted to bring back employees that have been previously been furloughed for any amount of time or shift pattern, which is currently not permitted; and

c) From 1 August 2020, employers will be required to pay the whole of the Employers’ NIC and auto-enrolment pension contributions that are due on furloughed wages; and

d) From 1 September 2020, employers will start to bear some of the cost of the furlough wage as the Government reduces it’s contribution to 70% of relevant wages (capped at £2,187.50) and to 60% from 1 October 2020 (capped at £1,875).

As a furloughed employee will not see any difference in their furloughed wage, the impact of this change will be an increase in employment costs to an employer, initially of 12.5% of the furloughed wage in September 2020 (rising to 25% in October 2020) in addition to the Employers’ NIC and auto-enrolment employer pension contributions payable from 1 August.


Any entity with a UK payroll can apply, including businesses, charities and individuals.

For JRS to be available:

  • An employer must have created and started a PAYE payroll on or before 19 March 2020, be enrolled for PAYE online and have a UK bank account;
  • The relevant employee must have been on the employer’s PAYE payroll on 19 March 2020 (this will include full-time and part-time contracts, employees on agency contracts and those on flexible or zero-hour contracts) and a notification regarding a payment in respect of that employee must have been made to HMRC under RTI on or before 19 March 2020. The relevant employee must have been first furloughed on or before 10 June 2020 with a claim for at least a three week furlough period under JRS being made by 31 July 2020;
  • Any employees who were made redundant or stopped working for the employer after 28 February 2020 can be rehired by the employer and put onto furloughed status provided that a notification in respect of a payment to that employee was made to HMRC under RTI on or before 28 February 2020;
  • The employer and employee must both agree to the furloughed status designation in writing and this will need to be kept for five years;
  • Whilst employees are furloughed the employee will continue to be paid via their employer’s payroll. Until 30 June, the employee cannot undertake any work for the employer although they may undertake training, work for other employers or undertake voluntary work; and
  • Where a director is placed on furlough (which will require formal approval of the company), the director may only fulfil their statutory duties.

The minimum claim per furloughed employee is 3 weeks. Employees may be furloughed multiple times, but each separate instance must last for a minimum 3 week period. 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. Employers can top-up salaries if they choose to but are under no obligation. It is important that the Employment Allowance is taken into account in determining the level of the JRS claim in respect of National Insurance Contributions that can be made in each pay period.

The amount that may then be claimed under JRS is dependent on the period that the JRS claim relates to:


  • 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;
  • The amounts claimed under the JRS 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; and
  • The Apprenticeship Levy and Student Loans should continue to be paid as normal.

Government guidance indicates that for a full or part-time furloughed employee the calculation of the wage for the JRS will be the regular payments paid to the furloughed employee before tax in their last pay period prior to 19 March 2020. This includes wages, past overtime, fees and

compulsory commission payments but not discretionary bonus (including tips) and discretionary commission payments nor non-cash payments. 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 same month’s earnings from the previous year; or
  • The average monthly earnings for the 2019/20 tax year

For an employee employed for less than 12 months, the wage calculation can be pro-rated. Specific rules will apply to apprentices, 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 HMRC portal under which a JRS claim may be made requires a number different pages to be completed and declarations made. The following information is required prior to making a claim:

  • The employer’s registered name and address;
  • The number of employees furloughed;
  • The dates employees have been furloughed to and from;
  • The name and NIC number of each furloughed employee for whom the claim is made;
  • The employer’s PAYE reference number;
  • The employer’s Corporation Tax UTR; self-assessment UTR; or Company registration number as appropriate;
  • Amount claimed (per the minimum furlough length of 3 consecutive weeks), broken down between furlough wage, associated NIC and associated pension contributions;
  • The employer’s bank account number, sort code and the employer’s address per its bank statements; and
  • The employer’s contact name and telephone number.

Claims will be made from the date the employee finishes work and starts furlough not when the decision is made or when written agreement of furloughed status is given. Currently, successful claims are paid directly to the employer’s bank account within 6 days of making the claim

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.

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