⚠️ We are working hard to ensure this guidance is up to date. However, you should bear in mind that things may change as the government respond to the ongoing situation.
Coronavirus: What is the Job Retention Scheme?
The coronavirus (COVID-19) outbreak is having far-reaching financial impacts on individuals and businesses across the UK, and indeed across the world.
This page sets out some information for employers about the Coronavirus Job Retention Scheme.
The Job Retention Scheme, set up in March 2020, helps employers pay their workers’ wages if they are unable to work during the coronavirus crisis. This can include workers who:
- have caring responsibilities resulting from coronavirus, such as caring for children who are at home as a result of school or childcare closing, or
- are clinically extremely vulnerable, or in the highest risk group for severe illness from coronavirus (even though ‘shielding’ has now come to an end).
- Under the Job Retention Scheme, you can claim a grant so that a ‘furloughed’ worker can receive up to 80% of their usual wages, via the payroll, up to a total of £2,500 each month.
These grants are taxable income for your business, however they should be offset by the employment costs that you deduct when calculating taxable profits for Income Tax and Corporation Tax purposes. Note, there is a box to tick on page 8 of the 2020/21 Self Assessment Tax Return to confirm that these payments have been included as taxable income for the purposes of calculating your profits.
The Job Retention Scheme was due to come to an end on 31 October 2020 with a new Job Support Scheme running from 1 November 2020. It was extended from 1 November 2020 to 30 April 2021 and then again from 1 May 2021 to 30 September 2021.
For more information on the Job Retention Scheme from 1 May 2021, please see below.
Treasury Direction and guidance
The underlying scheme rules (the ‘Treasury Directions’) can be found on GOV.UK.
The most recent (issued on the 21 April 2021) contains some interesting retrospective provisions in Part 2. We understand from HMRC that these are necessary to clarify the following:
- Employers may calculate their claims (and their employees’ furlough pay) on a pay period-by-pay period basis
- A weekly cap of £576.92 per week may be used instead of the £2,500 monthly cap, where certain conditions are met
HMRC have told us:
‘This reflects previous guidance, which included this flexibility to simplify calculations for employers (particularly for employers with weekly payrolls).
Earlier versions of the Direction described calculation on a ‘claim period basis’, which could result in some minor differences from the approach described above. The new Direction permits either approach - the ‘claim period basis’ provisions from Earlier directions are retained at paras 9.20-9.23 and employers may choose to calculate on a ‘claim period’ or ‘pay period-by-pay period’ basis if it facilitates the calculation of their claim.
For the vast majority of employers, the new provisions at paras 9.9 to 9.19 of the Direction will not be a material change from the rules outlined in earlier versions of the guidance. However, the new provisions do set out more clearly the conditions for use of the £576.92 weekly cap. Employers should only use this if they have a weekly (or 2-weekly or 4-weekly) payroll and are calculating on a pay-period by pay-period basis. This is reflected in the updated calculation guidance which was published on Thursday 8 April 2021.
Employers with a monthly payroll who have used the £576.92 weekly cap do not need to recalculate previous claims, provided they have followed the previous guidance and acted in good faith, but should use the £2,500 monthly cap in their calculations for any future claims (noting that the amount claimable under the scheme will reduce from July 2021).
Part 2 of the Direction clarifies that any claims for earlier periods calculated in the manner described above are acceptable provided they were made in accordance with the guidance available at the time of the claim and are not abusive.’
The government's guidance on the Job Retention Scheme is split over a number of pages, all of which can be found in the collection on GOV.UK.
Guidance on how to deal with the accrual of holiday leave and pay during furlough, can be found on GOV.UK.
The Pensions Regulator have also issued guidance for employers on the pension element of the Job Retention Scheme grant.
If you find the government guidance confusing, you may find the following ‘explainers’ useful:
Our colleagues at the ATT, have produced a useful summary of the Job Retention Scheme.
The ICAEW have also produced guidance on the Job Retention Scheme.
For some hints and tips to help you do your Job Retention Scheme calculations and make your claim, see our news item: How to claim a Job Retention Scheme grant. We provide further clarification around furloughing and look at some tricky aspects of claiming a Job Retention Scheme grant in more detail, here. (Although some of the news articles we refer you to on this page, were written early on in the life of the scheme, some of the information in them may still be useful to employers, so links to them have been retained. You can find the date they were published under the title.)
An article looking at some important Job Retention Scheme calculation considerations for January to April 2021, which are particularly important for employers with variably paid employees, can be found here.
You may also find the information that we have put together for employees on the Job Retention Scheme helpful.
There is a discussion of the interaction between furloughing and Statutory Sick Pay on our page Employees: illness or self isolation.
There is a useful guide to furloughing workers from an employment law perspective on the ACAS website.
The main thing to note is that the employment relationship continues through the furlough period and you will continue to have certain obligations – for example, workers may continue to accrue holiday. Therefore, you should bear in mind there may still be ongoing costs to you of ‘furloughing’ staff, over and above the employer contributions required under the Job Retention Scheme. There may also be other considerations that mean that furloughing is not appropriate and you may need to take some employment law advice.
You should also not assume that all employees will want to be furloughed in order to access the financial support available. In some instances, accepting redundancy for example, may be a better option for them. It is something that you may need to discuss and agree individually.
The scheme, open to most employers across the country, helps cover the cost of wages for any qualifying employees designated as ‘furloughed’ – originally, a qualifying employee was basically anyone was on their employer's payroll and included on an RTI payroll submission to HMRC on or before 19 March 2020.
For the purposes of the 1 November 2020 and 1 May 2021 extensions to the scheme, the meaning of 'qualifying employees' is widened, as we explain below.
The original Job Retention Scheme closed to new entrants from 30 June. For the period 1 July to 31 October, employers were only able to claim for furloughed employees that they had furloughed for a full three-week period before 30 June (with some limited exceptions). This meant that the final date by which an employer could furlough an employee for the first time was 10 June 2020, for the three-week furlough period to be completed by 30 June 2020. Employers had until 31 July 2020 to make any claims in respect of the period to 30 June 2020.
In the period 1 March to 30 June 2020, an employee could not undertake any work for their employer, including answering calls or emails.
Since 1 July 2020 employers have been able to bring their furloughed employees back to work part-time (‘flexible furlough’ – which we discuss in more detail here). Employers have to pay the employee’s wages for the hours they work as normal, as well as Employer National Insurance and employer pension contributions for those hours. Employers are required to submit data on the usual hours an employee would be expected to work in a claim period and actual hours worked. Since 1 July 2020, employees can also remain on 'full' furlough, as required.
If you are a small employer with only a handful of staff and relatively straightforward working arrangements, you may find the amount and complexity of the official guidance on flexible furlough overwhelming as it tries to cover all situations and every eventuality! We summarise the main things that small employers need to know about flexible furlough in our article: Fretting about Flexible furlough?.
Claims for the period ending 31 October 2020 needed to be made by 30 November 2020. From this date it is not possible to add to or amend any claims for the period to 31 October 2020.
On 31 October 2020, it was announced that the Job Retention Scheme, which was due to end on 31 October 2020, was to be extended to 31 March 2021. It was subsequently extended again to 30 April 2021, and has been extended further to 30 September 2021 in the March 2021 Budget
Claim windows under the 1 November 2020 and 1 May 2021 extensions to the scheme are much tighter than previously. Claims should be submitted by day 14 of the following month (unless employers have a reasonable excuse), to ensure prompt claims following the end of the month which is the subject of the claim. For example, any employers that use the scheme for May 2021, must submit their claim by 14 June 2021. A handy list of subsequent monthly claims deadlines can be found on GOV.UK.
Employers will also have only 28 days from the end of the month to increase their claim if they realise they have made a mistake (unless they have a reasonable excuse).
A list of these relevant dates, can be found below.
Until the end of June 2020, employers could claim for 80% of furloughed employees’ wages, up to a cap of £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on the wages.
For July 2020, the government paid 80% of wages up to a cap of £2,500 as well as Employer National Insurance and pension contributions for the hours the employee did not work (the cap on the furlough grant being proportional to the hours not worked). Employers paid employees for any hours they actually worked.
For August 2020, the government paid 80% of wages up to a cap of £2,500 for the hours the employee did not work, but employers paid Employer National Insurance and pension contributions. For the average claim, this represented 5% of the gross employment costs that they would have incurred if the employee had not been furloughed. Employers paid employees for any hours they actually worked.
For September 2020, the government paid 70% of wages up to a cap of £2,187.50 for the hours the employee did not work. Employers paid Employer National Insurance, pension contributions and 10% of wages (to make up 80% of wages in total) up to a cap of £2,500. Employers paid employees for any hours they actually worked.
For October 2020, the government paid 60% of wages up to a cap of £1,875 for the hours the employee did not work. Employers paid Employer National Insurance, pension contributions and 20% of wages (to make up 80% of wages in total) up to a cap of £2,500. Employers paid employees for any hours they actually worked.
From 1 November 2020 to 30 June 2021, the government has gone back up to paying 80% of wages up to a cap of £2,500 for the hours the employee does not work, but employers will pay Employer National Insurance and pension contributions. Employers must continue to pay employees for any hours they actually work.
From July 2021 employers will be required to contribute to furlough pay with the government contribution reducing accordingly – see this GOV.UK guidance for more information.
Further details of the 1 November 2020 and 1 May 2021 extensions of the scheme
On 31 October 2020, it was announced that the Job Retention Scheme, which was due to end on 31 October 2020, would be extended (first to 31 March 2021, then to 30 April 2021) with the UK government paying 80% of ‘usual wages’ for the ‘usual hours’ furloughed employees do not work, up to a cap of £2,500, for periods from 1 November 2020.
The Job Retention Scheme was subsequently extended again from 1 May 2021 to 30 September 2021 in the March 2021 Budget.
For claim periods running from 1 May 2021 to 30 June 2021, employers will receive a grant equivalent to 80% of their qualifying employee's usual wages for usual hours not worked, up to a maximum of £2,500 per month. The £2,500 cap is proportional to the hours not worked. Employers must meet any associated employers National Insurance Contributions and pension contributions, which will be a cost to them.
From July 2021, grants will cover 70% of employees' usual wages for the hours not worked, up to a cap of £2,187.50. In August and September, this will then reduce to 60% of employees’ usual wages up to a cap of £1,875.
Employers will need to pay the difference from July, so that they continue to pay furloughed employees at least 80% of their usual wages for the hours they do not work during this time, up to a cap of £2,500 per month.
How does it work?
Employers continue to have flexibility to ask their employees to work on a part-time basis and furlough them for the rest of their usual working hours, or furlough them full-time.
Employers can claim up to 14 days in advance of their payday, but they must claim within 14 days of the end of the month.
Under the scheme extensions, employees must agree to being furloughed (fully or flexibly) before their new working arrangements start and the employer must confirm details of their new terms and conditions in writing. The only exception to this is for agreements made retrospectively in the period to 13 November 2020 (given the extended scheme started on 1 November 2020 but the guidance wasn’t published until 10 November 2020).
The calculations for determining usual wages and usual hours for those employees who have been previously furloughed under the original scheme from March to October 2020 (or were eligible to have been previously furloughed, even if they actually were not), remain largely the same.
For employees on fixed pay, the last pay period on or before 19 March 2020 provides the basis for the usual wages/usual hours calculation. For variably paid employees it is the higher of the average in 2019/20 or the corresponding calendar period in the previous year – although for claims from March 2021 onwards you look back to the corresponding calendar period in 2019 not 2020. For more information see here.
So, if your employee was furloughed under the original scheme in March 2020 and they had a pay rise in April 2021, this will not be factored into their furlough pay calculation as their April 2021 furlough pay will potentially be based on April 2019 earnings.
Leo, who is 21, is on flexible furlough in the week of 12 to 18 April 2021. He works 11 normal hours. He got a payrise in April 2021 and his hourly rate is £9 per hour.
As Leo is ‘flexibly furloughed’, his employer can pay him the balance of his ‘usual’ hours using the furlough system.
Leo’s employer must start with the number of ‘usual’ hours (based on the higher of the average in 2019/20 and the week of the 12 to 18 April 2019) – in Leo’s case it is 41, and subtract the number of actual hours worked – in Leo’s case 11 - to arrive at the number of ‘furloughed’ hours.
Leo’s employer must the work out the furlough pay (based on the higher of the average in 2019/20 and the week of the 12 to 18 April 2019) – in Leo’s case 80% of this is £262.40 (he was paid £8 an hour during this time).
So his pay is 11 x 9 = £99 normal pay
And £262.40 x 30/41 = £192 furlough pay
Total = £291
For claim periods running from 1 May 2021 to 30 September 2021, if your employee was furloughed for the first time under the scheme from 1 November 2020 to 30 April 2021, the calculations of usual wages/usual hours will also be the same as previously:
- For employees on fixed pay, the last pay period on or before 30 October 2020 provides the basis for the usual wages calculation. Usual hours will be the contracted hours worked in the last pay period ending on or before 30 October 2020.
- For employees on variable pay, the average of the tax year 2020/21, up to the start of the furlough period, provides the basis for usual wages calculation. The usual hours will be the average hours worked in the tax year 2020/21 up to the start of furlough.
If your employee is furloughed for the first time under the scheme in the period from 1 May 2021 to 30 September 2021, the calculations of usual pay and usual hours are as follows
- For employees on fixed pay, the last pay period on or before 2 March 2021 provides the basis for the usual wages calculation. Usual hours will be the contracted hours worked in the last pay period ending on or before 2 March 2021.
- For employees on variable pay or hours, the average pay from 6 April 2020 (or the date they started if later) up to the start of the furlough period (on or after 1 May 2021), provides the basis for usual wages calculation. Usual hours will be the average hours worked in the same period.
- Employers must pay all Employer National Insurance contributions and pension contributions. Employers can choose to top up their furloughed employees’ wages beyond the 80% paid by the UK government for hours not worked, but they are not required to do so.
Under the extended scheme from 1 November 2020, employers can claim for employees who were on their PAYE payroll on 30 October 2020. Employers must have made a Real Time Information (RTI) submission to HMRC between 20 March 2020 and 11.59 pm on 30 October 2020, notifying a payment of earnings for that employee.
Employers and their employees do not need to have benefited from the scheme before to make a claim (unlike the scheme from 1 July to 31 October 2020). The extension can therefore include employees who started work for their employer too late to qualify for the original scheme.
If employees were on an employer’s payroll on 23 September 2020 (i.e. notified to HMRC on an RTI submission on or before 23 September) and were made redundant or stopped working for them afterwards, they can also qualify for the scheme if the employer re-employs them. You should be aware that there may be employment law considerations that go along with re-hiring ex-employees.
As announced in Budget 2021, for claim periods starting on or after 1 May 2021, employers will now be able to include employees that were previously not eligible due to RTI submissions being sent after 30 October 2020.
Guidance now states that all employees who have had a PAYE RTI submission made for them between 20 March 2020 and 11.59pm on 2 March 2021 are now eligible to be included in a CJRS claim from 1 May 2021.
Unfortunately, you cannot furlough employees who joined your employment on or after 3 March 2021.
Publication of employer details
From January 2021, HMRC started publishing the list of employers who have claimed under the CJRS for periods from December onwards, on GOV.UK. Starting from 25 February, on a monthly basis they will publish the names and Company Registration Numbers (for those who have one) of employers who make CJRS claims for periods starting on or after 1 December, together with an indication of the value of their claims.
HMRC will not publish the exact amount of claims, but rather the band within which claims fall; for example £0 - £10,000, £10,000 – £25,000, or £25,000 - £50,000. You can find a full list of these bands on GOV.UK. The details HMRC publish will not include information about the employers’ employees.
If an employer thinks publishing these details would result in a serious risk of violence or intimidation to them or others, they can request that details of their claims are not published by completing the online application form. HMRC will not publish an employer’s details until they have informed the employer of their decision on the application. Employers only need to apply once, as the decision will cover all CJRS claim periods starting from 1 December 2020 (or from when an application is agreed, if later).
We understand that a lot of employers will have got their calculations of furlough pay/grant amounts wrong, particularly in the early stages of the scheme when there was a lot of confusion about what the rules were.
There are obvious issues if an employer pays out too much by way of furlough pay (as they will have paid out more than they can legitimately claim for under the Job Retention Scheme) but there are also serious ramifications where they do not pay out enough by way of furlough pay (that is, where they have paid out less than the ‘reference pay’ as calculated under the scheme rules). Indeed, it could mean that the employer is not actually eligible to make a claim for a grant from the Job Retention Scheme at all!
We explain this issue further and what employers should do in cases where their calculations are wrong in our article: Have you made a mistake on a claim for the Job Retention Scheme?.
Note: Since 30 November it has not been possible to submit any further claims or add to existing claims for the period 1 July to 31 October 2020. (Note it has not been possible to submit any further claim or add to existing claims for the period 1 March to 30 June since 31 July).
Although the GOV.UK guidance does not say specifically whether or not it is still possible to amend existing claims for the period 1 July to 31 October 2020 after 30 November 2020 (for example, to extend an employee's claim within a particular claim period or to change monetary values), our understanding is that this is not allowed either.
Therefore, if you discover an underpayment of furlough pay to an employee for this period, which under the scheme rules you have an obligation to make good, this may have to come from your own pocket.
If you have underclaimed a grant in the period to 31 October 2020, there is now nothing you can do about this.
If you have underclaimed a grant from 1 November 2020, you must amend it by the amendment deadline for the relevant month:
To amend a claim for
You must amend the claim by 11.59pm on
29 December 2020
28 January 2021
1 March 2021
29 March 2021
28 April 2021
28 May 2021
28 June 2021
28 July 2021
HMRC may also accept amendments after these dates if there is a reasonable excuse for the failure to make the amendment in time. More information about reasonable excuse can be found in our news article Coronavirus Job Retention Scheme (CJRS): a brief update for employers.
If you have overclaimed a grant, you may need to pay some money back to HMRC, or you can reduce your next claim by the overclaimed amount. You can find HMRC's guidance on what to do, on GOV.UK.
Note, that the deadline for notifying HMRC about any overclaimed amounts of grant from before 22 July 2020 that employers haven’t managed to pay back 'informally', was 20 October 2020. The deadline for notifying HMRC about any subsequent over claimed amounts is 90 days from the date you received the overpaid grant.
If you do not meet the ‘notification’ deadlines, you may have to pay a penalty, as set out in this HMRC factsheet.
The factsheet is quite confusing, but our understanding of the penalty position in respect of failing to notify HMRC that you need to repay some grant monies within the relevant time limit, is as follows:
- A new law has been passed that specifically means employers who knew their JRS grant was incorrect at the time they received it, and who haven’t repaid it/who don’t notify within the relevant timeframe, will be treated as having made a deliberate and concealed failure to notify (of the over claimed grant). They can be charged a penalty of up to 100% of the amount over claimed as at the end of the notification period.
- Those who didn’t know their JRS grant was incorrect at the time they received it, and who don’t notify within the relevant time frame, will fall under general ‘failure to notify a liability’ principles, and will only face penalties if the amount of overpaid grant has not been repaid by 31 January 2022.
Further details of the penalty situation are available in a comprehensive article looking at correcting JRS claims, from our ATT colleagues. This article also confirms that HMRC will usually expect employers to pay back what they owe 30 days after the notification has been made. If employers do not do this, or do not engage with HMRC about paying, then HMRC may issue an ‘assessment’ to claw back the amount due.
If an overpayment has been received, but HMRC has not made an assessment, employers must detail the overpayment on their Corporation Tax return or Self-Assessment tax return. Note, there are boxes on page 5 of the 2020/21 Self Assessment tax return to enter any grant amounts that you have to pay back and that you haven’t already told HMRC about. Amounts entered will be added to your income tax liability that you need to pay by 31 January 2022.
Note that to the extent that you paid your employee an amount which you now need to pay back to HMRC, you need to think very carefully before attempting to claw an amount back from your employee.
Whilst there is no automatic right for an employer to recover such monies from an employee under the law governing the JRS scheme, the Employment Rights Act 1996 does allow employers to make deductions from an employee’s future wages to recover overpayments of wages made by mistake, which may apply. We explain more in our news article: Need to pay back a Job Retention Scheme (JRS) grant? What employers should – and shouldn’t – do.
Job Retention Bonus (JRB)
The Job Retention Bonus was to be a one-off payment of £1,000 per employee to employers that have used the Job Retention Scheme for each furloughed employee who remained continuously employed until 31 January 2021.
The purpose of the JRB was to encourage employers to keep people in work until the end of January. However, as the Job Retention Scheme is now being extended to 30 September 2021, the policy intent of the JRB no longer applies, so it will not be paid in February as was originally planned. It may not be paid now, at all.
Care and support employers
If you are a care and support employer and have had to ‘shield’ or have been unwell during the coronavirus pandemic or if your PA has had to shield or has had caring responsibilities, and they have not been able to work for you as a result, you may have been wondering if it is possible to ‘furlough’ them so that you can claim a grant from the government to help pay their wages while they are off.
Guidance on this issue can be found in these GOV.UK pages:
- Using direct payments during the coronavirus outbreak: full guidance for people receiving direct payments and personal assistants.
- Coronavirus Job Retention Scheme: people receiving direct payments.
Any Job Retention Scheme grant received by an employer who is an individual and not employing staff in the course of a business will not be taxable on them, although the payment made to the PA will be subject to tax and NIC as normal.
In recognition of the difficult position that unrepresented, small, employers (including care and support employers) may find themselves in, in trying to understand and administer the Job Retention Scheme grant, the tax charity TaxAid have also set up a free helpline where you can ask a qualified, professional tax adviser for specific advice. People can call their main helpline on 0345 120 3779 and choose option 1 ‘need help accessing government support as a result of coronavirus’. Your details will be taken and a call back will be offered the following day to discuss the help you need.