⚠️ 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 was the Job Retention Scheme?

Updated on 21 October 2021

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 scheme has now closed. However this page is retained as reference information for any employers needing or wanting to check their claims.

Illustration of a man surrounded by question marks

Overview

The Job Retention Scheme, set up in March 2020, helped employers pay their workers’ wages if they were unable to work during the coronavirus crisis. As well as situations where the business had to close or temporarily reduce its capacity, this could also include workers who:

  • had caring responsibilities resulting from coronavirus, such as caring for children who were at home as a result of school or childcare closing, or
  • were clinically extremely vulnerable, or in the highest risk group for severe illness from coronavirus (even though ‘shielding’ came to an end some time ago).

Under the Job Retention Scheme, you could claim a grant so that a ‘furloughed’ worker could receive up to 80% of their usual wages, via the payroll, up to a total of £2,500 each month.

As an employer, 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 /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.

You can read more about reporting your grants in our separate guidance.

The Job Retention Scheme closed down on 30 September 2021.

Employers will have had to decide whether to:

  • bring their employees back to work on their agreed terms and conditions, or
  • agree any changes to their terms and conditions with them, or
  • consider ending their employment.

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 15 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.’  

Guidance

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.

We provided some hints and tips to help you do your Job Retention Scheme calculations and make your claim, in our news item: How to claim a Job Retention Scheme grant. We also provided further clarification around furloughing and looked 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 were 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 short discussion of the interaction between furloughing and Statutory Sick Pay on our page Employees: illness or self isolation.

Employment law

There was a useful guide to furloughing workers from an employment law perspective on the ACAS website.

The main thing to note was that the employment relationship continued through the furlough period and you continued to have certain obligations – for example, workers may have continued to accrue holiday. Therefore, there may have been ongoing costs to you of ‘furloughing’ staff, over and above the employer contributions required under the Job Retention Scheme. There may also have been other considerations that meant that furloughing was not appropriate.

Our separate page says more on finding employment law advice.

Important dates

The scheme, open to most employers across the country, helped 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' was widened, as we explain below.

The original Job Retention Scheme closed to new entrants from 30 June 2020. For the period 1 July 2020 to 31 October 2020, employers were only able to claim for furloughed employees that they had furloughed for a full three-week period before 30 June 2020 (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.

From 1‌‌ July 2020 employers were able to bring their furloughed employees back to work part-time (‘flexible furlough’ – which we discussed in more detail here). Employers had to pay the employee’s wages for the hours they worked as normal, as well as Employer National Insurance and employer pension contributions for those hours. Employers were required to submit data on the usual hours an employee was expected to work in a claim period and actual hours worked. From 1 July 2020, employees could also remain on 'full' furlough, as required.

If you were a small employer with only a handful of staff and relatively straightforward working arrangements, you may have found the amount and complexity of the official guidance on flexible furlough overwhelming as it tried to cover all situations and every eventuality! We summarised the main things that small employers needed 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 was 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 were much tighter than previously. Claims should have been 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 used the scheme for May 2021, must have submitted their claim by 14 June 2021. A handy list of subsequent monthly claims deadlines can be found on GOV.UK.

Employers only had 28 days from the end of the month to increase their claim if they realised they made a mistake (unless they have a reasonable excuse).

A list of these relevant dates, can be found below.

Contribution amount

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 went back up to paying 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. Employers paid employees for any hours they actually worked.

Since July 2021, employers were 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 could have received 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 was proportional to the hours not worked. Employers must have met any associated employers National Insurance Contributions and pension contributions, which was a cost to them.

From July 2021, grants covered 70% of employees' usual wages for the hours not worked, up to a cap of £2,187.50. In August and September, this reduced to 60% of employees’ usual wages up to a cap of £1,875.

Employers needed to pay the difference from July, so that they continued to pay furloughed employees at least 80% of their usual wages for the hours they did not work during this time, up to a cap of £2,500 per month.

How did it work?

Employers continued 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 could claim up to 14 days in advance of their payday, but they must have claimed within 14 days of the end of the month.

Under the scheme extensions, employees must have agreed to being furloughed (fully or flexibly) before their new working arrangements started and the employer must have confirmed details of their new terms and conditions in writing. The only exception to this was 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).

Calculations

The calculations for determining usual wages and usual hours for those employees 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), were as follows:

For employees on fixed pay, the last pay period on or before 19 March 2020 provided the basis for the usual wages/usual hours calculation. For variably paid employees it was 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 looked 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 would not have been factored into their furlough pay calculation as their April 2021 furlough pay will have potentially been based on April 2019 earnings.


Example

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 would also have been as follows:

  • For employees on fixed pay, the last pay period on or before 30 October 2020 provided the basis for the usual wages calculation. Usual hours were 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, provided the basis for usual wages calculation. The usual hours were the average hours worked in the tax year 2020/21 up to the start of furlough.

If your employee was 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 were as follows:

  • For employees on fixed pay, the last pay period on or before 2 March 2021 provided the basis for the usual wages calculation. Usual hours were 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), provided the basis for usual wages calculation. Usual hours were the average hours worked in the same period.

Employers must have paid all Employer National Insurance contributions and pension contributions. Employers could choose to top up their furloughed employees’ wages beyond the 80% paid by the UK government for hours not worked, but they were not required to do so.

Eligible employees

Under the extended scheme from 1 November 2020, employers could 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.

The extension could therefore include employees who started work for their employer too late to qualify for the original scheme.

For claim periods starting on or after 1 May 2021, employers were able to include employees that were previously not eligible due to RTI submissions being sent after 30 October 2020:  employees who had a PAYE RTI submission made for them between 20 March 2020 and 11.59pm on 2 March 2021 were eligible to be included in a CJRS claim from 1 May 2021.

Unfortunately, you could not 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).

Employees will also be able to check if a CJRS claim has been made on their behalf through their online Personal Tax Account from 25 February.

Incorrect calculation/claim?

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 could legitimately claim for under the Job Retention Scheme) but there are also serious ramifications where they did 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!

If you are out of time to claim a further amount of grant (see below) and 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. You must make good any shortfall to employees within a ‘reasonable period’ as confirmed in this CIOT guidance for agents.

In summary:

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

November 2020

29 December 2020

December 2020

28 January 2021

January 2021

1 March 2021

February 2021

29 March 2021

March 2021

28 April 2021

April 2021

28 May 2021

May 2021

28 June 2021

June 2021

28 July 2021

July 2021

31 August 2021

August 2021

28 September 2021

September 2021

28 October 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.

We understand the online claim system will be taken down on 28 October. People who have a reasonable excuse, that want to make an amendment to a claim, will need to ask HMRC to process this manually after this date.

If you have overclaimed a grant, you may need to pay some money back to HMRC. You used to be able to reduce your next claim by the overclaimed amount, although as the Job Retention Scheme is now closed, this is no longer possible). You can find HMRC's guidance on what to do, on GOV.UK.

HMRC have recently clarified that they are content for employers to offset over and underclaims for different employees in the same period, so that you only have to repay any net overclaim to HMRC. HMRC give an example in their new guidance.

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 overclaimed amounts (that haven’t been paid back ‘informally’ 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 by an employer (and has not been paid back informally), but HMRC has not made an assessment, employers must detail the overpayment on their 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.

Now the CJRS has come to an end, we expect that HMRC will be checking some claims. HMRC have said that they are concentrating their compliance activity on those who they think have been abusing the system and that they will not be actively looking for cases where the employer has simply made an innocent error.  Our colleagues at the ATT, set out what this might mean here.

All employers, at the very least, will need to keep records for six years, supporting the grants they have claimed, in case HMRC want to check them.

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, it was overtaken by the Job Retention Scheme extensions. It may not be paid now, at all.

Care and support employers

If you are a care and support employer and had to ‘shield’ or were unwell during the coronavirus pandemic or if your PA has had to shield or had caring responsibilities, and they could not work for you as a result, you may have ‘furloughed’ them so that you could 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:

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.

Tax guides

Share this page