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  • Mr Paul Clifton

Coronavirus Job Retention Scheme for furlough employees

Updated: Apr 14



While directors who run their own limited companies may consider themselves to be self-employed. However, for the purposes of this scheme they are not. Directors of their own limited companies are not self employed. They are employees and can claim under the Coronavirus Job Retention Scheme as furloughed employees.


Most director-shareholders of small limited companies will usually keep their salaries as low as possible and top up their income with dividends. Dividends are not salary and therefore these director-shareholders will receive very little under the scheme.


This scheme does not apply to the self-employed. They have their own scheme.


Check if your employer or business is listed on the publicly available Gov.uk list of employers who have claimed through the Coronavirus Job Retention (furlough) Scheme.


From February 2021, HMRC will publish the names and a banded range indication of the value of claims of employers who make CJRS claims from December onwards. Details of CJRS claims will then be published monthly as part of HMRC’s commitment to transparency and to deter fraudulent claims. Employees will also be able to check if their employer has made a CJRS claim on their behalf through their online Personal Tax Account from February 2021.


Work out 80% of an employee’s usual wage (updated 14 April 2021)


if an employee has had a pay increase/decrease this will not affect the reference pay that is used to calculate the grant and which must be passed on to the employee.


The CJRS policy intention has always been to put the employee back on to the pay they were on pre-furlough. Any worked hours must be paid based on their current terms and conditions.


If the employee has fixed pay


Employers will need to identify the reference period that they will use to work out their employee’s usual wages.


The reference period is the last pay period ending on or before 19 March 2020 for employees who either:

  • were on the payroll on 19 March 2020, that is the employer made a payment of earnings to them in the tax year 2019 to 2020 which was reported to HMRC on a Real Time Information (RTI) Full Payment Submission (FPS) on or before 19 March 2020 even if not claimed for before 1 November 2020

  • the employee's last pay period was on, or before, 30 October 2020 for those reported on RTI between 20 March 2020 and 30 October 2020 where employees will be eligible for a CJRS claim from 1 November 2020 onwards

  • the employee's last pay period was on, or before, 2 March 2021 for those newly eligible from 1 May 2021 where employees will be eligible from 1 May 2021 if they were reported by 2 March 2021 even if their first pay period was after that date.

For all other employees who were on the payroll on 30 October 2020, the reference period is the last pay period ending on or before 30 October 2020; this will only apply for periods starting after 1 November 2020.


If the employee's pay varies


If an employee has variable pay, how the employer works out their usual wages depends on when they were on the payroll.


For employees who were on the payroll on 19 March 2020 (#), that is the employer made a payment of earnings to them in the tax year 2019-20 which was reported to HMRC on a Real Time Information (RTI) Full Payment Submission (FPS) on or before 19 March 2020 an employer can choose to calculate 80% of the higher of the:

  • average wages payable in the tax year 2019-20

  • if applicable, the wages earned in the corresponding calendar period in the previous year (in 2020) for wages paid up to 28 February 2021

  • if applicable, the wages earned in the corresponding calendar period in the previous year (in 2019) for wages paid from 1 March 2021

(#) This also applies to employees or the employer who made a valid Job Retention Scheme claim in a claim's period ending any time on or before 31 October 2020.


For employees who were not on the payroll at 19 March 2020, but were on the payroll on 30 October 2020, employers should calculate 80% of the average wages payable between 6 April 2020 (or, if later, the date the employment started) and the day before they were first furloughed on or after 1 November 2020.


For employees who were first reported on a payroll between 31 October 2020 and 2 March 2021 they can be furloughed from 1 May 2021. Employers should calculate 80% of the average wages payable between 31 October 2020 (or, if later, the date the employment started) and the day before they were first furloughed on or after 2 March 2021.


If an employee has variable hours the employer will have completed a similar comparison to work out their usual hours but the outcome may be different.


Calendar lookback method


When the employer calculates 80% of the wages from the corresponding calendar period in a previous year, the period the employer looks back to depends on the period they are claiming for:


Claim month Lookback period

November 2020 November 2019

December 2020 December 2019

January 2021 January 2020

February 2021 February 2020

March 2021 March 2019

April 2021 April 2019


If your employee did not work for you in the lookback period, you can only use the averaging method to calculate 80% of their wages.


Lookback periods for periods starting on or after 1 May 2021 will be provided in updated HMRC guidance in due course but are expected to follow the above pattern.


HMRC have produced numerous examples on Gov.uk.


Extended scheme until 30 September 2021 (updated 3 March 2021)


The current furlough scheme was due to finish at the end of April 2021. The scheme will now be extended until the end of September 2021.


The Coronavirus Job Retention Scheme (CJRS) has protected more than 11 million jobs since its inception last March. Currently, about 4 million employees are using the CJRS. This is the highest level since last summer 2020.


The furlough scheme will now continue until September, with no change of terms. Employers will have to contribute 10% from July and 20% in August and September towards the hours their employees do not work. Employers will have to make up wages and salaries to the full 80% and so will have to pay the extra 10% and 20% themselves.


From an employee’s perspective nothing will change.


Ray of hope for inclusion of dividend income (updated 25 January 2021)


The Tax Return for 2019-20 should be filed by 31 January 2020. However, HMRC have just announced a penalty free extension to the filing date for the 2019-20 Tax Return to 28 February 2021, though taxpayers must still pay the tax due by 31 January 2021 or will be charged interest.


Martin Lewis of MoneySavingExpert.com has apparently had ‘exclusive’ Treasury confirmation that no official announcement on the eligibility criteria and calculation of the amount of the next Self Employed Income Support (SEISS) grant will be announced until after 3 March, the date of the next UK Budget.


Directors and shareholder of small limited companies are classified as employed and not self employed. They are therefore not entitled to the SEISS grant; but instead the furlough scheme. Unfortunately, director-shareholders typically take a low salary of around £8,800 pa and much higher dividends as a way of tax efficiently taking profits from their company. Dividends are not salary and therefore have been excluded from furlough calculations of income.


Martin Lewis says that his ‘exclusive’ sources have indicated that the principled objections to providing financial assistance to such director-shareholders have fallen away and the only hurdle is now how to get money to these people. The Treasury has argued that unlike salary, which is reported to HMRC every month through payroll software, dividends are only reported to HMRC once a year on an annual Tax Return.


In order to reduce fraudulent claims for director-shareholders of small limited companies the Government decided to exclude what is normally a significant proportion of these people’s annual income from their furlough calculations.


There may now be a ray of light for director-shareholders to receive a 'furlough' grant calculated based on their salary and larger dividends!


Updated 3 March 2021 - Those who pay themselves mainly through dividends through their own company are unfortunately still not able to count their dividend income for grant claims purposes under the furlough or other scheme.


Can I use CJRS furlough scheme to pay for holidays? (updated 20 December 2020)


Employees can only be placed on furlough if an employer cannot maintain their workforce because their business has been affected by coronavirus, and not just because they are on paid holiday leave. This also applies during any peak holiday periods in late December and early January. If an employee is flexibly furloughed, any time taken as holiday should be counted as furloughed hours rather than working hours.


In other words, an employer cannot just furlough their employees over the Christmas or other holiday periods and claim the CJRS grants, unless their employees were already on furlough, and will continue on furlough after the holiday period.


If a furloughed employee takes holiday, their employer should pay them their normal rate of pay in line with the Working Time Regulations.


Furlough scheme extended again until 30 April 2021 (updated 17 December 2020)


On 17 December, Rishi Sunak confirmed that the furlough scheme would be extended for an additional month to 30 April 2021. The government will continue to contribute the 80% towards wages to 30 April 2021 for the hours not worked by employee 'to give businesses and employees across the UK certainty into the New Year' and 'ahead of the 45 day redundancy notice period'. Employers must still pay wages, NICS and pensions for hours worked and NICS and pensions for hours not worked. Eligibility criteria will remain the same.


Furlough scheme extended until 31 March 2021 (updated 5 November 2020)


The original Coronavirus Job Retention Scheme 'furlough scheme' that was to end on 31 October 2020, was extended by a month to 2 December 2020 with the national lockdown. Within days, it was extended again until 31 March 2021.


Furlough grants will continue to be paid on the basis of claims submitted through the HMRC portal after calculating employees’ payroll. The portal will open for claims from 11 November. Claims for this month must be made by 14 December 2020. Subsequent claims must be submitted by the 14th of the following month.


The extended scheme will continue, with employees still receiving 80% of normal wages and salaries and employers able to claim the full 80% of employee pay. This will continue to give employers the flexibility to use employees when required, for any amount of time and shift pattern, including furloughing them full-time. The flexible furlough scheme from 1 July therefore continues. However, employers must pay the whole of employer's national insurance and pension contributions for the whole furlough period.


To be eligible for the extended scheme from November, employees must have been on their employer’s PAYE payroll on 30 October 2020. The employer must also have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings to the employee. Employees can be on any type of contract, including a zero-hours, fixed-term or temporary contract.


The government has adjusted its position on claiming the grants during an employee’s notice period. For claim periods from 1 December, employers cannot claim CJRS grants for any days that their employee is serving a contractual or statutory notice period, including notice of retirement or resignation. This now means that if you dismiss a furloughed employee or make them redundant then you cannot claim for the employee during that final period.


The main issues to be aware include:

  • National Insurance and employers’ pension still cannot be reclaimed on furlough pay.

  • Employers are prohibited from using the scheme to finance wages and salaries of employees serving a notice period.

  • Employees continue to be entitled to holiday pay whilst furloughed.

  • Employers need to decide whether to keep employees on furloughed or class them as on sick leave and therefore pay them Statutory Sick Pay.


Job Retention Bonus of £1,000 now on hold (updated 5 November 2020)


On 5 November, the Chancellor announced that employers would now not be entitled to the previously announced £1,000 Job Retention Bonus for every furloughed employee retained in employment until at least 31 January 2021. This is because the furlough scheme has been extended. It was announced that 'we will redeploy a retention incentive at the appropriate time.'


Chancellor announces the Job Retention Bonus of £1,000 (updated 6 October 2020)


To reward and incentivise employers who bring back to work furloughed employees, employers will receive a £1,000 payment per employee. This does not need to be passed on to the employee.


The one-off amount of £1,000 will be paid to employers for each employee who has been furloughed at some stage under the CJRS; earns at least £520 pm on average for November, December 2020 and January 2021, and a total of at least £1,560 across the three months, and has been continuously employed by the employer until at least 31 January 2021.


An employee must be paid at least once in each of the three tax months from 5 December to 5 February 2021. Therefore, if an employee is paid nothing in November and then works in December and January, earning £2,000 in the latter two months then the employer would not be eligible for the bonus for that employee. Although the employee had meets the minimum income threshold, of £1,560 over three months, they had not received a salary payment in each tax three months.


Employers will be able to claim the bonus from February 2021 once all payroll RTI data to 31 January 2021 has been submitted to HMRC.


As with other Coronavirus grants, the JRB will be taxable as the employer’s income.

The guidance will be updated by the end of January 2021 with details on how to access the online claim service.


Parents returning to work after leave eligible for furlough (updated 10 June 2020)

The government has announced that parents returning to work from late June, following extended parental leave, will be eligible for the furlough scheme

It had previously been announced that from 1 July that the CJRS would only be available to those employees furloughed for the first time before 10 June.

This will therefore allow employees who are available to return to work after taking maternity, paternity, adoption, shared parental and bereavement leave to receive furlough pay under the CJRS. More details are to be published.


More details regarding the extension of the scheme (updated 29 May 2020)

Introduction

Under the CJRS, for the months of March 2020 to 31 July 2020, employers can claim 80% of furloughed employees’ salaries up to £2,500 pm as well as the related employer’s National Insurance and 3% auto-enrolment pension contribution on the furloughed earnings.

From August 2020, employers will have to start contributing towards the cost of furloughing employees. This will be on a sliding scale over three months.

The CJRS will close to new entrants from 30 June 2020. From this point onwards, employers will only be able to furlough employees that have been furloughed for a full three-week period up to 30 June 2020.

The Chancellor has confirmed that the CJRS will close on 31 October 2020.

Increasing employer contributions

The CJRS will be slowly tapered away as follows:

  • in August 2020, employers will continue to pay and reclaim 80% of earnings up to a cap of £2,500. However, employers will not be able to reclaim any of the related employer’s National Insurance or Auto-Enrolment minimum pension contribution and in future months.

  • in September 2020, employers will continue to pay 80% of earnings to furloughed employees up to a cap of £2,500. The government will repay employers 70% of earnings up to a cap of £2,187.50 pm. Employers must therefore make-up the 10% shortfall.

  • in October 2020, employers will continue to pay 80% of earnings to furloughed employees up to a cap of £2,500. The government will repay employers 60% of earnings up to a cap of £1,875 pm. Employers must therefore make-up the 20% shortfall.

Around 25% of CJRS claims relate to wages and salaries paid to employees who are paid below the employer’s National Insurance threshold of £732 pm and the auto enrolment threshold of £520 pm. As no employer’s National Insurance and pension contributions would be payable on their earnings below these thresholds then this should not affect employers who continue to furlough employees in August and onwards.

For smaller employers, some or all of the employer’s National Insurance can be recovered through the £4,000 pa Employment Allowance. Therefore, these employers should once again not be affected by the reduced government contribution from August.

Flexible furloughing

From 1 July 2020, employers will have more flexibility. They can ask furloughed employees to work on a part-time basis while remaining on furlough for the rest of the time. This is new, before this date furloughed employees were prohibited from doing any work for their employer whilst furloughed.


Under the existing scheme, that runs up to 30 June, employees must be furloughed for a minimum period of three weeks. On 30 June 2020 the current CJRS will close to new entrants.

From 1 July 2020, to enable the introduction of flexible furloughing, claims under the CJRS will be restricted to ‘employers currently using the scheme and previously furloughed employees’.

Therefore, in order to meet the minimum three-week furlough period an employer who wishes to use flexible furlough rules from 1 July must furlough an employee for the first time on or before 10 June.

The government will repay the 80%, 70% and 60% of earnings to employers, as noted above, for any normal hours that employees do not work up.

The caps on the furlough grant, of £2,500, £2,187.50 and £1,875 pm, will be proportional to the hours not worked.

Employers can decide what hours their employees will work and employers will be responsible for paying employees their normal contractual earnings while working part-time. This means that employees can work as much or as little as the business needs and with no minimum number of days that an employer must furlough their employees.

A furloughed employee could return to work for two days and would be paid as normal, while the government would cover the remaining three days under the CJRS.

Employers will have to submit data on the usual hours an employee would work in a claim’s period as well as the actual hours worked.

Any working hours that employers do agree with their employees must cover at least one working week and be confirmed to the employee in writing. When claiming the CJRS grant for furloughed hours, employers will have to report and make a claim for a minimum period of a week. Employers can choose to make claims for longer periods such as on a monthly or two weekly basis if they prefer.

If employees are unable to return to work, or employers do not have work for them, they can remain furloughed and employers can continue to claim the CJRS grant for their full hours under the normal CJRS rules.


Furlough scheme clarification (update 6 April 2020)


Over the weekend of 4 to 5 April 2020, it was confirmed that employers must notify their employees of their furlough status in writing. The previous guidance did not require it be in writing. Furthermore, employers must keep a record of that written notification for five years.


Latest on the HMRC claims portal (update 8 April 2020)


On 8 April, Jim Harra, director general and head of H M Revenue & Customs, told MPs that the new claims portal will go live on 20 April 2020. This will allow submissions by employers, and their tax agents on behalf of authorised clients, and give them a 10-day window before the month-end to make a claim for funding to pay furloughed employees' monthly salaries.


Claims made in April 2020 should be paid to employers within 10 days. Claims in future months should be paid within 4 to 6 six days according to HMRC.

Apparently, there should be time for HMRC to make the payments to employers before 30 April i.e. pay day for employers to pay hundreds of thousands of furloughed employees 80% of their normal wages and salaries.

The CJRS scheme will be self-service portal. There could be millions of claims and HMRC’s coronavirus business hotline would not be unable to cope with a surge in calls, particularly on the first day that the portal is opened.

After working night and day, CapGemini and HMRC have developed a working portal. The first phase of testing of the CJRS portal started on 8 April 2020.

Jim Harra has confirmed that HMRC has tested the new system at up to a 450,000 application per hour. HMRC will be receiving a large multiple of that number in online applications each day.


Furlough scheme eligibility date changed (update 15 April 2020)

The eligibility date has been changed from 28 February to 19 March 2020.

On 15 April 2020, H M Treasury issued a direction to HMRC updating several elements of the scheme.

Employees on a PAYE payroll who were employed on 19 March 2020 can now be furloughed. Previously, only employee on the payroll at 28 February or before could be furloughed under the scheme. This brings many employees within the scope of the scheme.


Furlough scheme extended (17 April 2020)


The UK government has extends the CJRS furlough scheme until the end of June in order to cover 80% of employees' salaries for a further month.


Furlough scheme extended again (updated 12 May 2020)


The Chancellor, Rishi Sunak, announced that the CJRS will be extended by a further four months until the end of October. The scheme will continue in its current form until 31 July.

Employees will continue to receive the same level of support of 80% of their salary, up to a maximum of £2,500 a month. Employers will be able to bring back furloughed employees part-time.

From 1 August until 31 October, the scheme will offer greater flexibility to support the transition back to work. Employers using the scheme will be able to bring back furloughed employees part-time and contribute to paying employees' wages while still receiving support from the scheme. Full details are to be provided by the end of May.

Introduction to the Coronavirus Job Retention Scheme


The government has announced unprecedented measures to fight the coronavirus pandemic including ordering pubs, restaurants, shops and clubs to close down.

The government has announced that it will pay 80% of wages and salaries of furloughed employees, up to a maximum of £2,500 a month provided they keep the worker employed. The scheme will also be backdated to 1 March and open initially for ‘at least’ three months.

Overview of the new 80% scheme

Under the Coronavirus Job Retention Scheme (CJRS), all employers will be able to access support to continue paying part of their employees’ salaries for those employees that would otherwise have been laid off during this crisis. The scheme will be in place for three months initially and all businesses are eligible.

A furloughed worker will remain on payroll, be paid as normal but temporarily not be working during the coronavirus outbreak.

Employers will have to make initially pay their employees and then claim reimbursed under the CJRS from HMRC.

Employers can choose to top-up wages and salaries, either for the unfunded 20% of pay or the amount above £2,500 for higher earners. However, this will not be a legal requirement to obtain access to the scheme.

The scheme will be backdated to 1 March and open initially for at least three months but extended ‘for longer if necessary’. However, a claim under the CJRS can only be made from the date that an employee is actually furloughed. It does not mean that all employers can claim under the scheme from 1 March. The 1 March date should only be used to claim a grant under the CJRS if the employee and employer had already agreed a change in employment status on 1 March and had 'furloughed' (laid-off) the employee by1 March. Most employers will therefore only be able to claim from a later date, possibly two or three weeks after 1 March, when the government stepped up quarantine and self-isolation rules.


For an employer to claim they must have set-up a PAYE payroll scheme by 19 March 2020 (previous announcement was 28 February 2020). This rule is designed to stop fraudulent claims by settling up schemes after 1 March once the new CJRS rules were announced.

Where a business can carry on without those physical interactions, for instance by working remotely, it should be business as usual. Therefore, in those cased the new scheme would not apply. The scheme is not designed as a wage subsidy for all UK businesses, only those who furlough their employees.

Even in the face of this unprecedented global Covid-19 crisis, there will have to be tight controls to avoid abuse by unscrupulous employers who could see it as a way to simply lay off staff with no intention of rehiring them and creating ghost staff.

There has been criticism that the scheme takes controls away from businesses who could put staff on half time and equally employees could have found other jobs in critical areas where there is real need at the moment.

While it is not compulsory to use this scheme, it can serve as an alternative to a lay-off or redundancy situation while helping employees to cover their on-going costs.

HMRC and their IT contractors are working night and day to create the infrastructure to deal with the repayments for employers. It is expected to take until late April to complete.


Example of how the scheme will work


Bob is normally paid a monthly gross salary of £3,000. His employer has agreed to continue to pay him that amount. Bob is a member of the company’s pension scheme to which the employer pays 10% of salary. The employer’s pension contribution therefore amounts to £300 pm.

The employer’s National Insurance on Bob’s gross salary is £314.78.

Under the CJRS, Bob’s employer can claim for £2,500 [maximum amount] together with £245.78 (i.e. £2,500 less the £512 starting NI threshold x 13.8%) of employer’s National Insurance and £59.64 of employer’s pension contributions (i.e. £2,500 less £512 qualifying earnings threshold x the 3% minimum employer Auto-Enrolment rate).

This example uses the National Insurance rates for the 2019-20 tax year.

New word to learn

I think that a new word may have been invented on Friday 13 March. However, I would be wrong. Furlough (a noun pronounced as ‘fur low’) is not a new word.

People often encounter the word furlough during government shutdowns, in which nonessential public employees are told not to go to work. Private companies, however, also furlough employees e.g. due to special needs of a company. These involuntary furloughs may be short or long term, and many of those affected may seek other temporary employment during that time.

In this case furlough means anyone asked to stop working during the coronavirus pandemic but not made redundant. If an employee and employer both agree, the employer may be able to keep the employee on the payroll if the employer is unable to operate or has no work for its employee because of coronavirus (COVID-19). This is known as being ‘furloughed’.

Layoffs, by contrast, are when an employer dismisses employees e.g. through redundancy as there is no longer any job to keep the employee within.

Employee furloughs are a temporary unpaid leave from work, used by companies as a cost-cutting measure. People who get furloughed usually get to return to their job after a furlough, unlike those made redundant.

In general, people are not paid during furloughs but they do keep employment benefits, such as health insurance. Furloughs are mandatory. Workers are ordered not to do anything work-related while they are on furlough.

Can you work while on furlough?

No. A furloughed employee cannot so much as take a phone call or answer e-mails. If a salaried employee does any work while on furlough the employer must pay them the equivalent of their salary for the entire day. If an hourly employee works while on furlough the employer must pay them for the time worked

Employment law


The CJRS doesn’t override employment law. The employer must mutually agree with an employee, ideally in writing as it is a employment contract change, that the employer is designating them as furloughed (i.e. there is no work for them to do due to Covid-19) and what the employer is planning to pay them whilst furloughed.

Being a director does not mean that you are an employee. A director is an officer of the company and may be entitled to director’s fees for being an officer of the company only.

Some directors of companies have an executive role e.g. managing director, finance director, marketing director, sales director etc. This means that they will have a formal contract of employment.

We suspect that very few, if any, of our clients where we run their company payroll will have any employment contract between themselves and their limited company.

Some employment and payroll legislation treats a director as an employee. For redundancy pay purposes, unless a director has a contract of employment with their company that they are not entitled to Statutory Redundancy Pay.

More details

The government has provided information on how the CJRS will work.

  • Employers must receive agreement from their employees to designate them as furloughed workers and then reduce their salary to 80% which under the scheme is capped at £2,500 pm.

  • Employers can designate employees as furloughed if they are paid under a PAYE scheme and were employed by them on 28 February 2020 *.

  • The CJRS applies to all types of employees and employment contract including full time, part time, zero hours and variable hours contracts.

  • Once employees have recovered from being sick leave or have self-isolated they can then be furloughed.

  • The scheme is open to all employers with a PAYE payroll scheme that was created and started on or before 28 February 2020 *. This is to stop artificial schemes being created following the CJRS.

  • Any employee made redundant from 28 February 2020 * can agree to be brought back to the employer and placed on furlough.

  • Employees hired after 28 February 2020 * cannot be furloughed and claimed for in accordance with this scheme.

  • A furlough must be for a minimum of 3 weeks though an employee can be placed on furlough leave more than once and the period can therefore extended indefinitely.

  • Employees can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed.

  • Employees cannot apply for the CJRS. It is a jointly negotiated decision between employer and employee as it relates to a change in employment contract terms and conditions. Once agreed, the employer must write to its employee and receive confirmation from them to be furloughed and eligible to claim.

  • Wages and salaries must first be paid to an employee before the employer can reclaim 80% of those wage costs through an online portal from HMRC.

  • Wages and salaries paid to employees by their employer will be subject to the normal PAYE scheme and therefore pay income tax, National Insurance and student loan repayments as normal.


* On 15 April 2020, H M Treasury changed the eligibility date from 28 February to 19 March 2020 to bring more new employee starters within the furlough scheme.


The grant will cover 80% of furloughed employees' wages and salaries, and will permit the recovery of up £2,500 of salary per month. In addition, the grant will repay the associated Employer’s National Insurance and the minimum employer’s automatic enrolment pension. If an employer pays more than the 3% statutory minimum, based on pensionable qualifying earning over £6,240 (2020-21 rates), on those wages and salaries then the excess will not be refunded under the scheme. The 80% grant is not a loan and it is not repayable to HMRC.

Employers will be able to claim the higher of either:

  • the amount an employee earned in the same month last year

  • the average of an employee’s monthly earnings for the 2019-20 tax year.


If an employee is employed for less than a year, employers will claim for an average of an employee’s monthly earnings since they started work. The same arrangements apply if an employee’s monthly pay varies such as if they are on a zero-hour contract.

Bonuses, commissions and fees are not included as part of your monthly earnings.

What should directors do?

It was not initially clear whether directors of owner managed companies could put themselves 'on furlough'. This has now been clarified. See our blog on what are freelance worker entitled to for more information on directors of their own limited companies.

Our concern for directors though is that the amount available under CJRS is likely to be limited to 80% of payments made through PAYE only i.e. no account for the dividends a director might take to supplement their salary.

We are sure that directors will wonder if they should increase their company salary to take advantage of the £2,500 pm maximum limited, either retrospectively or for their March 2020 payroll and onwards. Under the scheme, any salary increase after 1 March 2020 will be ignored. This is to stop abuse by unscrupulous directors

Even in the face of this unprecedented global Covid-19 crisis, there will be tight controls on the job subsidy to avoid abuse by employers who could see it as a way to simply lay off staff with no intention of rehiring them and creating ghost staff.

It is quite clear that the government and HMRC do not have any system in place to deal with this at the moment. It may take several weeks or over a month before the system is in place to reclaim a grant towards wages and salaries paid to employees.

There will also be strict record keeping measures to stop abuse of the system by unscrupulous employers taking advantage of the refund system.

What if you currently have more than one employer?

An employee can be furloughed by one employer and continue to work for another.

If an employee is furloughed by more than one employer, they will receive separate payments from each employer. The 80% of normal wages and salaries, up to a £2,500 pm, applies to each job.

What if the employee is on maternity or paternity leave, receiving adoption pay or shared parental pay?

The employee must complete their agreed minimum period of leave. Only after that period has the come to an end can they be furloughed.


What is an employee's pay varies?

If the employee has been employed for at least one year, the employer can claim the higher of either the:

  • same month’s wages and salaries as from the previous year

  • average monthly wages and salaries for the 2019-2020 tax year


If the employee has been employed for less than one year they can claim for 80% of the employee's average monthly wages and salaries since they started work for the employer.


An employer can claim for any regular wages and salaries that they are obliged to pay to their employees. This includes past overtime, fees and compulsory commission. However, discretionary amounts e.g. bonuses, tips and commission payments and non-cash amounts, e.g. benefits in kind, should be excluded.


What about taxes on furloughed salary and grants?


Employees will still pay income tax, national insurance and student loan repayments, as normally, on whatever wages and salaries they receive through the scheme, which may have been reduced to 80% of normal gross pay. This includes pension contributions.


Grant payments received by a business under the scheme are offset against the actual wages and salaries paid to their employees. The net cost of wages will be a normal business cost. Putting this another way, the grant will be fully taxable and the wages and salaries together with the associated employer's national insurance and pension contributions will be fully tax deductible normal business costs.


Statutory Sick Pay

Employees will be are entitled to Statutory Sick Pay (SSP), so long as they meet the eligibility criteria e.g. earning are more than £118 pw in 2019-20. If the SSP is paid because of, or self isolation from, Covid-19 then the employee does not have to wait to receive SSP. The employee can receive SSP from day one, rather than having to wait until the usual day four of sickness. SSP can be paid up to 28 weeks.

It was announced that employers will be able to recover the new style Covid-19 SSP paid to their employees for a maximum period of 14 days. Employers can only claim for this type of SSP if their employee has or is self isolating because of Covid-19. This provision still applies to employers that have not furloughed their workforce and where only selected employees are sick or need to self-isolate.

While SSP is payable by an employer to an employee for up to 28 weeks, only 14 days of SSP can currently be recovered by the employer from HMRC and only is it is Covid-19 related. If an employee is sick for any other reason they must wait until day four of sickness to receive SSP. Furthermore, an employer cannot claim the 14 days of SSP paid to the employee unless it is because of Covid-19, either through sickness with it or isolating because of it.

Once full eligibility criteria are confirmed, the SSP refund will be backdated to 13 March 2020. Currently, there is no system for employers to claim for a refund of Covid-19 related SSP from HMRC. This is expected in late April 2020.

See also UK practical business advice: COVID-19 and Budget 2020


HMRC is now actively encouraging employees to make claims for their homeworking costs through a new online portal.


Chancellor announced measures to support people and businesses through this period of disruption caused by COVID-19.

Updated guidance for employers, businesses and employees is available at:


Take care and stay safe. HMRC will continue to issue more guidance and update the rules in due course.


To work out the claim through the CJRS see the HMRC website.

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