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30 Mar 2020

Coronavirus Job Retention Scheme and other Covid-19 developments


New guidance on the Coronavirus Job Retention Scheme (CJRS) was published by the government on 26 March 2020. The CJRS allows employers to claim back 80% of their furloughed employees’ wages (up to a cap of £2,500 per month) and is open to employers who operated PAYE on or before 28 February 2020.

The basics:

By agreement, employers impacted by the Covid-19 pandemic can designate their employees as “furloughed”, meaning they remain employed but do not perform any work.

  • The CJRS is open to all UK employers including charities, recruitment agencies and public authorities.
  • Employers must calculate their claim and submit it to HMRC at least every three weeks (this is the minimum period of furlough). In addition, HMRC will pay the employer’s NICs and minimum auto enrolment employer’s pension contributions.
  • HMRC will pay the grant (it is not a loan) directly into the employer’s UK bank.  The first payments are due to be paid at the end of April 2020.
  • Employers can choose to top up their employee’s wages to 100%, but are not obliged to and will not receive any additional funding from HMRC for doing so.  Any top up by the employer would need to be taken into account when calculating employer’s NICs and pension contributions.
  • Employees’ wages paid for by the CJRS will be subject to income tax and NICs in the usual way.
  • Claims can be backdated to 1 March 2020 and the CJRS is currently open until the end of May, but it may be extended.

Important points to note:

  • “Wages” means basic pay only and does not include fees, commission or bonuses.
  • The CJRS is open to employees on all types of contract including agency and zero-hour contracts.
  • Even if employees are only paid the national minimum wage, their entitlement is still 80% of their monthly wage.
  • Employees hired after 28 February 2020 cannot be furloughed nor claimed for.
  • Employees who were made redundant after 28 February 2020, are eligible if they are re-hired by their previous employer.

How it works:

  • Furlough leave must be taken in blocks of at least three weeks or employees can be furloughed for the entire length of the CJRS. This enables some short-term gaps in the furlough period if required by the business.
  • Employers can rotate furlough leave amongst employees so that employees come on and off the CJRS.
  • Employees cannot perform any work at all for the company, but they can undertake voluntary work or training, as long as this does not provide services to or generate revenue for their employer. 
  • If employees are required to complete training whilst they are furloughed, they must be paid at least the national minimum wage for the time spent training.
  • If an individual has more than one employer they can be furloughed for each role. Each job is separate and the cap applies to each employer.
  • Payments by HMRC to businesses must be included as income and can then be deducted as employment costs in the calculation of taxable profits for income and corporation tax purposes.
  • Further guidance on how to calculate employer’s national insurance and pension contributions will be produced by the government in due course.
  • Employers should be aware that if they designate employees as furloughed, this could affect their eligibility to participate in tax advantaged incentive plans and may also impact their existing awards.

Vulnerable employees:

  • Employees on sick leave or who are self-isolating should receive sick pay, but can be moved onto the CJRS after their sickness or isolation absence.
  • Vulnerable employees who are shielding in line with public health guidance can be furloughed.
  • When employers are deciding who to furlough, they should be mindful of how they select employees to avoid risks under equality and discrimination laws that still apply.
  • Prioritising vulnerable workers, such as elderly employees or those with medical conditions, for the CJRS is unlikely to be discriminatory as this aligns with the objective of reducing infections nationwide.
  • Employees on maternity leave can continue to draw their maternity benefits or can give notice to end their leave and move onto to the CJRS.
  • Employers who offer enhanced maternity pay can claim this as wage costs through the CJRS. The same principles apply for employees who receive contractual adoption, paternity or shared parental pay.
  • If, at the end of the CJRS, an employer undertakes a redundancy exercise, then a fair process needs to be followed and employers should avoid selecting only those who were furloughed, unless that can be justified.

Other developments

  • The government has also announced a support package for the self-employed. The scheme mirrors much of the relief being offered to employees although it is only available to self-employed persons who make profits of up to £50,000 a year and the grant will be payable as a lump sum in June 2020.
  • In addition, workers who have not taken all of their four-week statutory annual leave entitlement due to Covid-19 will be able to carry it over into the next two leave years. This means that staff who cannot currently take holiday can disregard the normal “use it or lose it” rule.

We have a dedicated Covid-19 team of employment lawyers keeping up to date on the latest developments and who are available to answer any questions you may have.  You can find more information here.

Please do get in touch with Paul Reeves, Barbara Allen, Michèle Aubertin, Charlotte Varela or your usual Stephenson Harwood contact. 

In the meantime, we hope that you, your families, and loved ones stay healthy and safe at this difficult time.