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The Coronavirus Job Retention Scheme

by Advocko

Amidst the COVID-19 lockdown, businesses are struggling to address the immediate as well as long-term challenges that the virus represents. On 26th March 2020, the UK government published guidance on the Coronavirus Job Retention Scheme (CJRS). Under this scheme, employers will be able to claim part of their employees’ wages through an online portal. The object of the CJRS is to encourage companies to hold essential staff which will be required to bring their businesses back to scale in the future. 

The scheme will operate for at least 3 months and is backdated to 1st March 2020, after which it may be extended if necessary. It is open to all UK employers operating PAYE (HMRC’s system of collecting income tax and national insurance) as part of their payroll. 

Moreover, employers may only claim for furloughed employees i.e employees they can no longer afford but have not made redundant.

While official details have been published on, our understanding of the eligibility criteria and claim process, including any prerequisites and important pointers is outlined below.

If you are an employer looking to file a claim…

  • You must notify employees of their furloughed status.

  • Furloughed employees may not undertake any work that generates revenue for your company.

  • Employees contracted after 28 February 2020 cannot be furloughed and therefore are not eligible to be claimed for under this scheme.

  • Employees who were laid off after 28 February 2020, are eligible if they are re-hired by their previous employer.

What does the scheme cover? 

  • 80% of your employees’ wages up to a cap of £2,500 per month and the affiliated employers’ national insurance contributions (NIC) on this amount and the minimum automatic enrolment employer pension contributions on that wage.

  • “Wages” means basic pay only. It does not include any type of fees, commission or bonuses.

  • The employee’s wage will be subject to the usual income tax and other deductions.

  • Employers can choose to top up their employee’s wages to 100%, but are not required to and will not be provided any additional funds from HMRC for doing so. Any top up by the employer would need to be taken into account when calculating the employer’s NICs and pension contributions.

How do I access this scheme? 

  • Employers must calculate their claim and submit it to HMRC at least every three weeks.

  • An online portal will be set up by the government by the end of April 2020, this is where employers will submit their claims. The following information will be required:

  1. Your PAYE reference number
  2. The number of employees being furloughed
  3. The claim period
  4. The amount claimed
  5. Your bank and contact details

  • Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to your UK bank account.

The following illustration can be used to calculate the amount that is to be granted to an employee: 

  • Company Z employs Mr C and pays him an annual salary of £21,000 or a monthly salary of £1,750. After tax, he receives £1,493 as his ‘take-home’ salary. Company Z also pays a NIC of £123.
  • Provided that Mr C is furloughed by his employer, the grant that he is to be paid is the lower of 80% of £1,750 plus company Z’s NIC on this amount. (Note: the amount does not surpass £2,500, hence the ‘cap’ is irrelevant in this example)
  • So company Z should file a claim for £1400 + £123 = £1523
  • According to their employment contract, Company Z might be required to top up this amount by £350 (£1,750 + £123 – £1523) to maintain Mr C’s salary.

Note: The government has also guaranteed support for self-employed individuals. Grants will be provided in a similar manner in one installment in June 2020. 

It is also worth noting that since the CJRS online system will take some time to set up, companies have been provided with the option to apply for emergency loans under The Coronavirus Business Interruption Loan Scheme in order to manage their short term cash flow. 

Although the UK government has been criticised for being slow in terms of response and policy changes, the COVID-19 bailout package is the one of the largest the country has ever seen since the financial crisis of 2008. 

Countries around the world are looking to stall the economic impacts of the pandemic as experts suggest massive fiscal policy changes and governments introduce huge bailout packages. This is how some countries are responding to mitigate damage to their economies:

United States

President Donald Trump signed a $2 trillion stimulus bill that incorporates $500 billion to back loans for companies and $350 billion for small businesses. Lower and middle-income adults will get $1,200 and $500 for each child, while unemployment insurance is beefed up and interest rates have been significantly reduced by the central bank. This can be compared to the approximately $500 billion Wall Street bailout package which was considered huge at the time.


Similar to the UK, the Danish government is paying 75% of employees’ salaries, up to $3,288 per month, at private companies that have been affected by the pandemic.

For daily wagers, the government is prepared to pay upto 90% of their wages.


Authorities will spend €45 billion to encourage small businesses and employees and President Emmanuel Macron said there will be unlimited aid for companies. It has further promised €300 billion for corporate loans.


Officials are prepared to make as much as $219 billion of aid available, including €100 billion of guarantees for company loans and €17 billion of direct support for enterprises. Prime Minister Pedro Sanchez reportedly said private investment will provide €83 billion of support.


The German government has signed a $800 billion package for loans, guarantees, government stakes in companies, and credit to keep businesses afloat.
According to CNN, these bailout packages have cost the world’s economy $7 trillion and that figure is only going to rise if we witness another wave of cases.

HMRC Updates:

On April 6th, the HMRC published further guidance on the job retention scheme addressing eligibility and other crucial aspects.

Who is eligible?

  • All employers are eligible regardless of their circumstances.
  • Foreign entities can apply.
  • Office holders, company directors, salaried LLP members, agency workers, apprentices and limb workers payed through PAYE are all covered.
  • Employees with multiple jobs (they will have to be furloughed separately by each employer and the £2,500 salary cap will apply to each employer separately.)

What happens during the furlough period?

  • Employees are not allowed to perform “key work” for a company during the period that they are furloughed (this excludes training).
  • They can however work for other employers or start new jobs (this would presumably apply to part time employees who take other work on during this period).
  • They can delegate work to staff that has not been furloughed.

Wages and commission

  • Furlough pay for employees whose pay varies includes contractual fixed pay, compulsory commission and past overtime
  • Compulsory commissions are included whereas discretionary are not.

What remains unclear:

  • No clarity has been provided on whether employers can require employees to take a holiday during furlough under the working time regulations.
  • Furthermore, it is unclear whether taking a holiday will be covered with furlough pay.



For more Coronavirus related legal updates, such as the relief provided to renters and self-employed workers, click here.

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