• Coronavirus Job Retention Scheme

    Everything you need to know


Coronavirus Job Retention Scheme: Everything you need to know

19 January 2021

The Coronavirus Job Retention Scheme (CJRS) will now expire at the end April 2021. For employees made redundant between 24 September and 30 October, it may be possible to re-employ them and then furlough them until 30 April 2021. Read our article explaining the changes and the third ‘phase’ of the scheme

It is still expected that when the CJRS expires, a further Job Support Scheme aimed at minimising unemployment will replace it. Read more on the two strands of the Job Support Scheme

HMRC has restated that it will check all claims before payments are made and from December 2020 will publish details of all companies and LLPs making furlough claims. It is important to make sure that all claims you have made are checked as any errors must be reported to HMRC and corrected – read more on the HMRC’s CJRS enforcement rules and powers

Try our Tools

BDO has two CJRS tools to support your business with calculations and understand your exposure to risk. 

CJRS Calculator

A time saving calculator that allows our specialist employment tax team to assist you with calculations for your entire furlough population. 

Read more

CJRS Process Risk Review Tool

Understand your exposure to risk and ensure the detail of claims has been accurate and whether further action is required in order to be compliant with HRMC. 

Read more

The Basics




Flexible furlough – how does it work?

Broadly, the maximum number of employees for whom you can claim under the CJRS from 1 July to 31 October was the highest number employees for which you made one or more valid CJRS claims for before 30 June 2020. For example, you may have claimed for 30 employees for several periods prior to 30 June so: even if only 25 employees are actually furloughed on 30 June, you can still claim for up to 30 employees in a later period if some go back onto furlough after 1 July. Equally, if your highest claim was for 41 employees but this was later corrected to withdraw one of them, that person should not count towards the maximum, so your maximum would be 40. 

For the November to 30 April 2021 version of the scheme, it is not necessary for employees to have previously been furloughed to qualify and there is no maximum number of employees that can qualify for a claim.

The concept of ‘Usual hours’ is new for the CJRS from July onwards and can be calculated on a ‘fixed’ or ‘variable’ basis. If the employee’s contract specifies a fixed number of hours, an employee's 'usual hours' must be worked out as follows to calculate the CJRS claim:

  1. Start with the hours your employee was contracted for at the end of the last pay period ending on or before 19 March 2020 (30 October for the second lockdown period).
  2. Divide by the number of calendar days in the repeating working pattern, including non-working days.
  3. Multiply by the number of calendar days in the pay period (or partial pay period) you are claiming for (minimum of 7 days unless at the start or end of the month).
  4. Round up to the next whole number if the outcome isn’t a whole number.

An employee must be treated as on ‘variable’ hours if their contract does not specify a fixed number of hours and it is made clear that pay depends on the number of hours worked. In such situations, the ‘usual hours’ for that employee is will be calculated based on the higher of either:

  • The average number of hours worked in the tax year 2019 to 2020, or
  • The corresponding calendar period in the tax year 2019 to 2020.

Note that in this calculation of “usual” variable hours, employers must include any hours of leave for which the employee was paid their full contracted rate (such as annual leave) and any hours worked as ‘overtime’ (but only if the pay for those hours was not discretionary).

For employees that were not furloughed before 1 November 2020, 80% of wages (capped at £2,500) of employees on a fixed salary must be calculated based on the last pay period ending on or before 30 October 2020. Where and employee’s pay varies, the calculation is based on the average payable between 6 April 2020 (or start date if later) and the day before their CJRS extension furlough periods begins.

Our experience to date is that the calculations are not as simple as many employers had hoped, particularly where there are salary sacrifice arrangements. BDO have responded to this by creating our own CJRS tool and employer assistance. More detail on this can be found here.

HMRC has created a calculator to assist employers with their calculations. As with all calculators it must be used with care: it is worth reading HMRC’s specific guidance to understand exactly how to calculate CJRS and deal with the RTI implications. HMRC has provided worked examples to help employers calculate their claim here.

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Job retention bonus scheme - how will it work?

Payments under the CJRS will cease at some point – currently expected to be 30 April 2021. At that point it is expected that the bonus scheme will be implemented but the terms have yet to be confirmed. Under the original proposals employers were be paid a bonus of £1,000 for every employee who has been furloughed at some point but who returns to work and remains continuously employed from for a specified period after the CJRS ends.

Read more here

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What is a furloughed employee?

The concept of an employee furlough is new to the UK but in general terms it refers to when employers require their staff to take unpaid leave of absence. For the initial scheme to 30 June, to be eligible for the subsidy, when on furlough, an employee could not undertake work for or on behalf of the organisation (eg providing services or generating revenue). Under these rules, where an employee is was working, but on reduced hours, or for reduced pay, they are not ‘furloughed’ and will not be eligible: this is due to change from August. If an employee chooses to volunteer, for example to assist the NHS, this will not impact their status as a furloughed employee.

From 1 July 2020, the new ‘flexible furlough scheme allows part time working arrangements – see Flexible furlough – how does it work?

While on furlough, the employee’s wage will be subject to usual income tax and other deductions. Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, and rights against unfair dismissal and to redundancy payments.

Each employee must be notified in writing that they are being furloughed, however, HMRC’s guidance states that “Collective agreement [for furlough] reached between an employer and a trade union is also acceptable for the purpose of such a claim.” We would recommend that employment law advice is sought before issuing the relevant written communications/notifications to selected employees. Note that a record of this written communication must be retained for six years.

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How will CJRS payments be paid to us? 

Employers will need to make a claim via HMRC’s online portal. For the November to 30 April 2021 period, HMRC will open claims from 11 November: claims for November must be made by 14 December and then by 14th of the following month for each subsequent monthly claim. The deadline for claims for October 2020 remains 30 November 2020.

The HMRC guidance provides detail on the information an employer will need to be able to make a claim but where the claim for the period covers 100 or more employees, HMRC will reject the claim file automatically if it does not include all the information required. A claim template is available from HMRC here. For periods up to 30 June, employers could only make one claim in any three week period was is the minimum time an employee may be furloughed for. Now claims can be made for shorter periods (as little as 7 days) within a month but must not overlap or go over the calendar month end (as different grant rates apply to different months).

Once HMRC has processed the employer’s claim it will make payment by BACs into their nominated UK bank account. If employers have not already paid the employee, then they must pay the employees all of the grant they received for their gross pay. No fees may be charged from the money which is granted. The normal RTI return process must apply to all payments to employees – read HMRC guidance.

If an employer uses an agent who is authorised to act for their PAYE purposes, the agent will be able to make the claim on the employer’s behalf. However, if the employer uses a file-only agent, they will not be able to provide this service, but they will be able to provide the employer with the information needed to make the claim.

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How much is the CJRS subsidy for each month?

The CJRS subsidy is phased down from 1 August to 31 October as shown below (reverting to the full rate for November because of the second national lockdown) so claims from 1 July onwards must relate only to periods in one calendar month (eg days only in August), for pay periods covering a calendar month end, two claims must be submitted.

  To end June July August September October November 2020 to 30 April 2021
Government contribution: employer NICs and pension contributions Yes Yes No No No No
Government contribution: wages 80% up to £2,500 80% up to £2,500 80% up to £2,500 70% up to £2,187.50 60% up to £1,875 80% up to £2,500
Employer contribution: employer NICs and pension contributions No No Yes Yes Yes Yes
Employer Contribution: wages - - - 10% up to £312.50 20% up to £625 -
Employee receives

80% up to £2,500 per month

80% up to £2,500 per month

80% up to £2,500 per month

80% up to £2,500 per month

80% up to £2,500 per month

 80% up to £2,500 per month

While furloughed employees are not working, they are not subject to the usual National Minimum Wage (NMW) regulations. However, there are some anomalies to this such as in relation to online training – see below. Care will be needed if employees return to part time working after 1 July.

It should be noted that furlough payments should be used for their intended purpose and that if they are not passed on to employees HMRC may refuse subsequent claims. Similarly, HMRC would not expect to agree a Time to Pay Arrangement that includes the NIC (employer and employee) and PAYE payments due on money’s received through the furlough scheme.

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What is the minimum furlough period?

For the flexible version of the scheme from July onwards, employees can work as required and be on furlough at other times. For example, while employers must claims for periods of at least 7 days, the employee/s need not have been on furlough for all of those days – see Flexible furlough – how does it work? For each PAYE Payroll scheme, only one claim can be made for any given period – there can be no overlap so each claim must cover all employees furloughed for a period.

For the CJRS up to 30 June 2020, there was a minimum furlough period of 3 consecutive weeks and whilst employees could be furloughed multiple times, each separate instance must have been for a minimum period of 3 consecutive weeks. When an employee returns to work they must be taken off furlough. Employees must have been added to the scheme by 10 June (so that they meet the furlough days requirement by 30 June when the initial version of the scheme ends) to qualify for the flexible version of the scheme.

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What about holiday pay?

Employees continue to accrue annual leave and if they take holiday during a period of furlough, they are entitled to holiday pay at their normal rate of pay in accordance with the Working Time Regulations. It is worth noting that HMRC has stated that it will continue to keep policy on holiday pay under review. HMRC’s current guidance on holiday pay is here.

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Which employers are eligible?

All UK businesses can claim under the scheme if they:

  • Created and registered a PAYE payroll scheme on or before 19 March 2020 (30 October for the second lockdown period)Have enrolled for PAYE online
  • Have a UK bank account, and
  • Have furloughed employees who were already employed and had been paid via RTI on or before 19 March 2020 (30 October for the second lockdown period).

Eligible entities include businesses, charities, not-for-profit organisations, recruitment agencies, single director companies and public authorities. Administrators could also apply but only if there was a reasonable expectation that individuals will ultimately be rehired. It was not expected that many public sector organisations would furlough employees. Individuals who employ domestic workers (eg a nanny) can apply where the worker is formally furloughed.

If a business has taken on employees of a previous business transferred after 19 March 2020 (30 October for the second lockdown period) they are eligible if either the TUPE or PAYE business succession rules apply to the change in ownership, regarding the employees concerned.

Finally, if a group of companies with multiple PAYE schemes transfer of all employees into a new consolidated PAYE scheme after 19 March 2020 (30 October for the second lockdown period), the new scheme will be eligible to furlough those employees and claim the grants available under the CJRS.

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Which employees can/could be furloughed?

The new flexible furlough scheme replaced the original scheme which closed from 30 June. With the exception of employees returning from maternity or paternity leave, no employees can be added to the furlough scheme after 30 June. However, provided an employee was furloughed under the original scheme for any consecutive three week period between 1 March and 30 June 2020, they can enter the flexible scheme (ie they do not need to have been on furlough on 30 June).

The original scheme covered, full-time and part-time employees (including foreign nationals), apprentices and those on agency contracts (including umbrella companies) or on flexible, fixed term or zero-hour contracts, including Limb (b) workers paid through PAYE. Office holders (including company directors) and salaried members of Limited Liability Partnerships (LLPs) can also be furloughed.

The HMRC guidance states that in the case of agency workers (including umbrella companies), furlough should be agreed between the agency or umbrella company and the worker, not the end user business.

If the individual was on a fixed term contract the key criteria is whether or not the employer included them in an RTI submission to HMRC before 28 February or 19 March (30 October for the second lockdown period). Where such an RTI return was made, the individual can have their fixed term contract renewed and then be furloughed to participate in CJRS.

Employees that were on payroll as of 28 February 2020 and were made redundant or stopped working for the employer after that and prior to 19 March 2020 can also qualify for the scheme if the employer re-employs them and puts them on furlough. An employee who started unpaid leave after 28 February 2020 can be put on furlough instead, but an employee who went on unpaid leave on or before 28 February 2020 cannot be put on furlough until the date on which it was agreed they would return from unpaid leave. No employees can be furloughed after 10 June 2020.

Note that if an employee had multiple employers over the past year but only worked for one of them at any time and is being furloughed by their current employer, no former employer(s) should also re-employ, furlough them and make a CJRS claim in respect of them.

There are special rules for those on sick pay, maternity/paternity/shared parental leave, and those who are volunteers or who undertake online training. Where employees are carers or need to look after children or are ‘shielding’ under government advice as a result of the COVID-19 crisis they can be furloughed.

Note that apprentices can be furloughed and continue to train during this time but employers must pay at least the appropriate minimum wage for the time they spend training.

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How does the maximum number of furloughed employee rule work from 1 July to 31 October?

Broadly, the maximum number of employees for whom you can claim under the CJRS from 1 July to 31 October is the total of all employees for whom you made a valid CJRS claim for before 30 June 2020. For example, you may have claimed for 30 employees prior to 30 June so, even if only 25 employees are actually furloughed on 30 June, you can still claim for up to 30 employees in a later period if some go back onto furlough after 1 July. Equally, if you claimed for an employee but this was later corrected to withdraw them, that person should not count towards the maximum.

To cater for special situations, where an employee was on maternity or paternity leave (or armed forces leave) before 30 June and is furloughed on return (ie the date of return to work or later) then the maximum number of qualifying employees will increase to include them.

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What about training for furloughed employees?

Yes, any furloughed worker can take part in remote/online training (the government is encouraging it to maintain skills). For example, a furloughed apprentice may need to continue their study course online. This training must not however generate revenue for the business or (an associated business) or should not involve the provision of services to the business. However, all workers that undertake training will still need to be paid at least the appropriate NMW for the hours that they spend training. Therefore, for some employees, employers may need to top up furloughed pay for the period/s in which they undertake training.

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Are Expats eligible for the Coronavirus Job Retention Scheme? And does the employee have to be physically paid by the UK employer?

Inbound expats will qualify for CJRS if the conditions of the scheme are met. The individual must be on the UK payroll, must have received a payment of earnings included on an RTI submission before 19 March (30 October for the second lockdown period), and must be an employee of the UK business submitting a claim under the scheme.

Whether the individual is an employee of the UK entity is a question of fact. HMRC will accept that assigned or seconded employees who are included by an employer within a normal, Appendix 6, or dedicated expatriate PAYE scheme, constitute employees of the UK entity for the purposes of the Coronavirus Job Retention Scheme.

So long as the UK entity is the employer it doesn’t matter who physically pays the employee.  We would note, though, that businesses should only access the scheme if they could not maintain their current workforce without doing so. If the UK employer can continue to successfully recharge costs to an overseas entity, then it does not need to access the Coronavirus Job Retention Scheme and is, therefore, ineligible for it.

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I operate through my own personal service company but my work has dried up, can I furlough myself? 

Yes, as a company director you can qualify as a furloughed employee. As with other employees you must not carry out any profit generating work for the company while on furlough but can undertake company administrative tasks (such as filing tax returns and company accounts) as needed.

Please note that personal service companies paying their director in both salary and dividends will only be able to claim a grant for the salary element for the furloughed director.

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What about people I laid off in my business the week before the CJRS announcement, could I still claim for them?

The purpose of the scheme is to protect jobs, therefore, under the original scheme, provided that you did not lay staff off prior to the 1 March and you reinstated them onto the payroll before 10 June, you could then claim for them. 

Similarly, for the furlough scheme from November to March 2021, where employees were:

  1. paid through RTI at some point between 20 March 2020 to 23 September 2020, and
  2. still employed at 23 September and
  3. made redundant after 24 September

- they can be re-employed and participate in the furlough from November to 31 March 2021. Equally, where an employee was on a fixed term contract and this expires after 23 September, the contract can be renewed and the employee put on furlough.

We would recommend that employment law advice is sought particularly where termination payments have been made as unwinding the arrangement may be complex. If you are still considering making staff redundant, it is important that redundancy and termination payments are handled properly, including NIC payments where the termination takes place after 5 April 2020 – read more.

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What happens if we have made a mistake in our furlough claim?

You can delete your claim within 72 hours and start again. If you spot a mistake after that time, when you make your next claim you can state the past over-claims of furlough payments and correct it by reducing the amount claimed for the current period. Employers who are no longer making CJRS claims can also correct errors in past claims by repaying a lump sum to HMRC. Note that HMRC current guidance says that claims and changes to claims for the month of October 2020 can be made up to 30 November 2020. It is not currently clear whether or not this means that corrections for earlier periods will be possible through this process from 1 December onwards. However, it will always be possible to correct errors in some form and it is important to do so before HMRC identifies them. 

Employers who have made mistakes must disclose them to HMRC with a specified period or face potential tax penalties as well as recovery action from HMRC - read details.

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Is the CJRS payment taxable? 

Yes, both on the employee and the employer. When furloughed employees are paid through RTI, the employer must make the usual PAYE, NIC and automatic enrolment deductions.

Employers must treat the grant as taxable income for corporation/income tax purposes but can deduct employment costs as normal when calculating their taxable profits.

Note that individual households who have furloughed domestic staff (e.g. nannies) are not taxable on grants received under the scheme. However, the domestic staff are subject to PAYE/NIC on their wages as normal.

HMRC has not provided specific guidance on the VAT status of the payment. However, the scheme is described as providing a ‘grant’ and this is likely to be treated as outside the scope of UK VAT on the basis that there is no underlying supply from the claimant to the Government. Of course, as with all new schemes, we would recommend keeping a watchful eye on announcements.

Read more on the tax status of CJRS payments.

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Do CJRS payments have to be counted for EU State Aid limits?

HMRC has now confirmed that the CJRS grant is not considered state aid because it is available to all businesses. See BEIS Guidance.

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What if instead of furloughing employees we pay them reduced wages and/or cut their hours during the crisis instead?

You should take legal advice on any arrangement to reduce employees’ contractual hours or wages. Please also bear in mind that employers must continue to pay at least the minimum wage per hour to employees who continue to work and HMRC will continue to take enforcement action against those that do not. A claim for CJRS may not be made in respect of these workers, although from 1 August 2020 the rules changed to reflect that part time working is permissible.

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Redundancies – how do they affect CJRS claims before the leaving date?

Grants may not be used to substitute redundancy payments. However, CJRS does not change the normal rules and arrangements for redundancy notice periods, the government has updated legislation to confirm that from 31 July 2020, employees must be paid their normal pay during notice periods and that normal pay rates are used to calculate the termination payment.

However, employers can continue to claim for a furloughed employee who is serving a statutory or contractual notice period. The level of CJRS grant that can be claimed, towards pay during any redundancy notice period, follows the same rules for calculating a CJRS grant during an ordinary period of employment. All of the grant must be paid over to the employee.

Once the employee has been made redundant, and is no longer serving their notice period, they are no longer eligible for further CJRS grants to the employer.

Read more on redundancies and termination payments

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