UK: Coronavirus Job Retention Scheme - An Overview

This note provides an overview of the Coronavirus Job Retention Scheme which is designed to support UK employers who cannot maintain their current workforce because their operations have been affected by the coronavirus pandemic.

Last updated: 30 March 2021

It sets out the position under the current iteration of the UK Coronavirus Job Retention Scheme at the time of writing.  For details of past iterations of the scheme please consult  

What is the UK Coronavirus Job Retention Scheme?

The Coronavirus Job Retention Scheme (“JRS”) is a scheme announced by the UK government on 20 March 2020 to support employers who cannot maintain their current workforce because their operations have been affected by coronavirus (“COVID-19”).

Broadly speaking, employers can apply for grants to cover the costs of employees who are “furloughed”, ie. placed on leave of absence in connection with the COVID-19 pandemic.

The scope of the JRS has changed over time, and the government has issued a series of guidance notes to assist employers and employees to access the JRS.  The Treasury has also issued a number of directions to Her Majesty’s Revenue and Customs (“HMRC”) providing formal details of the JRS (the “Direction”) which have also been amended over time. 

What is the timeframe of the JRS?

The JRS was initially only intended to run between 1 March 2020 and 31 May 2020.  However, it was subsequently extended on a number of occasions.  Most recently, the JRS was extended until 30 September 2021.

How much do employees on the JRS receive?

Furloughed employees are entitled to furlough pay of no less than 80% of their usual monthly wage costs for unworked hours, up to a cap of £2,500 a month (“Furlough Pay”).  

How much can employers claim under the JRS? 

Employers can apply for a grant that covers furloughed employees’ usual monthly wage costs for unworked hours, up to a cap of £2,500 per month (“JRS Grants”) up to 30 June 2021.  From 1 July 2021 the level of grant will be reduced each month and employers will be asked to contribute towards the cost of their furloughed employees’ wages. 

Employers are currently responsible for employer national insurance contributions (NICs) and minimum automatic enrolment employer pension contributions on Furlough Pay.

Can employees carry out work while on furlough?

Initially, employees were not able to complete revenue generating work for their employer while on furlough. However, from 1 July 2020 furloughed employees have been permitted to carry out work for their employer in conjunction with furlough leave (“Flexible Furloughing”).  

Which employers can use the JRS?

The JRS is open to all UK employers who created and started a PAYE payroll scheme on or before 30 October 2020, are enrolled for PAYE online and have a UK bank account. 

Which employees are eligible for the JRS?

Employers can claim JRS Grants in respect of employees who were on their PAYE payroll on or before 30 October 2020 and which were notified to HMRC on a Real Time Information (RTI) submission between 20 March 2020 and 30 October 2020.  For periods starting on or after 1 May 2021 employers can claim for employees who were employed on 2 March 2021 provided the employer made a PAYE RTI submission to HMRC between 20 March 2020 and 2 March 2021.

Can employers re-hire and furlough employees who had been made redundant or stopped working?

Where an employer made employees redundant or they stopped working for the employer on or after 23 September 2020, the employer can re-employ them and furlough them under the JRS. This applies as long as the employee was employed on 23 September 2020 and the employer made a PAYE RTI submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.

How does an employer place employees on furlough leave?

To place an employee on furlough leave, employers must agree this with the employee in a way that is consistent with employment, equality and discrimination laws. The employer must confirm the furlough agreement with the employee in writing.   

In the circumstances, it appears that it is acceptable to rely on oral or implied consent to furlough leave so long as confirmation of the agreement is provided in writing. However, we consider that it would be best practice to obtain employees’ express written consent to furlough leave.   

A record of the furlough communication must be kept for at least five years.

Collective agreement reached between an employer and a trade union is acceptable for the purpose of evidencing an employee’s furloughed status to claim under the JRS.

Do employers need to “top up” the Furlough pay?

No, to claim a JRS Grant employers do not need to “top up” any gap between the Furlough Pay (ie. 80% of the employee's usual wages for unworked hours, capped at £2,500) and the employee’s normal pay, although they may choose to do so if they wish.  Note however that where the employer does not top up the difference, the employee must agree to the change in their pay.

Is there a minimum period of furlough?

Currently no minimum period of furlough applies. However, in most cases the period that employers can claim for must be for a minimum claim period of seven calendar days.

Do the employees need to be at risk of redundancy to be furloughed? 

Based on all of the information to date, we understand that the JRS is intended to cover a broader range of scenarios rather than only being an alternative to redundancy, but employers should ensure their reasons for placing any employees on a period of furlough leave are compatible with the government’s messaging around the purpose of the scheme.  As a minimum, any period of furlough leave must relate to circumstances arising as a result of coronavirus or coronavirus disease or measures taken to prevent or limit its further transmission.

More generally, the Direction states that no claim may be made under the JRS if it is abusive or is otherwise contrary to its exceptional purpose.

Can an employer claim JRS Grants for notice periods?

No. Employers cannot claim JRS Grants in respect of any day on which an employee is on notice of termination of their employment on or after 1 December 2020.

JRS Grants also cannot be used to fund payments in lieu of notice (PILONs) and/or statutory/enhanced redundancy pay. 

Can employees carry out work for other employers during furlough leave?

Subject to the terms of their contract with the employer who placed them on furlough leave, employees are able to work for another employer whilst on furlough leave. 

Similarly, an employee with more than one job may be placed on furlough leave by each employer and claim Furlough Pay up to the maximum amount from each employer (subject to the usual eligibility criteria).

Will collective consultation obligations arise when seeking to place 20 or more employees on furlough leave or to agree a Flexible Furlough agreement?

Where an employer is asking 20 or more employees to agree changes to their terms of employment as a condition of furlough leave or Flexible Furlough, such as reducing their pay to the level of the maximum Furlough Pay, the employer will need to consider whether it needs to engage in collective consultation to procure agreement to the changes to the terms.

We consider that collective consultation obligations may not arise if the employer is confident that most employees will accept the changes to their terms of employment (eg. because they are temporary and more attractive than redundancy) such that the threshold for collective consultation is not therefore met.  However, employers should keep the matter under review as it moves through the process, particularly if there are a large number of affected employees or if it becomes aware of significant pushback.

Are employers obliged to use the JRS?

The JRS is voluntary and employers are not under an obligation to use it.  Note however that, where an employer decides to make redundancies rather than placing employees on furlough leave, this could potentially give rise to claims for unfair dismissal unless the employer has a good reason for not using the JRS or the redundancy is otherwise entirely unrelated to COVID-19.

Can an employee demand to be placed on furlough leave?

No. Furlough leave is subject to agreement between the employer and the employee.

Do employees continue to accrue statutory rights during furlough leave?

Yes. Employees remain employed during furlough leave and will continue to accrue statutory rights, including annual leave and continuous service for statutory purposes.

Can an employer make furloughed employees redundant following furlough leave?

Yes.  If following the expiry of the JRS employers are still facing a redundancy situation affecting previously furloughed employees they may still effect redundancies (subject to the usual legal requirements).

What elements can employers claim by way of JRS Grants?

Employers can apply for a grant that covers a percentage of furloughed employees’ usual monthly wage costs for unworked hours, up to the relevant monthly cap. 

 “Usual monthly wage costs” broadly covers regular payments employees are obliged to make, including:

  • Regular wages
  • Non-discretionary overtime
  • Non-discretionary fees
  • Non-discretionary commission payments
  • Piece rate payments 

What elements are excluded from JRS Grants?

Employers cannot take into account any payments that are discretionary or that are paid without any contractual obligation to pay, including:

  • Tips (including those distributed through tronc systems)
  • Discretionary bonuses
  • Discretionary commission payments
  • Non-cash payments
  • Non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay.

Are JRS Grants taxable?

Yes.  Employers are required to make the usual PAYE payroll deductions (ie. income tax and national insurance contributions) from Furlough Pay payable to furloughed employees (including the pay covered by JRS Grants).  This means the employees will only receive the net amount of the maximum JRS Grant from time to time. 

Can employees take annual leave during furlough leave?

Employees are able to take annual leave during furlough leave without breaking the period of furlough leave.  This includes bank holidays that arise during furlough leave, where such days are usually worked by the employee.

What are employees entitled to be paid during annual leave taken while on furlough leave?

Employers are required to pay employees their “usual holiday pay” for any annual leave taken during furlough leave, ie. broadly speaking they would need to be paid their full rate of pay prior to furlough leave rather than at any lower rate agreed for the period of furlough leave. 

This means employers are required to “top-up” employees’ pay for periods of annual leave taken during furlough leave, even if they are not topping-up their pay during furlough leave itself.

Can employers claim JRS Grants covering periods of annual leave during furlough leave?

It seems that employers can claim JRS Grants covering periods of annual leave during furlough leave. The JRS Grants will only cover the relevant percentage of the employees’ usual monthly wage costs, up to the relevant monthly cap, notwithstanding the fact that employers are required to pay employees at their full rate of pay during annual leave.

Do employers have any say over employees’ annual leave during furlough leave?

While not expressly dealt with in the guidance, save for a reference to employers' flexibility to restrict when holiday is taken if there is a business need, we consider it likely that employers’ usual rights to direct the timing of employees’ annual leave are unaffected by furlough leave, ie. broadly speaking employers are able to require employees to take and/or not take annual leave at particular times during furlough leave (subject to statutory notice requirements). 

However, some commentators have asserted that travel and/or social distancing restrictions could preclude employees from enjoying a period of leisure, rest and relaxation with the effect that holiday taken in this way may be invalid.

Do employees continue to accrue annual leave during furlough leave?

Yes, employees will continue to accrue annual leave during furlough leave in the usual way.

Subject to employee agreement, it would be possible to reduce employees’ annual leave entitlement to statutory minimum levels when implementing the furlough leave, ie. remove any entitlement to contractual holiday allowance in excess of statutory holiday. In such cases, employers may need to stipulate the order in which contractual and statutory leave is deemed to be taken.    

Can employees on sickness absence be placed on furlough leave?

It is possible to move an employee on sickness absence onto furlough leave.  Note however that government guidance states that the JRS is not intended for short-term absences from work due to sickness.  The guidance also appears to give employers flexibility to decide whether to furlough or keep furloughed for business reasons employees who are or otherwise become eligible for statutory sick pay (“SSP”) because they are sick, self-isolating or shielding in accordance with Public Health guidance. 

Can employees who are “shielding” due to COVID-19 be placed on furlough leave?

The guidance states that employees who are shielding (or need to stay home with someone who is shielding) can be furloughed like other employees. 

Can employees with caring responsibilities be placed on furlough leave?

Employees who are unable to work because they have caring responsibilities resulting from COVID-19 can be furloughed.

Can employees on maternity or other forms of parental leave be placed on furlough leave?

The guidance states that the normal rules for maternity and other forms of parental leave and pay apply.

For furloughed employees on maternity leave, employers should therefore reclaim statutory maternity pay ("SMP") in the normal way up to the permitted amount. The Direction makes clear that any balance of SMP that is not reclaimable cannot be recovered under the JRS. However, employers can claim through the JRS for enhanced (earnings related) contractual pay for employees on maternity leave and other forms of parental leave, which suggests that employees may be furloughed simultaneously with their maternity or other parental leave. 

For employees who are furloughed on return from maternity and other forms of parental leave, any claim should be calculated against their normal salary (or the salary for a variable pay worker as above), not the pay they received while on leave.

Can foreign nationals be placed on furlough leave? 

Foreign nationals are eligible to be furloughed. 

The guidance further states that JRS Grants are not counted as “access to public funds” for immigration purposes and that employers can furlough employees on all categories of visa. 

Can workers engaged via umbrella companies be placed on furlough leave?

Yes. Workers engaged via umbrella companies (including agency workers and “limb (b) workers”) can be placed on furlough leave by the umbrella company.

Can company directors be placed on furlough leave?

Yes. Company directors can be placed on furlough leave. This includes individuals who provide services through a personal services company of which they are a director.

Directors who are paid annually can qualify for the JRS provided they were notified to HMRC on an RTI submission on or before 19 March 2020, which relates to a payment of earnings in the 19/20 tax year.

Company directors who are furloughed may carry out duties to fulfil their statutory obligations during furlough leave.  However, they may do no more than reasonably necessary for that purpose, ie. they should not carry out their normal work to generate commercial revenue or provide services to or on behalf of the company.

Furlough of a director should be formally adopted as a decision of the company and noted in the company records.

Can apprentices be placed on furlough leave?

As apprentices have employee status, they can be furloughed along with other employee, provided they meet the requirements of the JRS.

Apprentices cannot carry out employment duties but can continue to train during furlough leave.  Apprentices should be paid at least the relevant national minimum wage rate for periods of training during furlough leave (even if this exceeds the amount of their Furlough Pay). 

When did JRS Grants become available?

The JRS portal opened for claims on 20 April 2020.  The guidance states that eligible claims will be paid within six working days.

Should employers wait to receive JRS Grants before paying furloughed employees?

Unless employers have agreed with employees to defer payment of their wages, they should continue to pay employees’ Furlough Pay at the usual times. Employers can make claims in anticipation of an imminent payroll run, at the point payroll is run or after payroll has been run. 

Note that the entirety of the JRS Grant received must be paid to employees in the form of money and no part of it can be netted off to pay for the provision of benefits or a salary sacrifice scheme. 

The guidance and Direction are clear that any grant must be returned to HMRC immediately should an employer become unable or unwilling to use it to pay its employees' Furlough Pay, the Employer NICs and Employer Pension Contributions (so far as they are claimed as part of the JRS Grant). 

Is the payment of JRS Grants subject to retrospective scrutiny?

Yes. The government has retained the right to retrospectively audit all aspects of the JRS with scope to withhold or claw back payment of fraudulent or erroneous claims. HMRC has put in place an online portal for employees and the public to report suspected fraud with respect to the JRS. The Direction also suggests that HMRC can ask for more information from employers at any time, including after a claim or payment of the claim is made.

Particular areas of concern include employers not passing JRS Grants on to employees, asking employees to work while furloughed and/or backdating claims to include periods when the employee was in fact working.

Following submission for a JRS Grant, employers must keep a copy of all records for 6 years, including:

  • the amount claimed and claim period for each employee;
  • the claim reference number;
  • their calculations;
  • usual hours worked, including any calculations that were required, for employees they flexibly furloughed; and
  • actual hours worked for employees they flexibly furloughed.

Will details of JRS Grants be made publicly available?

Yes, on 26 January 2021, HMRC published its first list of the names of employers who have claimed under the JRS since 1 December 2020. The information includes the employer’s details and an indication of the value of their claim within a banded range (e.g. £500,001 - £1m). 

The publication of the list is designed to promote lawful use of the JRS and deter fraud.  HMRC has actively encouraged individuals to report their employer if they reasonably believe the employer is using the scheme fraudulently. 

Can employers request that details of their JRS Grants are not made publicly available?

Yes, HMRC has the updated JRS guidance to confirm how employers can request that details of their claims are not published.

The guidance sets out the information that must be provided when making a request, which must be made by the employer itself.

An application will only need to be made once and HMRC's decision will apply to all claim periods from 1 December 2020 onwards. HMRC has confirmed that until a decision has been made about the application and the employer has been informed then no details will be published.

How can I access the JRS portal?

The JRS portal is available HERE.

Further information

The government has created a number of guidance pages and other materials regarding the JRS, which include the following:

  • A general JRS guidance page for employers, which is available HERE.
  • A guidance page on employee eligibility, which is available HERE.
  • Guidance on calculating claims, which is available HERE and HERE.
  • Worked examples of Flexible Furlough claims where are available HERE and HERE.

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