The Coronavirus Job Retention Scheme (CJRS) was originally planned to end on 31 October 2020, with the replacement Job Support Scheme (JSS) set to launch immediately on 1 November 2020. In a last-minute change of plan, however, on 31 October the Prime Minister announced that the CJRS was to be extended in order to provide support to businesses and employees during the new national lockdown of England due to begin on Thursday 5 November. A further statement of the Chancellor on 5 November announced the CJRS extension will extend beyond the November lockdown until 31 March 2021 with a further extension to 30 April 2021, announced on 17 December 2020.

On 3 March 2021, the Chancellor announced a further extension of the scheme until the end of September 2021.

The rules of the CJRS summer extension will remain largely unchanged. This means both full-time furloughing as well as flexible furloughing continue to be permitted, as at present, until 30 September. However, the scheme will be subject to a return of last summer's tapering provisions, with employers required to contribute 10% in July and 20% in August and September towards the hours their staff do not work as well as employer National Insurance (ER NICS) and pension contributions.

This extension of the scheme will give employers further time to plan in the hope and expectation that the impact of the vaccine programme and subsequent lockdown easing will allow them to trade more normally. An alternative approach would have been for the government to target the support to specific industries hardest hit by the pandemic, but clearly this wider support will give more breathing space not just to those industries but all employers and their staff continuing to face challenges.

On 15 April, HM Treasury published its latest Treasury Direction which extends and adapts the CJRS for the period beginning 1 May 2021 and ending on 30 September 2021, referred to as the "Seventh CJRS direction period". The HMRC guidance has also been updated correspondingly.

What does the guidance say...

1. Where is the HMRC guidance located?

The updated guidance comprises several documents including:

  1. Check if you can claim for your employees' wages through the Coronavirus Job Retention Scheme
  2. Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme
  3. Check if your employer can use the Coronavirus Job Retention Scheme
  4. Calculate how much you can claim using the Coronavirus Job Retention Scheme
  5. Find examples to help you calculate your employees' wages
  6. Steps to take before calculating your claim using the Coronavirus Job Retention Scheme
  7. Claim for wages through the Coronavirus Job Retention Scheme
  8. Reporting employees' wages to HMRC when you've claimed through the Coronavirus Job Retention Scheme
  9. Other types of employees you can claim for
  10. Find examples to help you calculate your employees' wages
  11. Penalties for not telling HMRC about Coronavirus Job Retention Scheme grant overpayments - CC/FS48.

2. When can the CJRS extension be used?

If an employer cannot maintain their workforce because their operations have been affected by coronavirus (COVID-19), the employer can furlough employees and apply for a grant to cover a portion of their usual monthly wage costs.

The Seventh Treasury Direction continues to state that the purpose of CJRS is to provide for payments to be made to employers on a claim made in respect of them incurring costs of employment in respect of employees who are within the scope of CJRS arising from the health, social and economic emergency in the United Kingdom resulting from coronavirus and coronavirus disease. It also stresses it is integral to the purpose of CJRS that claims relate to those whose "employment activities have been adversely affected by the coronavirus and coronavirus disease or the measures taken to prevent or limit its further transmission".

By submitting a claim the person making the claim accepts that it is being made for the above purpose and it will be an abuse of the CJRS if submitted otherwise.

See questions 13 to 15 below in relation to those who are sick, shielding or who have caring responsibilities.

3. What financial support is available under the CJRS extension?

The level of support available under the extended CJRS mirrors that available under the scheme in August 2020:

  • Employees will receive 80% of their usual salary for hours not worked, up to a maximum of £2,500 per month. The £2,500 cap is proportional to the hours not worked.
  • Employers to pay employer National Insurance Contributions (NICs) and pension contributions for the no worked hours claimed under the scheme.

From 1 July 2021, the scheme will be subject to tapering provisions:

  • Now to 30 June: The government will pay 80% of wages up to a cap of £2,500 monthly for hours the employee does not work, as well as ER NICS and pension contributions. Employers are not required to pay anything.
  • From 1 to 31 July: The government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and 10% of wages to make up the 80% total (up to a cap of £2,500).
  • From 1 August to 30 September: The government will pay 60% of wages up to a cap of £1,875 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and 20% of wages to make up the 80% total (up to a cap of £2,500).

4. Which employee taxes and pension contributions must be paid and by whom?

Employees will still pay the taxes they normally pay out of their wages.

The employer must deduct and pay to HMRC income tax and employee NICs on the full amount paid to the employee, including any CJRS grant.

The employer must also pay to HMRC the employer NICs on the full amount paid to the employee, including any CJRS grant.

These payments must be reported via a Full Payment Submission (FPS) to HMRC on or before the pay date.

5. What cannot be claimed for under the CJRS extension?

Employers can choose to top up employees' wages above the minimum 80% furlough pay amount but do not have to. Employees must not work or provide any services for the business during hours which they are recorded as being on furlough, even if they receive a top-up wage.

Employers cannot claim for:

  • Additional NICs or pension contributions made because the employer chose to top up employee's wages.
  • Employees' wages for any time they spend working, or any NICs or pension contributions made on these wages.
  • Any pension contributions made that are above the mandatory employer contribution.

6. When does the CJRS extension run to?

The initial CJRS extension began on 1 November 2020 and will run until 30 April 2021. A further extension of the scheme runs until 30 September 2021, subject to tapering.

7. What type of furlough is permitted?

Flexible furloughing is allowed under the extended CJRS, as well as full-time furloughing.

Employees can be asked to work on a part-time basis and be furloughed for the rest of their usual working hours. Employers will have flexibility to use the scheme for employees for any amount of time or shift pattern and will be able to vary the hours worked in agreement with the employee.

For worked hours, employers must pay employees according to their employment contract and will be responsible for paying the tax and NICs due on those amounts.

There is no minimum furlough period. Flexible furlough agreements can last any amount of time. Employees can enter into a flexible furlough agreement more than once.

Although flexible furlough agreements can last any amount of time, unless otherwise specified, the period claimed for must be for a minimum claim period of seven consecutive calendar days.

8. Which employers are eligible to claim?

Employers do not need to have used the CJRS previously. There is no restriction on the number of employees the employer can claim for in a single claim period as previously applied between 1 July and 31 October.

The CJRS extension applies to employers across the whole of the UK and whether their business is closed or open.

The Fifth Treasury Direction which applies to the extension until 30 April 2021 defines a 'qualifying employer' as an employer who has a PAYE scheme registered on HMRC's real time information system on or before 30 October 2020. If an employer has more than one qualifying PAYE scheme, it must make a separate CJRS claim in relation to each scheme.

The Seventh Treasury Direction which applies to the extension from 1 May to 30 September 2021 defines a 'qualifying employer' as an employer who has a PAYE scheme registered on HMRC's real time information system on or before 2 March 2021.

The guidance confirms all employers with a UK bank account and qualifying UK pay as you earn (PAYE) schemes can claim the grant, although as with the original CJRS, publicly funded organisations should not furlough staff. Partially publicly funded organisations may be eligible where their private revenues have been disrupted and should contact their sponsor department or respective administration for further guidance.

Where a company is being taken under the management of an administrator, the administrator can furlough and claim for employees. Administrators should only use the scheme if there is a reasonable likelihood of retaining the workers.

9. Which employees are eligible to be claimed for?

Importantly, the employee does not need to have been furloughed previously under the CJRS. Since July 2020, employees have only been eligible for the CJRS if they had been validly furloughed for at least a three week period before 30 June. Now those employees who had been excluded over the summer will be eligible under the extension, as well as recent starters.

Under the Fifth Treasury Direction which applies to the extension until 30 April 2021, the scheme is available in respect of employees, on any type of contract, who were on the employer's PAYE payroll on 30 October 2020. A Real Time Information (RTI) submission notifying payment for that employee to HMRC must have been made after 19 March 2020 and before 31 October 2020.

Under the Seventh Treasury Direction which applies to the extension of the scheme from 1 May to 30 September 2021, the scheme is available in respect of employees, on any type of contract, who were on the employer's PAYE payroll on or before 2 March 2021.

The guidance, Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme, says if you made employees redundant, or they stopped working for you on or after 23 September 2020, you can re-employ them and put them on furlough provided the employees were employed by the employer on 23 September and a PAYE RTI submission was made to HMRC between 20 March 2020 and 30 October 2020. Similarly, an employee who was on a fixed term contract that expired on or after 23 September 2020 can be re-employed and claimed for, provided the employee was employed by the employer on 23 September 2020.

Also as previously;

  • Apprentices can be furloughed in the same way as other employees and they can continue to train while on furlough.
  • Foreign nationals are eligible to be furloughed and employees on all categories of visa can be furloughed.

The term 'employees' means an individual treated as an employee for Income Tax purposes. [Note: this is wider than the definition of 'employees' used in the Employment Rights Act 1996]. Accordingly, included are:

  • Office holders.
  • Company directors.
  • Salaried members of Limited Liability Partnerships (LLPs).
  • Agency workers.
  • Limb (b) workers.
  • Contingent workers in the public sector.
  • Contractors with public sector engagements in scope of IR35 off-payroll working rules (IR35).

Additional guidance is available in 'Other types of employees you can claim for'.

10. What if there has been a TUPE transfer of employees?

The guidance contained in 'Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme' provides that for claim periods after 1 November 2020, a new employer is eligible to claim in respect of the employees of a previous business transferred if the TUPE or PAYE business succession rules apply to the change in ownership.

The employees being claimed for should have been:

  • transferred from their old employer to their new employer on or after 1 September 2020
  • employed by either their old employer or new employer on 30 October 2020
  • on a PAYE Real Time Information (RTI) submission to HMRC, by their old or new employer between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.

For a claim period beginning on or after 1 May 2021, the new employer can claim for employees transferred on or after 1 January 2021. The transferred employees must have been:

  • employed by the old employer on or before 2 March 2021;
  • transferred from their old employer to their new employer on or after 1 January 2021;
  • included on a PAYE Real Time Information (RTI) submission to HMRC, by their old employer, between 20 March 2020 and 2 March 2021.

In the event of a TUPE transfer, employers should ensure that information needed for future claims under the CJRS is passed on to the new employer including an employee's relevant reference day and details of 80% of the employee's wages.

11. Can employees be put on notice of redundancy while on furlough?

Yes, for November 2020 BUT not thereafter. The guidance, Check which employees you can put on furlough, was updated on 13 November and now states:

"For claim periods starting on or after 1 December 2020, you cannot claim for any days on or after 1 December 2020 during which the furloughed employee was serving a contractual or statutory notice period for the employer (this includes people serving notice of retirement or resignation). If an employee subsequently starts a contractual or statutory notice period on a day covered by a previously submitted claim, you will need to make an adjustment.
If you make an employee redundant, you should base statutory redundancy and statutory notice pay on their normal wage rather than the reduced furlough wage."

The Fifth Treasury Direction published on 13 November 2020 confirms that a claim cannot be made in respect of a day upon which the employee is "on notice of termination" (at least until 31 January 2021 as the Fifth Treasury Direction only covers the operation of the CJRS until then). Accordingly, Employers cannot claim under the CJRS for any days on or after 1 December 2020 during which the furloughed employee is/was serving a contractual or statutory notice period for the employer. This includes those working under notice of redundancy or dismissal for any reason and those serving notice of retirement or resignation.

This is a significant change that employers need to consider carefully as it is likely to increase the costs to an employer of retaining employees where furlough is being used to delay rather than avoid an inevitable future departure. Specialist advice should be sought on the financial balancing act that may be needed as a result of this change.

12. Can employees on furlough take holiday leave?

Yes. Employees can take holiday while on furlough. If an employee is flexibly furloughed then any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours.

However employers should note that the guidance stresses that an employee should not be placed on furlough for a period simply because

  • they are going to be on holiday(paid leave) for that period; or
  • the employer usually does less business over the festive period regardless of COVID-19 restrictions.

If a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations. Employers retain the flexibility to restrict when leave can be taken if there is a business need and the correct notice is given. This applies for both the furlough period and the recovery period.

If an employee usually works bank holidays then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave then the employer would either have to top up their usual holiday pay, or give the employee a day of holiday in lieu.

The 'BEIS Holiday entitlement and pay during coronavirus guidance' is unchanged, see our earlier alert 'COVID-19: Holiday during coronavirus - new BEIS Guidance' for more detail.

13. Can employees who have caring responsibilities be put on furlough?

The guidance "Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme" initially simply stated that employees that have caring responsibilities resulting from coronavirus, including employees that need to look after children were eligible to be furloughed (subject to the general eligibility criteria). On 5 January 2021, that guidance was updated to clarify that employees with caring responsibilities "such as caring for children who are at home as a result of school and childcare facilities closing, or caring for a vulnerable individual in their household" are eligible to be furloughed.

14. Can employees who are sick or shielding be put on furlough?

Employees can be furloughed where they are unable to work because they are shielding in line with public health guidance (or need to stay at home with someone who is shielding).

The CJRS is not intended for short-term sick absences. If, however, employers want to furlough employees for business reasons and they are currently off sick, they can do so, as with other employees. In these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee.

15. What happens if an employee who is on furlough becomes sick?

Furloughed employees who become ill, due to coronavirus or any other cause, must be paid at least Statutory Sick Pay (SSP). As under the CJRS previously, it is up to employers to decide whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate.

If a furloughed employee who becomes sick is moved onto SSP, employers can no longer claim for the furloughed salary. If employers keep the sick furloughed employee on the furloughed rate for the period that they are sick, they remain eligible to claim for these costs through the furloughed scheme.

The guidance regarding furloughed employees who become sick contained in the 'Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme' has an error as it mistakenly includes the now defunct "previously placed them on furlough before 30 June and submitted the claim by 31 July" requirement.

16. What if the employee has recently returned from family-related leave?

If an employee returns from maternity, shared parental, adoption, paternity or parental bereavement leave and the employer is claiming in respect of a period that starts on or after 1 November, the normal scheme rules apply.

If an employee decides to end their maternity leave early to enable them to be furloughed (with the employer's agreement), they will need to give the employer at least 8 weeks' notice of their return to work and the employer will not be able to furlough them until the end of the 8 weeks.

17. What restrictions apply in relation to non-working hours?

As under the CJRS previously, during hours which employees are recorded as being on furlough, they cannot do any work for their employer that makes money or provides services for their employer or any organisation linked or associated with their employer.

Employees can:

  • Take part in training
  • Volunteer for another employer or organisation
  • Work for another employer (if contractually allowed).

Employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers provided in doing this, they do not provide services to or generate revenue for, or on behalf of, the employer's organisation or a linked or associated organisation. In other words, employee and/or union representatives who are furloughed are able to accompany a colleague during disciplinary or grievance meetings, or undertake collective consultation duties (for example, redundancy or TUPE consultation), without it breaching the CJRS 'no work' rule.

A company director will not be treated as doing work (and therefore outside the CJRS) where they are simply making a CJRS claim for, or paying wages to, an employee of the company. Fulfilling duties as a trustee or manager of an occupational pension scheme is also permitted (except where the employer's business is the provision of occupational pension scheme independent trustee services.)

18. What agreement is required?

As previously under the CJRS, employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.

To be eligible for the grant, employers must have confirmed to their employee (or reached collective agreement with a trade union) in writing that they have been furloughed or flexibly furloughed. The employee does not have to provide a written response.

The terms of any agreement must specify the main terms and conditions upon which:

  • the employee will do no work; or
  • the employee will not work the full amount of their usual hours.

The agreement (including any collective agreement):

  • must be made before the beginning of the period to which the CJRS claim relates, but it may be subsequently varied to reflect changes agreed during the claim period;
  • incorporated into the employee's contract; and
  • made in writing or confirmed in writing (such as by email confirmation, but the employee does not have to provide a written response).

It should be sufficient to update an earlier furlough agreement, provided it is done before the employee is furloughed under the CJRS extension.

As previously, a written record of the agreement must be kept for five years. While the specific retention period for the agreement is five years, elsewhere in the guidance it requires, "a copy of all records" in relation to a claim under the CJRS to be kept for six years. It is therefore advisable to retain a copy of the furlough agreement for six years.

In light of the speed and late notice of the CJRS extension, retrospective flexible furlough or furlough agreements were allowed up to and including 13 November 2020. A retrospective agreement will have effect from 1 November 2020 for the purposes of a CJRS claim as long as it is made according to the conditions above.

19. How are reference periods and usual hours to be calculated?

The policy paper states "all employees on an RTI submission on or before 19 March 2020 will be able to use the CJRS calculations as applied in August 2020 for reference pay and usual hours. However, for new employers claiming and new employees hired between 20 March 2020 and 30 October 2020, the CJRS methodology will update the reference pay and usual hours to take account of the period covered by the extension. For employees on fixed pay employed on or after 20 March 2020, the last pay period prior to 30 October 2020 provides the basis for calculation. For employees on variable pay or hours, employed after 20 March, the average of tax year 2020 to 2021 up to the start of the furlough provides the basis for calculation."

The policy paper goes on to stress that for employees who were previously eligible for the CJRS, the calculation rules will remain the same, even if a claim was not made in respect of that employee prior to 1 November 2020.

The updated guidance confirms:

For an employee whose hours and pay does not vary:

  • The reference period is the last pay period ending on or before 19 March 2020 for employees who either:
    • were on payroll on 19 March 2020 [or]
    • had a valid CJRS claim made in relation to then in a claim period ending any time on or before 31 October 2020.
  • For all other employees, the employee's reference period will be their last pay period ending on or before 30 October 2020.

See the guidance contained in 'Steps to take before calculating your claim using the Coronavirus Job Retention Scheme' for more detail on calculating usual hours in various scenarios.

The Sixth Treasury Direction clarifies that furlough pay in March/April 2021 should refer back to the corresponding month in March/April 2019, and not March/April 2020 (as that would involve looking at a period when people might already have been on furlough pay). The calculation for 'usual hours' of work is similarly amended.

20. How does furlough pay interact with National Minimum Wage (NMW) requirements?

It remains the case that, at the least, NMW rates must be paid for all hours worked. However, furloughed workers can be paid the lower of 80% of their wages (subject to the £2,500 cap) for furloughed hours even if, based on their usual working hours, this would be below their appropriate NMW rate. This is because workers are only entitled to the NMW for the hours they work. Key to being able to claim a grant under the CJRS is that the worker is not 'working' for the employer or associated employer in relation to the claimed furlough hours.

This is subject to a caveat regarding work-related training, which is not classed as 'working' for CJRS purposes, but is classed as 'work' for NMW purposes. As set out in the HMRC guidance, 'Steps to take before calculating your claim using the Coronavirus Job Retention Scheme', "employers will need to ensure that the wages and furlough payment provide sufficient monies to cover all working time including these training hours. Where the pay is less than the appropriate minimum wage entitlement, the employer will need to pay additional amounts to ensure at least the appropriate minimum wage is paid for both working time and 100% of the training time whilst furloughed".

See 'NMW April increases: the 2021 small print' for why, when it comes to workers on NMW, employers need to be careful not to use the furlough pay calculation when working out the appropriate rate for time spent working (including work-related training).

21. Is there an online claims calculator?

Yes. There is a Job Retention Scheme calculator is available on the Government's website.

This calculator can be used to work out what you can claim. It can be used for most employees who are paid either regular or variable amounts each pay period (for example, weekly or monthly).

The calculator cannot be used if employees:

  • Returned from family-related statutory leave (maternity leave, paternity leave, shared parental leave, adoption leave, parental bereavement leave).
  • Get director's payments.
  • Have been transferred under TUPE.
  • Have been employed at separate times throughout the year.
  • Receive employer pension contributions outside of an auto-enrolment pension scheme.
  • Have an annual pay period.

If claiming for an employee who is flexibly furloughed, the employer will need to work out their usual hours before using the calculator.

The guidance contained in 'Calculate how much you can claim using the Coronavirus Job Retention Scheme' advises that if an employer cannot use the calculator, they will need to work out the claim manually using the calculation guidance or by seeking professional advice from an accountant or tax adviser.

For more detail on calculating claims, see the guidance contained in:

22. How and when can claims be made?

The CJRS extension will operate as the previous scheme did, in several respects:

  • Employers must report and claim for a minimum period of seven consecutive calendar days.
  • Employers will need to report actual hours worked and the usual hours an employee would be expected to work in a claim period.
  • The claim period must start and end within the same calendar month. If the pay period includes days in more than one month, each of those claims will need to be calculated separately. Claim periods cannot overlap, and employees claimed for will need to be included in each separate claim made.

Employers will be able to claim either shortly before, during or after running payroll. In terms of practicalities, there will be a short transition period whilst HMRC update the scheme and businesses will be paid in arrears for that period. There will be no gap in eligibility for support between the previously announced end date of CJRS and this extension.

Employers have been able to claim since 8:00 am on Wednesday 11 November 2020 in respect of an employee for a minimum seven day claim window in advance or in arrears for the period from 1 November 2020 to 11 November 2020.

Claims relating to:

  • November 2020 must have been made by 14 December 2020;
  • December 2020 must be made by 14 January 2021; and
  • January 2021 must be made by 15 February 2021.
  • February 2021 must be made by 15 March 2021
  • March 2021 must be made by 14 April 2021
  • April 2021 must be made by 14 May 2021
  • May 2021 must be made by 14 June 2021
  • June 2021 must be made by 14 July 2021
  • July 2021 must be made by 16 August 2021
  • August 2021 must be made by 14 September 2021
  • September 2021 must be made by 14 October 2021.

Grants payments are anticipated six working days after the first claims.

For more detail see:

23. What records must be kept?

As previously, employers must keep a copy of all records for six years, including:

  • the amount claimed and claim period for each employee;
  • the claim reference number;
  • calculations in case HMRC need more information about a claim;
  • usual hours worked, including any calculations that were required, for employees flexibly furloughed; and
  • actual hours worked for employees flexibly furloughed.

24. Will there be a public record of submitted claims?

From December 2020, HMRC will publish details of those who have made claims under the scheme for the month of December onwards. The information that must be published is:

Publication may be withheld if HMRC is provided with evidence that publication will expose an individual to a serious risk of violence or intimidation. The evidence could include:

  • a police incident number if you've been threatened or attacked;
  • documentary evidence of a threat or attack, such as photos or recordings;
  • evidence of possible disruption or targeting.

25. What happens to the Job Retention Bonus and the Job Support Scheme?

Due to the CJRS extension, the Job Retention Bonus ('JRB') falls away and will not be paid in February 2021 with any retention incentive instead to be deployed at a future "appropriate time". The purpose of the JRB was to encourage employers to keep people in work until the end of January. The Fifth Treasury Direction has now formally withdrawn the JRB.

Due to the CJRS extension, the Job Support Scheme was simply scrapped.

26. What happens post 30 September 2021?

On 30 September 2021, the CJRS closes. At present, there is no indication that the previously shelved Job Retention Bonus will be revived to encourage employers to retain previously furloughed staff. Some employers may need to begin to contemplate large-scale redundancies in the run up to the closure of the CJRS. See our article "Redundancy: the new normal?" looking at the key employment issues both old and new that employers face when conducting a redundancy exercise.