Coronavirus Job Retention Scheme Guidance – HMRC guidance update 12 June  2020


Advance notice of changes to the “furloughing” scheme was given in early June with detailed guidance issued on 12 June. Whilst hailed as an extension to the current scheme, the conditions have been changed to such an extent that the revisions, in practice, make it a different scheme. The changes being introduced from 1 July cover entitlement to make a claim, the amount of the grant available, how the grant will be calculated and administrative procedures.

Whilst the changes strictly do not come into place until July, when a mixture of working and furloughing is to be allowed, in effect, with one exception, actions were necessary from 10 June. For, given the scheme will close to new entrants on 30th June 2020, the last day that employers can place employees on furlough is 10th June 2020 as new entrants must have been furloughed for a full 3 weeks prior to 30th June 2020. The one exemption to this restriction is for those on statutory parental leave, who return to work after 30 June meaning the employer has not had an opportunity to furlough them for a 3-week period prior to 30 June. Note that the scheme will close on 31 October. And, it is important to note that those looking to make a claim under the existing scheme (which comes to an end on 30 June) will need to make their claim by the 31 July at the latest.

HMRC state regarding working whilst on furlough leave from July:

“From 1‌‌ July 2020, businesses using the scheme will have the flexibility to bring previously furloughed employees back to work part time – with the government continuing to pay 80% of wages for any of their normal hours they do not work up until the end of August. Employers will decide the hours and shift patterns their employees will work on their return and will be responsible for paying their wages in full while working. This means that employees can work as much or as little as the business needs, with no minimum time that they can furlough staff for.

Any working hours arrangement agreed between a business and their employee must cover at least one week and be confirmed to the employee in writing. When claiming the CJRS grant for furloughed hours, they will need to report and claim for a minimum period of a week. They can choose to make claims for longer periods such as on monthly or two weekly cycles if preferred. Employers will be required to submit data on the usual hours an employee would be expected to work in a claim period and actual hours worked.

If employees are unable to return to work, or employers do not have work for them to do, they can remain on furlough and the employer can continue to claim the grant for their full hours under the existing rules”.

The HMRC guidance issued on 12 June makes it clear the revised scheme will have added complexity and administrative burden. The changes will apply regardless of whether the employee will be on ‘full’ or ‘flexible’ furlough:

  1. Employers need to issue a new ‘flexible furloughing’ arrangement letter to the employees and keep track of hours worked and hours of furlough;

  2. There is now “minimum furlough pay”;

  3. The concept of ‘usual hours’ has been introduced; and

  4. The rate of grant will change from August.

Minimum furlough pay

Currently, the scheme allows employers to decide how much they pay their employees but caps their claim to the lower of the amount paid to the employee, £2,500 per month and 80% of their 2019/20 equivalent monthly earnings. But, from 1 July employers are required to ensure the employee receives ‘minimum furlough pay’ for the hours furloughed. If the employee doesn’t receive minimum furlough pay, no claim can be made. Employers will need to ensure they accurately calculate minimum furlough pay to ensure their claim is not retrospectively denied.

The calculation of minimum furlough pay is complicated and prone to error. Fairly detailed guidance has been published that will take some time to fully digest.

Usual hours


The calculation of minimum furlough pay also introduces the concept of ‘usual hours’, which needs to first be determined before the calculation of minimum furlough pay can be undertaken. Usual hours are loosely based on the methods of determining qualifying fixed and variable pay under the current scheme calculations and will be used to determine the amount of claim available. However, this is again likely to be difficult to get right. As with the current scheme, there are different methods to determine usual hours depending on the type of work undertaken by the employee. Each type of work has its own calculation to arrive at usual hours, with the work types being:


  • Employees with fixed hours

  • Employees with varying hours – this work type has two standalone calculations which are both required to be undertaken

  • Piece or task rate workers – identified using the NMW interpretation of a piece rate worker

HMRC makes it clear the following information is also needed to support claims from 1 July:


  • the number of usual hours your employee would work in the claim period

  • the number of hours your employee has or will work in the claim period

  • you will also need to keep a record of the number of furloughed hours your employee has been furloughed in the claim period

Rate of grant


Assuming employers’ national insurance and pension contributions represent circa 10% of pay (HMRC say they total between 3% to 5% of salary but we think that’s an underestimate) then, in the absence of a furloughing scheme, an employee costs a company 110% of gross pay. The employee receives 80% of gross pay whilst on furlough leave (assuming no employer “top up”) as compared to 100% whilst working or on holiday.

At present, the grant covers all reduced pay (so 80%) and employer related NIC and pension costs (so, about 8%).  This will change from August as follows:







To summarise:

Put another way, for furlough hours during September, the employer will cover the costs of an eighth of the furlough pay rising to a quarter of the furlough pay costs for October. So, costs to employers will ramp up as the reduction in wage support doesn’t allow employers to change the employees’ terms and conditions to reduce pay to these new levels. As employees must still receive 80% of normal pay, so the employer will have to make up the difference. And the cost is not just a financial one; for employers will also suffer a significant administrative cost in calculating and submitting a claim from July onwards.

Coronavirus Job Retention Scheme - Original Guidance

The Coronavirus Job Retention Scheme is a temporary grant scheme open to all UK employers (that had created and started a PAYE payroll scheme on 28 February 2020) for at least 4 (initially 3) months starting from 1 March 2020.


Employers can claim for 80% of the usual monthly wage costs of “furloughed” employees (employees on a leave of absence rather than being made redundant) up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period.


HMRC states that employers need to:


  • designate affected employees as ‘furloughed workers,’ and notify them of this change - changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.

  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal.


HMRC has issued guidance on the implementation of the scheme as set out below. The aim is that the first grants will be paid before the end of April; earlier payments are not possible as HMRC’s systems do not facilitate reimbursement payments to employers


HannawayCA Comment

As HMRC alludes to, unless there are specific provisions in contracts of employment, there is no automatic right to “furlough” or to suspend employees without pay, so before doing so the employee needs to give consent. (That said, if an employee is faced with losing their job or being suspended with 80% pay for a period, suspension at 80% pay will be the lesser of two evils). Further, brief calculations we have carried would suggest the take home pay of affected employees will be more than 80% (perhaps as high as 85% for those on minimum pay). Note that the employer can choose to top-up the extra 20% at their own discretion; there is no requirement to do so.

This is an historic and unprecedented intervention by government and is to be warmly welcomed. But, do expect some pretty strict implementation procedures to prevent abuse. Already the Institute for Fiscal Studies has warned that there are flaws in the design of the plans, which it said had been hastily drawn up and gave incentives to bosses to put half of their employees on temporary leave. And, of course, furloughed employees must not carry out any work for the business; the scheme it not designed to cater for those working reduced hours.


Coronavirus Job Retention Scheme Guidance – HMRC guidance until 17 April 2020

The scheme in overview


From 20 April, employers were able to use a HMRC portal and associated calculator to claim a taxable grant of 80% of the usual monthly wage costs of “furloughed” employees (those on leave of absence whether full time, part-time, flexible, zero hour or on agency contracts) up to a maximum of £2,500 a month, plus the associated employer national insurance contributions (NIC) and minimum automatic enrolment employer pension contributions on the subsidised element of the wage. Discretionary fees, commission, bonuses and the value of benefits in kind have to be excluded. The scheme is open to all UK employers that had created and started a PAYE payroll scheme on or before 19 March 2020 (previously 28 February 2020) and have a UK bank account.


If wages vary then usual monthly wage costs are calculated for those employed:


  •  for more than a year, the higher of either:


  • the same month’s earnings from the previous year

  • average monthly earnings from the 2019-20 tax year


  • for less than a year, the average of their monthly earnings since they started work.


  • since February 2020, a pro-rata for their earnings so far to the date of the claim


The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer. Those NOT eligible are:


  1. Employees working, but on reduced hours, or for reduced pay.

  2. Employees on unpaid leave unless they were placed on unpaid leave after 28 February.

  3. Employees hired after 28 February 2020

  4. Employees on sick leave or self-isolating should get Statutory Sick Pay (SSP) -  but they can be furloughed thereafter.


Making a claim


Employers should discuss with their staff and make any changes to the employment contract by agreement. When 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 subsidy employers  should write to their employee(s) confirming that they have been furloughed and keep a record of this communication for 5 years. Note that the statutory instrument implementing the CJRS states the employee must also agree in writing but HMRC appear not to require this.


To claim, the following is needed:


  • ePAYE reference number

  • the number of employees being furloughed

  • the claim period (start and end date)

  • amount claimed (per the minimum length of furloughing of 3 weeks)

  • employer:

    • bank account number and sort code

    • Contact name

    • Telephone number

  • for fewer than 100 furloughed staff – the information must be inputted directly into the system for each employee

  • for more than 100 or more furloughed staff – a file needs to be uploaded with information for each employee (the following file types are accepted: .xls .xlsx .csv .ods).


A claim should be made in accordance with actual payroll amounts at the point at which payroll is run or in advance of an imminent payroll.   Employers do not need to place all their employees on furlough and do not need to reduce salaries to the grant aided 80% amount. Thus, employers can choose to provide top-up salary in addition to the grant aided amount. But, NIC and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings.


Claims can be made, at most,  every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable. In summary, it is up to the employer  to calculate the amount it is claiming. HMRC will retain the right to retrospectively audit all aspects of claims.


Implications for furloughed workers


To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the employer. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.


Key points  to note


  • An officer bearer (so a director) can be furloughed and still carry out their statutory duties for the company (for example, the filing of annual accounts). But they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.


  • If an employee has more than one employer, they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.


  • A furloughed employee can take part in volunteer work or training, if it does not provide services to or generate revenue for, or on behalf of their employer.


  • If workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised. Otherwise NLW/NMW does not apply as furloughed staff are not carrying out any work.


  • Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.


  • If  employers offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that can be claimed through the scheme.


  • The same principles apply where employees qualify for contractual adoption, paternity or shared parental pay.


  • When the government ends the scheme (due to end on 30 June but this can extended), the employer must decide, depending on its circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).


  • Workers who have not taken all their statutory annual leave entitlement due to COVID-19 will now be able to carry it over into the next 2 leave years. In addition, the Government has also confirmed that they will relax the requirement on businesses to ensure that workers take the statutory amount of leave in any one year.


  • employees can start a new job when on furlough. The guidance does say it has to be allowed under the old employment contract, but employers can waive this requirement.


  • employers can reclaim 80% of compulsory commission from HMRC plus basic salary. This only refers to commission from past sales as furloughed employees cannot be completing new sales when on furlough, as clearly, they are then carrying out no work for the company.

  • the 80% does not include non-monetary benefits.


  • employees can be furloughed multiple times, i.e. they can be furloughed, brought back to work, then re-furloughed.


  • the scheme is not limited to employees who you'd otherwise have made redundant. So, you can use it for any employees who are furloughed "by reason of circumstances as a result of coronavirus or coronavirus disease”.


  • Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.


  • Employees can take holidays whilst on furlough. If a furloughed employee takes a holiday, then he/she is entitled to their usual pay whereby employers will be obliged to pay additional amounts over the grant. However, employers will have flexibility to restrict when leave can be taken if there is a business need.


  • If an employee usually works bank holidays, 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 must either top up their usual holiday pay or give the employee a day of holiday in lieu.


  • It would appear PAYE and NIC contributions due in respect of furloughed staff cannot be deferred under “Time To Pay” arrangements.


  • The calculation of employer NIC and pension contributions recoverable under the scheme appear to be quite complex. In particular, will be a clawback of the Employment Allowance claimed (£3,000 in 2019/20 rising to £4,000 from 6 April) and not all pension contributions will be grant aid able if, for example, the employer contributes a “flat” percentage of wages (as many do) ignoring the lower level of qualifying earnings.


Staff on Maternity Leave


Staff who are on or plan to take Maternity Leave must take at least 2 weeks off work (4 weeks if they work in a factory or workshop) immediately following the birth of their baby. If the employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.


Employees who qualify for SMP, will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower).


HannawayCA Comment


The increased guidance issued by HMRC on 26 March is to be welcomed. But we have a concern that this might be a “release and catch” grant. By that, we imagine grants will be processed and paid with the minimum of query when the scheme is operational (so, “release”) but could be subject to challenge and detailed scrutiny  thereafter (the “catch”). For, not only has the word “furlough” now entered into HMRC’s lexicon , so, too, has the word “audit”. So “buyer beware” when HMRC states it “will retain the right to retrospectively audit all aspects of claims”.


We imagine the 3-week period to “rotate” furloughing is to facilitate flexible shift patterns This should assist employers in essential businesses give their employees time off on furlough leave to minimise the risk of an infected asymptomatic furloughed employee returning to the workplace.


It should be noted that employers need to process payroll as normal (albeit for most at 80% of the previous level) and then later claim the grant. Thus, there are cash flow implications. But either a temporary overdraft extension or use of a CBILS – see later – should be of assistance here.


We await with interest the calculator to be launched on 20 April. For HMRC guidance issued to date indicates a very complex calculation in respect of the recovery of national insurance and employer pension contributions and in dealing with those on variable pay.

Self-Employed Income Support Scheme

Key features of this scheme are:


  • Cash grant of 80% of average monthly trading profit (either a sole trader or a partner) over the last three years, capped at £2,500 per month if:


  • trading profits are less than £50,000 in 2018-19 or average trading profits are less than £50,000 from 2016-17, 2017-18 and 2018-19, AND

  • these profits constitute more than half of total taxable income.


  • Only available to those who have filed a tax return for 2019 (filing deadline now extended from 31 January 2020 to 23 April 2020) and have traded in the tax year 2019/20.


  • No need to apply - HMRC will use existing information (data on 2018-19 returns already submitted and will risk assess any late returns filed before the 23 April 2020 deadline to check potential eligibility) and invite applications once the scheme is operational.


  • Applicants be able to claim the grants and continue to do business.


  • HMRC has now issued a SEIS eligibility checker (to use this, applicants need their UTR and NI number); those eligible will be given a date, between 13 and 18‌‌ May, from which a claim can be made. Key point to note are: ​

    • Applicants need their Government Gateway credentials (user ID and password). If necessary, this can be set up at; there will be no requirement to wait for pins or codes through the post.

    • Unfortunately, agents cannot make claims for SEIS on behalf of their clients.



HannawayCA comment


This is very welcome – and necessary – government support. But we do not understand why a £50,000 “trading” profit (is this trading or taxable?) has been imposed when PAYED workers can attract a monthly grant of £2,500 irrespective of previous salary. We do hope that government is not mistaking “earnings” and “turnover”. And the delay in receipt of the grant is disappointing.


And, there could be a national insurance contributions (NIC) “sting in the tail” to follow. At present the self-employed attract class 2 NIC of 3.05 per week and class 4 NIC at a rate of 9% on profits over £9,500 decreasing to 2% on profits over £50,000. Salaried workers, however, attract Class 1 NIC both personally  - at a rate of 12% on earning more than £9,516 falling to 2% on earning over £50,024 - and by their employers at a rate of 13.8% on all earnings over £8,788. The Chancellor said “But I must be honest and point out that in devising this scheme – in response to many calls for support – it is now much harder to justify the inconsistent contributions between people of different employment statuses.  If we all want to benefit equally from state support, we must all pay in equally in future.



Statutory Sick Pay (SSP)


Government as stated it will bring forward legislation to allow employers with fewer than 250 employees (based on head count as of 28 February 2020) to be able to reclaim up to 2 weeks of Statutory Sick Pay (SSP) per employee for sickness absence due to COVID-19. HMRC advises “employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note”.


HannawayCA Comment


Clearly this will only be relevant to those businesses that can still have the cash to pay their employees SSP. And for those that do, the timeframe for the repayment remains a concern. For HMRC states that “the government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible”.