At last, HMRC has published guidelines on the operation of the Coronavirus Job Retention Scheme (CJRS). Here they are, translated into plain English.


Who qualifies?


Any UK organisation that is registered with HMRC for PAYE and had employee(s) on the payroll on or before 28 February 2020 is eligible to claim CJPS. This includes businesses, charities, recruitment agency workers (as long as they are on a PAYE payroll) and the public sector. The scheme will run for at least three months, from March through May. It may or may not be extended, and when it ends employers must decide whether to take staff back at full salary or to terminate their employment due to redundancy.


Furloughed employees must have been on the payroll on 28 February, and they continue to be employed and on the payroll. The company continues to pay them, based on 80% of their salary up to a cap of £2,500 per month. This includes both full-time and part-time employees, those on agency contracts and zero-hour contracts. Employees who have been made redundant since 28 February will also qualify if they are re-hired and placed on furlough. Employees hired after 28 February do not qualify.


Now, here is the crux: furloughed employees cannot undertake any work for or on behalf of their employer. They may do volunteer work or training, but they cannot provide a service to or generate revenue for the employer. Even if they volunteer to do so. If you require employees to take training, then you must pay them at least the National Minimum Wage for the time spent training.


Reducing staff hours does not apply. This scheme is only available to furloughed employees who would have otherwise lost their jobs due to redundancy.


The guidance from HMRC is silent on whether directors qualify. I have seen some discussion on legal forums as to whether a company whose directors have been furloughed can legally operate. At present this is unclear, but the point above regarding not providing a service or generating revenue would indicate the answer is no.


The minimum period of time an employee may be furloughed is three weeks. This means cycling different staff members between furlough and working is possible, but they must be furloughed for at least three weeks at a time.


Employees on unpaid leave cannot be furloughed, unless the unpaid leave started after 28 February. Employees on sick leave or self-isolating are eligible for Statutory Sick Pay (SSP, which the government now covers for SMEs) but they cannot be furloughed until they return to work.


Employees who are on maternity leave are not eligible to be furloughed. The normal rules for Statutory Maternity Pay (SMP) continue to apply. Under health and safety law, the mother must take at least 2 weeks off work after the baby is born. The guidance is silent on those who will be giving birth at a later date, and I would recommend putting them on furlough until the baby is born when they must move to SMP. SMP remains the cost of the employer, and unlike SSP the government is not picking up this cost.


How does it work?


Employers continue to pay their furloughed employees at the reduced rate of 80% of their normal monthly salary, subject to a cap of £2,500. This is based on the salary you were paying them on 28 February, and it excludes any commission, bonus or fee over and above the salary. Here are some examples:


  • employees on £2,000 would receive £1,600 (£2,000 x 80%) on furlough
  • employees on £3,000 would receive £2,400 (£3,000 x 80%) on furlough
  • employees on £3,125 or above would receive the capped amount of £2,500 on furlough.


You may choose to top up these payments but are not obliged to do so.


Employees remain subject to deductions for income tax, national insurance and pension contributions on the actual salary you pay them whilst on furlough.


You must factor this cost into your cash flow planning, because you remain responsible for paying your furloughed employees. You then reclaim this money from HMRC, which is building a portal on the website to manage claims and says it will be ready by the end of April.


The amount you may claim is made up of:


  • actual salaries paid to furloughed employees
  • employer’s NI on those payments
  • mandatory employer contributions (currently 3%) to an auto-enrolment pension scheme (but not for those who opted out)


Claims can be made every three weeks, although if you run a monthly payroll it makes sense to claim in line with your payroll run. Claims can be backdated to 1 March if applicable. HMRC is saying that once you have made your claim and they have confirmed your eligibility, they will make the payment of this grant into your bank account. They don’t say how long this will take, especially for the initial confirmation of eligibility. Watch out in terms of cash flow.


Any claims received from HMRC must be treated as income in the business. The salaries are deductible so there is a nil net impact.


Employment law issues


The guidance says employers should discuss this with staff and make changes to employment contracts by agreement, but it does not set out the law and suggests you may need to seek legal advice. This is not very helpful!


Employees and the employer continue to be bound by all terms of the employment contract whilst the employee is on furlough.




This is a pretty good scheme for most employees. For those on higher salaries, or with a high amount of variable pay, there is going to be some pain. However £2,500 is a lot more than nothing and I don’t think there are many jobs going that people could apply for. This is a better scheme than many other countries are currently offering.


Business owners who are directors of their own limited company appear to be stuffed. Again. Something needs to be done and I am working on an open letter to Rishi Sunak. Watch this space.