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COVID-19 Response: Coronavirus Job Retention Scheme (last updated 27 March 2020)

On 20 March the Chancellor announced the creation of the Coronavirus Job Retention Scheme (CJRS). This scheme is designed to protect jobs by allowing employers to claim 80% of the wage costs for employees that are not required to carry out any work for them for a period of time.

Last night (26 March) more detail on the scheme has been released. There is too much to go over in this article so we will just set out the headlines below and the detailed guidance can be found by following this link CJRS Detailed Guidance on

The main points are as follows:

  • All UK businesses are eligible so long as they had an active PAYE payroll scheme at 28 February 2020 and have a UK bank account
  • To be able to claim for an employee, they must have been on the PAYE payroll on 28 February 2020, on any type of contract
  • Affected employees will need to be designated as 'furloughed', notified of this (please note that there are employment law aspects to this that we can't advise on), and flagged as such to HMRC using an as yet to be created portal
  • The furloughed workers should not carry out any work for their employer while classed as furloughed; note that employees continuing to work, possibly on reduced hours/pay, will not qualify
  • HMRC will reimburse 80% of furloughed workers' gross wages, up to a cap of £2,500 per employee per month (see below regarding the method of calculation)
  • The employer could choose not to fund the remaining 20%; we believe that they should confirm the % to be paid when agreeing the furlough with the employee(s) as this will form part of the amendment to the employment contract
  • HMRC will also reimburse 80% of the employer's National Insurance costs and minimum employer's pension contributions under auto-enrolment (these will be subject to detailed calculations)
  • These arrangements can be backdated to 1 March 2020 to cover workers laid off from that point if the employer offers to reinstate and then furlough the employee (and the now ex-employee agrees)
  • Affected employees may be eligible for support through the welfare system if their earnings are reduced
  • The first payouts under the scheme are likely to occur in late April, requiring the employer to fund the employee's wage costs fully until then
  • There are detailed sections in the guidance covering situations such as employees on unpaid leave, maternity pay or sick pay, and those with more than one main job or undertaking training or volunteer work; we suggest that you review the guidance on these in the first instance then let us know if you have any follow-up queries

The system should therefore work in the following way (there are still a few grey areas but this should be the rough process):

  1. Employer identifies workers to be furloughed
  2. Employer consults with employees and agrees the change in status and obtains consent to change in employment terms in writing
  3. Employer enters furloughed employee's details on new HMRC portal
  4. Employer pays employee as usual via PAYE system, anything between 80% and 100% of their qualifying salary (see below); note that this will be subject to the usual income tax and employee NIC deductions as well as employee pension contributions, and the employer will continue to have to pay this to HMRC via their PAYE scheme (unless separate "Time to Pay" arrangements are made)
  5. Employer submits claims for funding (claims to be made at 3 week intervals or longer)
  6. The Government pays the funding directly to the employer

Calculation of the gross pay due to each employee should be carried out as soon as possible and should be based on the following:

  • For full and part time salaried employees the gross pay for the scheme will be the actual gross salary for February 2020
  • For employees whose pay varies, if they have been employed for a full 12 months prior to the claim, the claim can be for the higher of the same month's earnings for the prior year, or average monthly earnings for the 2019/20 year
  • For such employees who have been employed for less than a year at 28 February, the claim should be for the average monthly earnings since starting work
  • For an employee who started during February 2020, a pro-rata of that month's earnings can be used
  • Note that calculations should exclude fees, commissions and bonuses paid in the periods on which the calculations are based

As we have commented before, there is some confusion as to whether some or all small company directors can be included in this scheme. They are certainly not included in the recently announced self-employed income support scheme (unless they have a significant separate sole trade or partnership involvement). If they were to be included it is likely that they would only be able to claim based on the typically low salary (£8,632 for 2019/20) that is processed for most directors, which would be a long way short of the support of up to £2,500 per month being offered to other groups. We fervently hope that this gap in the support net is dealt with sooner rather than later and will prepare a separate article on director's status once we know more.

March 23, 2020

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