The Coronavirus Job Retention Scheme – The Basics

Updated 14/05/2020: 10:30.

On 20 March 2020 the Chancellor, Rishi Sunak, launched the Coronavirus Job Retention Scheme (the “Scheme”).

The Scheme allows employers to reach agreement with employees to cease work and become ‘furloughed’ (an entirely new employment law concept). The Scheme is designed so that the Government will make payments to the employer of up to 80% of the furloughed employees salary costs (up to a maximum of £2,500).

The Government has published updated guidance regularly since the Scheme’s launch.

The latest guidance for employers can be found here , and the latest guidance for employees here (“Guidance”).

On 15 April the Treasury issued a direction to HMRC (found here) under powers conferred by the Coronavirus Act 2020 (“Direction”) containing authority and instructions to HMRC for making payments under the Scheme.

On 20 April HMRC’s online claims portal went live. Details of how you can calculate 80% of your employees’ wages to claim the Scheme can be found here. In addition a step by step guide for employers can be found here.

The government’s Direction and Guidance is detailed and nuanced. There are conflicts between the Guidance and the Direction. There remain a number of unanswered questions about how the Scheme operates. There could ultimately be elements of the Scheme that even become the subject of judicial review.

We are very happy to give you our opinion on the likely interpretation of these areas of conflict and uncertainty if you call on us. Our multidisciplinary team are here to help.

The Basics:

Time period

As at the date of this article the Scheme is open for 8 months from 1 March to the end October 2020.

The Scheme was originally open to end May this was extended to the end of June and again to 31 October. It could be extended again.


To be eligible to claim an employer must:

  • have created and started a PAYE payroll scheme registered on HMRC’s real time information system for PAYE on or before 19 March 2020;
  • operate a UK bank account;
  • operate the furlough period for any one employee for at least 3 weeks at a time.
    • a furloughed employee can come back to work and then be furloughed again.  
    • an employer does not need to furlough all employees.

To be eligible to participate as a furloughed employee the employee must:

  • have been on the payroll on or before the 19 March 2020 and been notified by the employer to HMRC on an RTI submission on or before 19 March 2020.
    • Employees placed on the payroll after 19 March 2020 cannot be furloughed.
  • Employees made redundant, or who stopped working on or after 28 February can be re-employed and put on furlough and their wages claimed through the Scheme.
  • Do please speak to our team if you are considering re-employing any employees as there are certain risks involved in re-employing.

Consultation and agreement

  • The employee’s agreement to furlough must be obtained. This agreement should be in writing. (It may be in an electronic form such as email).
  • The written agreement should also set out the detail of the arrangement:
  • for example, if the employer proposes reducing the employee’s salary (where wage costs exceed the £2,500 maximum reimbursement) this needs to be by agreement; and
  • agreed provisions relating to, for example, taking annual leave during furlough etc should be included. (This is just one of the areas where the Scheme still has some level of uncertainty).
  • The written agreement must be kept for five years.

What is reimbursed

  • The Scheme covers 80% of  usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment pension contributions on that wage. An employer can top up salaries above the amount reimbursed but is not obliged under the terms of the Scheme to do so.
  • The 80% of monthly salary, up to £2,500 per month, is the gross amount and is subject to deductions for tax and National Insurance Contributions.
  • Employers are still liable to pay the furloughed employees as usual (unless the employer and employee have agreed to, for example, reduce or defer salary).
  • The employer must claim the grant/reimbursement from HMRC.

Notifying HMRC 

  • Employers must notify HMRC of the details of the furloughed employees. This is done through the new HMRC portal.

What furloughed employees can and can’t do until end July 2020

  • Furloughed employees:
    • must cease all work for their employer;
    • cannot provide services to or generate revenue for or on behalf of the employer or any person, company or charity connected to the employer.
  • Furloughed employees can:
    • undertake training so long as the employee does not provide services to or generate revenue for the employer or on behalf of the employer or any person, company or charity connected to the employer;
    • undertake volunteering opportunities whilst on furlough if this is in line with public health guidance;
    • work for another employer whilst on furlough, if their employment contract allows that or this is otherwise agreed with the employer.

Changes from August 2020

New flexibility will be introduced from August 2020 to get employees back to work and boost the economy. From August furloughed workers will be able to return to work part-time with employers being asked to pay a percentage towards the salaries of their furloughed staff. Employer payments will substitute the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month.

Further guidance on these changes is expected to be published at the end of May.


Please see another Article on this topic, prepared by the accounting team at Dixcart UK: How to Claim and What to Claim for Wage Costs Through the Coronavirus Job Retention Scheme.

Dixcart has lawyers, accountants and tax advisers that can assist your business to apply for financial assistance, at this challenging time.  Please phone: 0333 122 0000 to speak to one of our directors or email: If you are already a client, please speak to your usual contact.

The data contained within this document is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time. This document is provided for information purposes only and does not constitute accounting, legal or tax advice. Professional advice should be obtained before taking or refraining from any action as a result of the contents of this document.