HMRC Publishes Details of Furloughed Employees’ Scheme

On 20 March 2020, the Government announced measures to protect employers and employees under the Coronavirus Job Retention Scheme (CJRS). Employers will be able to claim back 80% of the wages (up to £2,500 per month) of employees who have been furloughed (i.e. put on a leave of absence) in response to the COVID-19 pandemic.

Most recently, HMRC has published guidance on 26th March 2020, which is the first detailed overview of how it works in practice. It provides a further update on which businesses and employees will be covered and more importantly what counts as ‘furloughing’ for this purpose and how employees’ wages will be calculated.

CJRS will be in place for at least three months from 1 March 2020. HMRC will establish an online portal through which employers will be able to reclaim wage costs plus the employer’s NI contributions and the minimum automatic enrolment employer pension contributions on that wage. The scheme will be open to all UK employers, including charities, recruitment agencies and public authorities provided that they have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.

Employees you can claim for

Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:

  • full-time employees
  • part-time employees
  • employees on agency contracts
  • employees on flexible or zero-hour contracts

The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer. An employee is considered furloughed for the purpose of this scheme only if he or she does not work for the employer. Therefore, if an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.

Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers should then write to their employees confirming that they have been furloughed and keep a record of this communication.

Work out what you can claim

Employers will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included. The guidance notes state that the employer may choose to top up wages to 100% but it will be at the employer’s discretion.

Full time and part time employees

For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February 2020 should be used to calculate the 80%. Fees, commission and bonuses should not be included.

Employees whose pay varies

If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:

  • the same month’s earning from the previous year
  • average monthly earnings from the 2019-20 tax year

If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.

If the employee only started in February 2020 pro-rata their earnings so far to claim.

Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.

National Living Wage/National Minimum Wage

It is worth nothing that the guidance also refers to the application of the national minimum wage to furloughed employees.

Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working. Therefore, furloughed workers who are not working must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.

However, if workers are required to 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.

For advice about any of the issues raised in this article or other issues relating to employment law, please contact our employment law specialist Anna Illingworth via email at or call 0118 951 6629.