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The Coronavirus Job Retention Scheme was announced by the Chancellor on 20 March to incentivise businesses to keep employees on their payroll during the difficult times ahead.  

The guidance published so far, which is regularly updated as announcements are made, can be found here for employers and here for employees. More information is awaited and we will be updating our guidance as areas are clarified.

What we know so far:

• All UK businesses are eligible (including charitable or non-profit).

• The Coronavirus Job Retention Scheme will be a government grant and reimburse employers for 80% of ‘furloughed workers’ wage costs, up to a total of £2,500 per worker per month.  

• It will be backdated to March 1st, to allow businesses who had already started to lay people off to change their decision

• It will be open initially for at least 3 months but extended ‘for longer if necessary’.

• The Chancellor stated “I am placing no limit on the amount of funding available for the scheme. We will pay grants to support as many jobs as necessary.”

• The Coronavirus Job Retention Scheme will be administered by HMRC.

• Employers will need to designate affected employees as ‘furloughed workers’ and submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. 

• The grant is a reimbursement to the employer therefore the employer will make the wage/ salary payment to the furloughed worker and then be reimbursed by HMRC.

• Furloughed workers are “workforce who remain on payroll but are temporarily not working during the coronavirus outbreak”.  Workers cannot do any work for an employer that has furloughed them.

• Employers will need to notify employees of this change in employment status to furloughed and changing the status remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.

• The employer can top-up the 80% HMRC payment but does not have to do so. 

• If the employer proposes to reduce the pay of furloughed workers to the level of the maximum HMRC grant, the worker’s consent will be required (unless the existing employment contract allows otherwise). 


No set date has been announced for the Coronavirus Job Retention Scheme becoming operative but it is expected to be working by the end of April.


The scheme specifics are still awaited but clearly there are a number of important questions to be answered, for example:

1. Does the £2,500 cap refer to the gross monthly wage or the 80% amount? It is not clear yet but it is anticipated that £2,500 monthly limit will relate to gross pay.

2. How long will employers have to wait to receive payment? While HMRC is working urgently to set up a system for reimbursement, existing systems are not yet set up to facilitate payments to employers. Businesses that need short-term cash flow support, may benefit from the VAT deferral announced and may also be eligible to apply for a Coronavirus Business Interruption Loan.

3. How will the scheme work for those employees with irregular earnings or on zero hour contracts? We anticipate that there will be some form of averaging earnings calculation, as with statutory maternity pay qualifying earnings or statutory redundancy pay.

4. What pay date is used for the purposes of establishing an employee’s wage cost? As the scheme operative date is 1 March it is likely that the employee’s wage cost is set at the average wage level for the 12 week period up to the end of February 2020 (or on February 2020 where fixed salary).

5. Will the furloughed worker’s pay still be subject to PAYE tax and NIC deduction? Unless the government structure the grant so that it isn’t taxable pay, assume that the answer is ‘yes’ as it was announced to be a wage reimbursement. We await details of whether the PAYE/NIC payments due to HMRC can be deferred.

6. How will the scheme apply to directors running personal service companies drawing low salaries and paying dividends?  We anticipate that PSCs will be but subject to the same expected rules on the reference salary for the 80% calculation.


As soon as we hear any further details we will provide more guidance to help you access and use the new scheme.

We are here to help and support you through these challenging times. If you have any queries, please contact me or your local Thomas Westcott office.