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Last updated 12 June 2020

Section 1: Introduction and eligibility

1. What is the JRS?

The JRS was introduced to help businesses and other entities who cannot maintain their current workforce because their operations are affected by the COVID-19 outbreak (the scheme is not limited to workers engaged under an employment contract, but this note refers to ‘employers’ and ‘employees’ for ease).

Prior versions of the guidance suggested that employers whose operations were ‘severely affected’ by COVID-19 would be eligible for the scheme. However, on 12 June 2020, ‘severely’ was dropped from the wording contained in the guidance. Employers will still need to use their judgement in determining whether the JRS is intended for their circumstances.

Eligible employers can apply to HMRC for a grant to cover part of the employment costs of each individual they had on the payroll on 19 March 2020 who is temporarily not working due to the outbreak and is designated as a ‘furloughed worker’ (see point 10 below for updates to eligibility effective from 1 July).

2. How long will it run for?

The JRS was originally intended to run from 1 March 2020 until 30 June 2020. However, on 12 May the Chancellor announced that the scheme will run until  the end of October 2020. It may be extended further if necessary.

Certain aspects of the JRS (noted below) will change from 1 July 2020.

3. Is my business eligible to participate?

The JRS is open to all employers that operated a UK PAYE scheme on 19 March 2020, are enrolled for PAYE Online, and have a UK bank account.

4. Who does the JRS cover?

It covers all individuals who had been included on an RTI submission by the employer as at 19 March 2020 (see point 10 for updates to eligibility effective from 1 July), including:

  • All employees, regardless of whether their contract of employment is full-time, part-time, flexible, zero hours, fixed term, or an apprenticeship contract;
  • Officeholders (such as company directors, if not also employees);
  • Workers (or ‘limb (b) workers’ – in summary, self-employed individuals whose dependence on their client is broadly comparable to that of an employee on their employer) but only if they are treated as employees for tax purposes, that is, paid subject to PAYE;
  • Agency workers, provided they are subject to PAYE by their agency/umbrella company (for clarity, agencies will make claims for these individuals, not the end user clients); and
  • Members of limited liability partnerships who fall within the ‘salaried members’ income tax rules.

Eligible employees who joined their employer’s PAYE scheme after 28 February 2020 following a qualifying business transfer (under TUPE or the PAYE business succession rules) are also covered by the JRS.

The JRS does not cover self-employed individuals, or certain contingent workers in the public sector, who are assisted via other schemes.

However, the JRS can apply to contingent workers in the public sector if their engagement falls within the scope of the public sector ‘IR35’ rules and it is not covered by the alternative cabinet office public sector guidance.

5. What support can employers get?

From 1 July, furloughed employees will be able to return to work part time (see 8 below) and be paid at their full contractual rate for any hours worked.

Furloughed employees are entitled to receive 80% of their regular pay (up to a maximum of £2,500 per month) in respect of their non-working hours for the duration of the scheme (i.e. their minimum furlough payment) but that will now be pro-rated against pay received for hours worked. 

Whilst the employer must bear the salary (and associated employer’s NIC and pension contributions) in respect of any hours worked by furloughed workers, the JRS will subsidise the minimum furlough payments made, and the associated employer’s NIC and minimum pension contributions, in respect of non-working time.

However, the level of support available under the JRS in respect of non-working time will taper down from 1 August. This is summarised in the table below: 

Employment costs in respect of non-working time Support available under the JRS
Up to 31 July From 1 August From 1 September From 1 October
JRS grant payments 80 % of reference pay up to £2,500 per month 80 % of reference pay up to £2,500 per month 70 % of reference pay up to £2,187.50 per month 60 % of reference pay up to £1,875 per month
Associated employer’s NIC and minimum pension contributions Funded Not funded Not funded Not funded


From August 2020, the employer must fund the difference between the minimum furlough payments it must continue to make to employees in respect of their non-working time (and associated employer’s NIC and minimum pension payments) and the grant available under the JRS.

The JRS does not cover any Apprenticeship Levy due on payments made to furloughed workers.

6. Do participants need to repay JRS funding?

JRS funding is a grant and amounts the employer is entitled to claim will not need to be repaid unless:

  • Circumstances change such that the employer is not entitled to retain the grant; or
  • The grant is not used to pay relevant employment costs within a reasonable period of time.

HMRC has yet to give examples of when an employer would cease to be entitled to retain a JRS grant. However, these circumstances might include where, after receiving the grant and prior to using it to pay relevant costs, the employee returns to work without completing the minimum 3 week furlough period or potentially, the employer ceases to be affected by the COVID-19 outbreak.

In addition, we understand that, in HMRC’s view, the requirement to use grants to cover relevant costs within a reasonable period means that the payment of PAYE and employer’s NIC which is funded by the JRS should not be deferred under ‘time to pay’ or other deferral arrangements.

Legislation has been drafted which could give HMRC powers to recover grants claimed under the JRS where the employer was not entitled to make the relevant claim, or a repayment obligation arises as set out above. In addition, company officers will be held jointly and severely liable for repayments if they were aware that a claim was dishonest or fraudulent. This is a clear marker that future compliance action may be taken if claims are inaccurate and HMRC has stated dishonest or fraudulent claims could result in criminal proceedings being considered. 

7. Do employers have to top up pay to 100%?

Furloughed employees must be paid their full contractual salary entitlement in respect of any part time hours worked on or after 1 July (see 8 below).

In addition, employers can choose to top up furlough payments for non-working time and associated costs (e.g. pension contributions) above the minimum payment to which furloughed workers are entitled, but this is not a requirement of the JRS.

Note that, without a change in terms and conditions, which would need to be agreed, furloughed workers will still be contractually entitled to their usual pay and benefits (including pension contribution) in respect of their non-working hours. It is therefore very important that employers reach a written agreement with their employees about the detailed terms of their furlough.

If agreement cannot be reached employers would be obliged to continue paying full pay and providing relevant benefits in respect of non-working hours, or make redundancies as an alternative to the scheme.

HMRC’s guidance confirms that employees on any category of visa can be furloughed, and that JRS grants do not count as ‘access to public funds’ for immigration law purposes. Additional Home Office guidance states that if participation in the JRS reduces the salary of a sponsored migrant employee, the reduction must be part of a company-wide policy to avoid redundancies which treats all workers the same. The reduction must be temporary, and the employee’s pay must return to at least previous level once they are no longer furloughed.

8. What can a furloughed worker do?

Whilst an employee is ‘furloughed’ they will continue to be employed and their continuity of employment will be preserved.

However, prior to 1 July they cannot undertake any work for their employer or any linked or associated company (though directors can continue to carry out their statutory duties as set out in the Companies Act 2006).

Whilst on furlough, employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers. However, they must not provide services to or generate revenue for, or on behalf of, their employer or an associated organisation.

Additionally, subject to certain exceptions, furloughed workers may undertake duties as a trustee or manager of a pension scheme.   

From 1 July, furloughed workers will be permitted to work part time for their employers for any amount of time and on any shift pattern. However, any flexible furlough arrangements that will apply from 1 July must be agreed in writing between the employee and the employer.

If employees take part in compulsory training, employers should ensure that the amount they are paid is at least the relevant minimum wage for the time they are training, even if not all that pay is covered by the grant.

HMRC’s guidance says that furloughed workers can undertake a new or existing employment with an unconnected employer provided their contract permits it.

This places the decision with employers of whether to allow other work with a new employer whilst on furlough. Many will want to allow it, but with restrictions, for example, to certain types of roles, no working for competitors etc. Further, some employers might want to allow more flexibility to junior staff, or those in particular roles within their business.

In any event, employers should be careful to specify that any new employment must not impact on their ability to return to work promptly when furlough ends, or on a part time basis from 1 July. In short, employers should be clear about their overall policy position on this, as well as the fine detail, in their furlough agreements with their workforce.

9. Can I reduce the hours of my staff and still furlough them?

Prior to 1 July, employees cannot undertake any work for their employer whilst furloughed and the cost of employees who continue to work, but are on reduced hours due to the COVID-19 outbreak, cannot be supported by the JRS.

However, this will change from 1 July when previously furloughed employees will be able to work part-time for their employer whilst being furloughed for the remainder of their ‘usual hours’.

The methodology of the calculation of ‘usual hours’ is different depending on whether employees work ‘fixed hours’ or ‘variable hours’.

Employees will be regarded as working variable hours where:

  • The employee is not contracted to a fixed number of hours; or
  • The employee’s pay depends on the number of hours they work.

The usual hours for an employee working variable hours will be based on the higher of:

  • The average hours worked in the tax year 2019/20; and
  • The hours worked in the corresponding calendar period in the tax year 2019/20.

If the employee is not regarded as working variable hours, they will be regarded as working fixed hours. In this case the usual hours will be regarded as the hours the employee was contracted to work in the last pay period ending on or before 19 March 2020. This will be pro-rated for the particular claim period.

The calculation of usual hours is complicated and sourcing the relevant data on hours worked will be key.

10. Can any employees be furloughed?

Employers can furlough some or all of their workforce, but an individual must already have been furloughed for at least three weeks at some point in time prior to 1 July in order to be furloughed on or after that date. In practice this means the last date on which they could have been furloughed under version 1 of the scheme was 10 June.

Additionally, employers cannot furlough individuals who:

  • Were on unpaid leave on 28 February until the date on which it was agreed they would return from that unpaid leave; or
  • Are in receipt of Maternity Allowance or certain other statutory payments.

HMRC’s guidance specifically confirms that employees can be furloughed:

  • When they are entitled to receive Statutory Sick Pay (SSP), provided this is done for business reasons and not by reason of their absence from work (i.e. they would also have been furloughed had they not been sick or self isolating in line with public health guidance);
  • When they are ‘shielding’ in line with public health guidance (or need to remain at home with a member of their household who is shielding) and cannot work; or
  • Have COVID-19 related caring responsibilities, such as childcare due to school closures.

HMRC’s guidance also states that employers can claim through the JRS in respect of enhanced (earnings related) contractual maternity pay and other forms of parental leave pay.

11. Can redundant employees be rehired?

Employers can rehire and then furlough any individuals who were made redundant on or after 28 February because of the COVID-19 outbreak. However, rehired employees can only be furloughed from the date they were rehired (not from the date they were made redundant).

This will not apply to individuals who were made redundant for reasons unrelated to COVID-19. HMRC’s guidance also states that individuals who ‘stopped working’ after 28 February can be ‘re-employed’ and then furloughed.

On one hand, this suggests that employers can claim a grant backdated to 1 March in respect of employees who had agreed to leave on reduced or nil pay, but who were not actually made redundant. However, the reference to being ‘re-employed’ suggests that there must have been a dismissal. Clarification is needed in relation to this important aspect of the JRS.

This also has potential implications for employee share plan participants in regards to whether the original redundancy triggers a ‘leaver’ position or whether this prior dismissal is in effect nullified by the re-hire and furlough.

12. How flexible is furlough?

Employees can go in and out of furlough for as long as the JRS remains in place (i.e. to 31 October 2020 unless the scheme is further extended).

However, until 30 June each individual furlough period must last for at least three consecutive weeks, and an employee must have been furloughed for at least three weeks prior to 1 July in order to be furloughed on or after that date (see 10 above).

Section 2: Implementing furlough

13. Can staff be made to go on furlough?

Employers remain subject to employment law and anti-discrimination legislation when furloughing employees.

Unless employers have an express contractual right to lay-off staff, they will therefore need to agree a temporary change to the employment contracts of furloughed employees.

This will need to cover the terms of the furlough, including both a reduction of pay and other benefits (for example if an employer ceases payments over and above that required by auto-enrolment legislation), as well as practical matters such as how employers end furlough and how much notice is needed to do so.

Employers who furlough without obtaining these agreements will risk employment claims.

14. How is agreement reached with employees?

Employers should first consider how they usually approach these matters with their workforce. They may have an obligation to discuss the matter with recognised Trade Unions or other representative bodies.

In any event, employers should seek agreement to furlough by consent first.

If the alternative to furlough is redundancy, we expect that in the vast majority of cases agreement would be reached quickly.

If not, employers will need to consider whether to start a collective consultation process, since the choice of being furloughed or made redundant will trigger collective consultation legislation.

The consultation period would normally be 30 days (for 20 or more impacted staff) or 45 days (for 100 or more impacted staff). However, many employers simply will not have that time, so should consider whether the COVID-19 outbreak gives rise to ‘special circumstances’ allowing them to take steps that are reasonably practicable to reach agreement rather than comply with the mandatory consultation periods (although they would still need to go through a fair process).

When agreement is reached (including by means of a collective agreement between the employer and a trade union), that agreement must:

  • Specify the main terms and conditions on which the employee will cease work;
  • Be incorporated (expressly or by implication) into the employee’s contract;
  • Be made in writing or be confirmed in writing by the employer; and
  • Be retained by the employer until at least 30 June 2025.

Additionally, new flexible furlough arrangements must be agreed separately where furloughed workers are to return to work part time on or after 1 July.

Ultimately if employers cannot reach agreement with their workforce, they will need to decide whether to (i) unilaterally impose the furlough and risk employment claims; (ii) furlough on full pay and reclaim part of these costs via the JRS or (iii) make staff redundant.

15. What if part of the workforce is furloughed?

This may present more complexity. Employers need to consider and carefully identify which parts of the workforce to furlough. That will be easy if whole identifiable business units are being furloughed, but harder if only part or a particular kind of worker is to be furloughed.

In those cases, employers will need to find a fair and objective way to decide who should be furloughed and who should not. It may be best to start that process by asking for volunteers to either continue to work or furlough, since depending on their personal circumstances they may have a preference.

If there is still a need to select those to furlough, employers will need to find a fair and objective way to identify those staff. This may make reaching agreement a lengthier process. All of the usual employment law considerations will apply when going through this process.

Similar considerations apply when determining which furloughed workers will return to work on a part time basis on or after 1 July.

16. Can employees request to be furloughed?

Yes, but the employer must initiate the process and has the final say.

Section 3: Operating the furlough

17. How do employers claim the grant?

Once employees have been furloughed, employers will need to submit relevant information through HMRC’s JRS online portal in order to make a claim.

Grant payments should be made by HMRC into employer bank accounts within 4-6 days of receipt of the claim.

Claims can be backdated to 1 March in respect of employees who were furloughed on or after 28 February (and meet the other requirement of the rules of the scheme).

Claims may be submitted up to 14 days before the relevant payroll run.

Employers cannot make more than one claim per claim period. From 1 July, a minimum claim period of one week will apply (albeit that the period of furlough may be less than a week), and claims will not be permitted to overlap calendar months. However, special rules can allow claims to be made for shorter periods at the start and end of the month if these would be outside a claim period. This means that the timing of claims post 1 July will be key particularly for weekly payrolls. 

Where an employer has submitted an excessive claim, subsequent claims must be adjusted to net off the overclaimed amount. Employers who have under claimed are advised to contact HMRC if this under claim causes undue hardship.

Supporting calculations must be retained for at least 6 years.

Claims for employees furloughed from 1 July can be made from 1 July and claims for employees furloughed in periods up to 30 June must be submitted by 31 July. Where an employee is furloughed for a continuous period that crosses from June into July, two separate claims must be made.

From 1 July, the number of employees included in a single claim cannot exceed the highest number of employees included in any one claim covering employees furloughed up to 30 June.  However, employees returning from statutory parental leave do not count towards this limit.  

18. What pay will be covered by the JRS?

Employers can claim for employees’ ‘regular pay’ during furlough.

The guidance says that this includes regular payments such as wages, non-discretionary overtime (i.e. where the employer is contractually obliged to pay the employee at a set and defined rate for the overtime worked), non-discretionary fees and non-discretionary commission (i.e. where the employer has a contractual obligation to pay the relevant sum and to which the employee has an enforceable right).

Discretionary payments – such as bonuses and tips – and the cost of benefits in kind are excluded. The cost of providing benefits in kind, including via salary sacrifice arrangements, is not covered by the JRS.

19. How will the JRS grant be calculated?

For fixed rate full time and part time salaried employees, the employee’s actual pay before tax, from the last pay period before 19 March 2020 should be used as the reference pay.

Employers who had already calculated their claim based on the employees’ wages on 28 February 2020 (due to earlier HMRC guidance), may choose to still use this calculation for their first claim.

For fixed rate salaried employees who are furloughed on their return from statutory leave (e.g. maternity, paternity, shared parental, adoption, sick or bereavement leave), the reference pay is based on the contractual salary before tax, and not what the employee was actually paid whilst on statutory leave.

For employees whose pay varies, if they have been employed since at least 6 April 2019, reference pay is the higher of:

  • The pay from the same pay period in the previous year; and
  • Average pay from the 2019/20 tax year.

If the employee began employment after 6 April 2019, their reference pay is an average of their earnings since they started work until the date they are furloughed.

Once employers have worked out how much of an employee’s pay they can claim, they must then calculate the associated employer’s NIC and minimum automatic enrolment.

20. How much will the employee receive?

The employer must pay furloughed workers at least 80% of their reference pay (up to £2,500 per month) in respect of their non-working time. The monthly cap on minimum furlough payments reduces proportionately in respect of any hours worked during the month.

This will remain the case even when the financial support available under the JRS begins to reduce from 1 August (see 5 above).

This amount must be paid in cash, and cannot be reduced by any administration or other charges, or by any salary sacrifice or other deductions in respect of the provision of benefits. However, where an employee has authorised their employer to make other deductions from their salary, these can continue.

The employer must also pay any additional amounts (and provide any relevant benefits in kind) agreed with the employee as part of the furloughing process.

All payments are made subject to normal payroll deductions, including student loan repayments. Payments made to furloughed employees are subject to employer’s NIC and, where relevant, Apprenticeship Levy.

HMRC has specifically confirmed that where employees purchase partnership shares under a tax-advantaged Share Incentive Plan, or contribute to a savings contract linked to SAYE options, these deductions can continue during furlough. However, participating employees might wish to suspend these salary deductions in light of their reduced income whilst furloughed. It will be necessary to ensure these points are correctly communicated to affected employees.

21. What other rights do furloughed workers have?

Furloughed workers have the same employment rights as they previously held.

That includes entitlement to SSP, maternity rights, rights against unfair dismissal and to redundancy payments.

Employees will continue to accrue holiday entitlement whilst furloughed. Additionally, holiday (including bank holiday) can be taken by an employee whilst they are furloughed, although this would need to be paid at the employees’ normal rate of pay.

The rules of the JRS do not replace the existing employment contract. This means that contractual benefits would continue unless there is an express agreement to the contrary.

That said, employers will likely be required to make changes to employment contracts in any event to implement furlough, so changes to employee benefits could also be included within the negotiations for those changes.

For employees who hold tax-advantaged Enterprise Management Incentive (EMI) share options, being furloughed could constitute a ‘disqualifying event’ due to inability to meet the working time requirement. However, this is yet to be confirmed by HMRC.

22. Can furloughed workers’ employment be terminated?

Yes, and HMRC’s guidance confirms that furloughed workers can be made redundant, either during or after the furlough period.

23. What is the tax treatment of a JRS grant for the employer?

The employer should include the JRS grant as income in its tax computation.

However, as this receipt should be offset by deductible employment costs, no associated tax charges should arise.