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This is a fast-moving area and the paper should be read as correct at the time of publication (8 March 2021).

This information is provided to Members of Parliament in support of their parliamentary duties and is not intended to address the specific circumstances of any particular individual. A suitably qualified professional should be consulted if specific advice or information is required.

Introducing the Coronavirus Job Retention Scheme

On 20 March 2020 the Government announced the Coronavirus Job Retention Scheme.

The purpose of the Scheme is to provide grants to employers to ensure that they can retain and continue to pay staff, despite the effects of the COVID-19 pandemic.

The CJRS initially applied from 1 March to 30 May 2020. It was then extended to 30 June. The CJRS was extended again from 1 July to 31 October 2020. The rules were changed to allow employees to be ‘flexibly furloughed’ – meaning employers could ask employees to work any pattern and claim a CJRS grant for any usual hours not worked.

Under the initial CJRS, only employees who were employed on 19 March 2020 on a PAYE payroll notified to HMRC through an RTI submission on or before that date were eligible. Employees who were on a payroll on or before 28 February or 19 March but who stopped working after those dates could be re-employed and furloughed.

The CJRS initially covered 80% of an employee’s wages (up to £2,500 per month) as well as employer National Insurance and pension contributions. From 1 August, NICs and pension contributions were not covered. In September and October the CJRS only covered 70% and 60% of wages, respectively, and employers were required to top up to 80%.

Extending the CJRS from 1 November 2020 to 30 April 2021

The CJRS was set to end on 31 October 2020 to be replaced by the Job Support Scheme. Under the JSS Closed, businesses that were legally closed would have been able to furlough their staff and claim a grant for 67% of their wages with no employer top-ups required. Under JSS Open, which was open to all businesses, employers would have had to bring employees back for at least 20% of their normal hours. For hours not worked, employers would have had to cover 5% of wages and HMRC would have provided a grant to cover 61.67% of wages.

On 31 October 2020, as a new temporary national lockdown was announced for England, the Chancellor announced that the CJRS would be extended until December and the JSS would be postponed. On 5 November, the Chancellor announced that the CJRS would be extended further until 31 March 2021 to give businesses certainty over the winter months. On 17 December, the Chancellor announced the CJRS will be extended to 30 April 2021.

Under the extended CJRS, employers can flexibly furlough employees and claim a grant from HMRC for 80% of an employee’s wages for any usual hours not worked (up to £2,500 per month or the relevant pro rata amount). Employers must cover employer NICs and pension contributions. As such, the rules are similar to those in August 2020.

Under the extended CJRS, employees who were employed on 30 October 2020 on a payroll notified to HMRC on or before that date are eligible. Those who were employed on 23 September but who since stopped working can be re-employed and furloughed. There is no need for an employee to have been furloughed between March and October.

Extending the CJRS from 1 May 2021 to 30 September 2021

In Budget 2021 the Chancellor announced that the CJRS would be extended until 30 September 2021. The CJRS grant will continue to cover 80% of an employee’s wages until 30 June 2021. From 1 July, the grant will cover 70% of wages and employers will be required to top up an additional 10%. From 1 August the grant will cover 60% of wages and employers will be required to top up 20%.

Relationship between the CJRS and employment law

The CJRS is simply a mechanism through which employers can claim money from HMRC. It does not alter existing employment law rights and obligations.

Employers will normally be liable under the employment contract to pay employees their full wages, even if they cannot provide any work. In many cases, the employment contract would need to be varied to allow employers to furlough an employee on reduced pay.

The rules of the CJRS – set out in Treasury Directions – require employers to enter into a full furlough agreement or a flexible furlough agreement with their employees, setting out the main terms and conditions that will apply during any period of furlough. Agreements must be incorporated into the employee’s employment contract.

It is for employers to decide whether to furlough an employee. This could cause problems for zero-hours workers and agency workers whose employers could simply reduce their work to zero without making a claim under the Scheme.

The Scheme also sits amongst a range of existing statutory employment rights. These include protections from discrimination, protections from unfair dismissal and rights to consultation in cases of collective redundancies. It also includes the rules on Statutory Sick Pay, statutory maternity pay and holiday pay.


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