Job Retention Scheme update

Vanessa Sanders

The Job Retention Scheme (JRS), which was due to end on 30 June 2020, now runs to 31 October 2020. Businesses whose operations have been severely affected by Covid-19 will be able to continue to place workers on furlough leave over this extended period. Vanessa Sanders, of Stanbridge Associates, gives the lowdown

The scheme will operate on its current basis until the end of July; but, from 1 August, employees who are currently on furlough leave, will be able to work part-time for their employers while remaining in the JRS. 

Additional guidance is awaited, but it appears that employees can only continue to be covered by the JRS between August to October if they are already on furlough leave at the end of July. 

After 1 August, employers will be required to meet part of the employment costs of their employees who are on furlough leave. Details of this update of the scheme are expected before the end of May.

The JRS will continue to operate in its current form until 31 July 2020, and in particular:

Subject to limited exceptions, furloughed workers are not permitted to undertake work for their employer; and

HMRC will pay participating employers:

  • 80% of a furloughed worker’s reference pay up to a cap of £2,500 per month;
  • The associated employers’ National Insurance contributions – less any claim for the employers’ allowance – and minimum automatic employer pension contributions.

From 1 August 2020, employees who remain furloughed up to 31 July 2020, will be permitted to return to work for their employers on a part-time basis. 

Specific guidance is awaited, but it appears the employee will need to have been on furlough leave at the end of July in order to continue through August to October.

Participating employers will also be required to meet part of their workers’ minimum salary payments, which are equal to 80% of their reference pay or, if lower, £2,500 per month. The employer can choose to ‘top up’ this minimum payment but is not obliged to do so.

Details of these changes, such as the portion of the minimum salary payment to be borne by the employer, and whether this will be linked to employees who return to work part-time or be a free-standing requirement, are due before the end of May.

HMRC guidance

HMRC has published updates to its JRS guidance including:

Clarification that claims cannot be submitted more than 14 days before the end of the relevant claim period;

Confirmation that participating employers must retain their relevant records for six years for possible HMRC review;

Guidance on what overtime payments and other ‘non-discretionary payments’ can be included in JRS reference pay.

HMRC’s guidance now confirms overtime payments can be included where the employer was contractually obliged to pay the employee at a set and defined rate for the overtime worked. Also confirmed is that other contractually enforceable variable payments – for example, shift allowances – should be included in reference pay.

The treatment of overtime, allowances and similar payments require careful consideration and employers should assess the basis on which they calculate their JRS claims in light of this updated guidance. Employers should also consider whether any amendments to past claims might be required once HMRC introduced this functionality to its JRS portal.

HMRC’s updated JRS guidance can be found at

What should employers do?

Extension of the JRS will require employers to consider how the support available affects decisions in relation to managing its workforce. 

In particular, if it is indeed the case that employees can only be placed on furlough leave from August to October if on furlough at the end of July, employers will need to review the extent to which they continue to need support from the JRS and plan which are necessary to kick-start business and which can remain out of action.

Other practical steps employers may take include:

Reviewing existing agreements with employees – do existing agreements with employees need to be revised to allow the possibility of furlough continuing into July and beyond?

Returning to work – what staffing requirements are forecast from now until the end of October, and is it appropriate to bring furloughed workers back into the business on a full or part time basis?

Physical requirements – what are the plans for where and how employees will work in the future?

Workforce planning – does the extension of the JRS or part-time working affect headcount requirements?

Levels of employer contributions – what level of top-up can the business afford? If discretionary payments are made in excess of furloughed workers’ minimum entitlements, should this position be assessed?

Checking claims – for many employers, calculating JRS claims is not straightforward, with common difficulties including:

  • Establishing the correct components of furloughed workers’ reference pay – in particular, employers should review past claims in light of HMRC’s recently updated guidance;
  • Making deductions from payments to employees – furloughed workers must receive their entire minimum furlough payment in cash and any deductions made by the employer must be carefully considered to ensure this condition is met.
  • Reviewing JRS compliance – are controls sufficiently robust for HMRC scrutiny including the prospective changes being introduced?

Vanessa Sanders is a partner with Stanbridge Associates, accountancy, finance and tax advisory medical specialists