How your business can apply for the Coronavirus Job Retention Scheme Get the lowdown on the Coronavirus Job Retention Scheme here, which has now been extended until 31 October Alec Hawley January 11, 2022 6 min read Our experts We are a team of writers, experimenters and researchers providing you with the best advice with zero bias or partiality. This article was authored by: Alec Hawley Faced with the prospect of companies across the UK going out of business, the government has taken unprecedented action, launching the Coronavirus Job Retention Scheme to save the jobs of employees that would have otherwise been laid off, and to keep salaries coming in even when business have been forced to temporarily close.The scheme was initially due to end on 31 May 2020, but has now been extended to 31 October by chancellor Rishi Sunak.In a nutshell, the scheme will cover 80% of an employee's salary, but they cannot do any work during this period.This guide will break down the Coronavirus Job Retention Scheme in detail, covering how it works, eligibility, how to apply, and some common FAQs.It is divided into the following sections: Coronavirus Job Retention Scheme extensionOn 12 May, Chancellor Rishi Sunak announced that the Job Retention Scheme will be extended until October.It will continue to operate in the same way, and to cover 80% of an employee's salary.Around 7.5 million workers are now covered by the scheme, which will now be more flexible to support the transition back to work.From August, firms will be asked to start sharing the cost of the scheme. How the Coronavirus Job Retention Scheme works Who is eligible for the Coronavirus Job Retention Scheme How to apply for the Coronavirus Job Retention Scheme Coronavirus Job Retention Scheme FAQs Summary How the Coronavirus Job Retention Scheme worksThe basic idea behind the Coronavirus Job Retention Scheme is that, in order to be eligible for the 80% salary grant, employees must be “furloughed”.This means that they’re placed in a weird limbo zone where they’re still employed but not allowed to do any work.This salary grant is capped at £2,500 per month, per employee (plus the cost of employers' National Insurance and the the legal minimum pension contributions on the salary being claimed for).Income tax and national insurance should be deducted as normal through PAYE.This salary does not include bonus or commission.This is the key point:Employees being supported through the Coronavirus Job Retention Scheme must not do any work whatsoever for the company – this includes answering calls and emails.The other vital point is that the salary paid will be reimbursed by HMRC – in other words, you’ll need to pay your employees and then claim the money back for those that are furloughed and eligible for the scheme.Currently, the scheme is expected to run from 1 March 2020 to 31 October, with wages backdated to this date.It applies to workers who were employed up to and including 19 March 2020.The minimum period that an employee can be furloughed for is three weeks.The scheme is currently under development and it’s not clear when exactly businesses will receive payments, with the government having opened for applications by at 7am on April 20th.Companies (and especially small businesses) may therefore still face cashflow issues in the meantime, and may need to apply for a coronavirus business loan for help with these. For more info, see our page on how to apply for a Coronavirus Business Interruption Loan.Finally, companies can then fund the remaining 20% to pay employees their full salary, but this is not compulsory. Who is eligible for the Coronavirus Job Retention SchemeThe official government guidance is that all UK businesses that pay their staff via PAYE are eligible for the scheme.However, as discussed above, employees must be furloughed to be eligible for the grant, this means they cannot do any work and must officially have their employment status changed.This change is subject to existing employment law and may, in some cases, require negotiation with affected employees. Employees must be notified of this change, but if the alternative is being made redundant, it’s unlikely that many of them will complain.This also means that the scheme will not apply to employees who are working from home, as you should be able to pay them without government assistance. How to apply for the Coronavirus Job Retention SchemeOnce the scheme is up and running, the process is expected to be similar to running payroll – you’ll enter details of any affected employees into an online system set up by HMRC, and be reimbursed appropriately.One key question mark regarding the scheme is how an employee’s base pay will be worked out. This has not yet been confirmed by the government, but Nigel Morris, tax director at accountancy firm MHA Macintyre Hudson, estimates it’s likely to be based on pay for the 12 weeks up to the end of February (excluding overtime and bonuses).However, if you expect to apply for the scheme, you should start preparing now by taking the following steps:Work out which employees are at risk and would otherwise need to be laid offCalculate the monthly pay of those employees – for now, use the Macintyre Hudson 12-week timeframeIf desired, calculate the additional pay required for ‘normal’ salaryInform affected employees of the new arrangementsAgree new arrangement with employees, and unions where appropriatePrepare HMRC submissionIf applicable, you may need to consult with employees that your business retains, negotiating to alter pay where necessary. Coronavirus Job Retention Scheme FAQsHere are answers to some common queries about the Coronavirus Job Retention Scheme.How does this affect employees who are off sick?The current guidance is that employees who are off sick or self-isolating in line with government guidelines are not eligible for the Coronavirus Job Retention Scheme.They should be, as a bare minimum, paid statutory sick pay, the cost of which can then be reclaimed from the government.However this is subject to change, especially with the country now having been placed under lockdown, and only a select list of essential businesses allowed to continue operating as normal.How does this affect annual leave entitlement?The guidance seems to be that as the employee will effectively remain on the payroll, their entitlement to annual leave and continuous length of service shouldn’t be affected.Can furloughed employees complete training?Employees that have been furloughed can complete training, but it must not be anything that results in revenue generation (i.e. makes money for the company). If employees have to complete training when furloughed, they must be paid at least the National Minimum Wage for the time they spend doing training, even if this pay would be more than the 80% of pay that is being subsidised by the government. If training is optional, then these restrictions do not apply.Can I force my employees to take holiday?Yes, you can force your employees to use their paid holiday entitlement, but you have to give them notice of twice the length of holiday you are requiring them to take.So, if you wanted to make your employees take 14 days of paid holiday, you would need to give them 28 days of notice on this. SummaryThe Coronavirus Job Retention Scheme is designed to support employees who would have otherwise been made redundantIt will cover 80% of the salary of an employee that is “furloughed”Furloughed employees must not do any work for the company – this includes answering calls and emailsThe minimum period that an employee can be furloughed for is three weeksThe grant is capped at £2,500 per month, per employee (plus the cost of employers' National Insurance and the the legal minimum pension contributions on the salary being claimed for)The salary paid will be reimbursed by HMRC, companies will need to first pay their employees a lower salary and then claim this money backThis salary does not include bonus or commissionIncome tax and national insurance should be deducted as normal through PAYE.The scheme will operate for a minimum of three months, with wages backdated from 1 March 2020It applies to workers who were employed on 28 FebruaryThe scheme is open to all UK businesses that pay their staff via PAYEOnce live, applications will be made via an online HMRC portalCompanies should begin planning to take advantage of this scheme now, by identifying employees likely to be affected, consulting with them, and maintaining records of which employees have been furloughed and how much they are being paidCommenting on the scheme, Startups.co.uk editor Bryn Glover stated:“It's great to see the government taking this unprecedented step, though a few difficulties remain. A system that requires businesses to pay staff and wait for reimbursement may still be untenable when there is no regular income to front costs.“While it is certainly positive for some, the introduction of this scheme could also see a huge number of businesses becoming reliant on grants – which they may struggle to access – or more likely on loans, which might put stress on their finances in future months.“It's also important to recognise that this scheme is unlikely to provide protection for the contractors or freelancers who work for businesses regularly, but won't be covered.” Share this post facebook twitter linkedin Alec Hawley Alec is Startups’ resident expert on politics and finance. He’s provided live updates on the budget, written guides on investing and property development, and demystified topics like corporation tax, accounting software, and invoice discounting. Before joining, he worked in the media for over a decade, conducting media analysis at Kantar Media and YouGov, and writing a wide variety of freelance pieces.